For adult entertainment entrepreneurs seeking a broader audience, Europe is a fertile field from which an abundant crop of new business may spring. While many typical adult Internet marketing efforts may focus on the U.S. audience, for today’s global merchant, Europe holds significant promise — despite the region’s current financial turmoil.
Writing for Reuters early last year, Bernd Debusmann asked readers about who has the world’s biggest economy, most Fortune 500 companies and most U.S. investment?
While European operators may have an advantage when serving their home markets, for domestic U.S.-based operators considering the European billing scene, one of the biggest (but most often overlooked) factors is the current currency exchange rate and its impact on both marketability and revenue.
“The correct answer in each case is Europe, short for the 27-member European Union, a region with 500 million citizens,” Debusmann stated. “They produce an economy almost as large as the U.S. and China combined but have, so far, largely failed to make much of a dent in American perceptions that theirs is a collection of cradle-to-grave nanny states doomed to be left behind in a 21st century that will belong to China.”
While China may indeed have its day, today, Europe is far friendlier towards online adult entertainment than is the communist behemoth — and indeed, seen as more open to porn consumption and sexuality in general than is “The Land of Freedom” — providing a great opportunity for merchants seeking to profit from the proclivities of this market.
While European operators may have an advantage when serving their home markets, for domestic U.S.-based operators considering the European billing scene, one of the biggest (but most often overlooked) factors is the current currency exchange rate and its impact on both marketability and revenue.
Marketability is affected because consumers want to know exactly how much something will cost before purchasing it, so listing the price in their local currency is a necessity because forcing them to perform their own currency conversion is a hindrance to the sales flow; while expecting them to accept a charge for an unknown amount will doubtlessly hamper sales. Revenues are affected because localized pricing and economic conditions may dictate that for an offer to have traction, retail prices must be lowered — or raised in more prosperous markets that can afford it. The infamous “Beer Index” which ties pricing to the average local cost of beer comes to mind as one smart way to balance value into this equation.
To complicate matters, the currency exchange rate fluctuates, with the Euro enjoying most of its days decidedly dominating the dollar; although it has recently suffered major declines against the world currency standard — making pricing a more dynamic process.
For example, consider an equal exchange rate of $1 to 1€, where a paysite charging $29.95 per month for a subscription may charge the exact same price in Euros. Today, however, it takes approximately $1.44 to equal 1€, so that $29.95 becomes 20.85€ — conversely, a 29.95€ price point would provide a roughly $43 sale, providing a little bit of perspective on the profit-boosting possibilities of the process.
Although the example above oversimplifies the factors involved in setting a profitable price point, it provides direction and evaluation points for merchants homing in on the sweet spot between sales volumes versus net earnings — a discovery process which is not always as simple and easy as we’d like.
Fortunately, there are a number of companies that can assist merchants in deploying a comprehensive European billing strategy.
According to its website, CCBill, for example, offers global payment processing without the hassle, through its use of geo-targeted payment (“join”) forms and acceptance of many major global payment types — with multiple currency options and multilingual support staff, among other features. While most adult operators think of CCBill as a U.S. domestic credit card processor, its direct debit services and other Euro-targeted options make it — and competitive provider Epoch — well versed in processing for this region.
CCBill’s service roster also provides an indication of a merchant’s key action areas, or in other words, the main building blocks that must be addressed by webmasters when creating a successful processing chain.
Understanding these steps, however, isn’t as important as understanding the market.
“Anyone entering a new region should consider the audience/culture that they will be targeting,” L3Payments COO Melody L. told XBIZ. “These consumers may have a different tolerance for what the services are worth, so your pricing plans as well as the additional payment methods you will offer, may have to be adjusted.”
‘When you are targeting a geographic market, wherever they are located, you will want to present to them the ability to pay in their currency with their preferred payment instrument and in their preferred language,” Melody noted, adding that while consumer preferences and behaviors change by region, the company “still sees the widespread use of credit cards in regions outside the U.S.”
Phone billing systems are also popular in Europe, where (unlike America) one-click SMS payments are possible for adult content. The use of this form of billing is coming under increased scrutiny, however, with measures such as the U.K.’s new PhonepayPlus registration scheme, which according to txtNation CEO Ashley Cross “requires all parties who supply premium phone content or services to consumers in the U.K. to register their details on the website of PhonepayPlus.”
PhonepayPlus (www.phonepayplus.org.uk) is the official organization responsible for regulating phone-paid services in the U.K., with its new registration program mandating a September 1, 2011 deadline for merchant compliance.
“The registration is mandatory,” Cross stated. “Even if you are based outside the U.K., you must still register if your services are enabled for consumers based in the U.K., which includes England, Scotland, Wales, Northern Ireland and islands.”
With so many payment platforms to choose from, using an aggregator makes sense.
For example, Failsafe Payments recently announced its integration of TrustPay and its bank transfer network which provides coverage of Eastern Europe, adding the processor to its CertoConnect payment platform and broadening merchants’ global billing options.
According to the company, CertoConnect offers, processes and authenticates various alternative payment brands and payment gateways through a single e-payment platform and is integrated with alternative payment brands including Ukash, PasswordByPhone, MyECheck and more; with a wide range of direct debit systems such as iDEAL, GiroPay, POLi, Przelewy24, Sofortüberweisung and EuroDebit, along with Chinese and Korean debit cards, helping to bridge the EU-Asian connection.
Failsafe Payments COO Patrick Sallnert says that the company is seeking to integrate other bank transfer networks.
“Failsafe Payments is looking to create as complete a country and banking coverage as possible for direct debits and bank transfers … through a single e-payment platform instead of having to integrate and enable each one by one,” Sallnert stated.
To maximize revenues, it is vital to work closely with trusted partners that understand the various regions you are targeting. This includes fostering relationships with global partners that possess regional presences.
For example, Euro Payment Group / EPGBill recently opened an American office in Miami, in an effort to strengthen its ties to the domestic adult entertainment industry — creating a synergistic blend of services and industry experience.
But a merchant’s physical location can also play a role in selecting its billing options.
For example, U.S.-based operators wishing to use Visa must pay a $750 registration fee for the privilege — a fee which their EU-based counterparts are not obligated to pay.
Likewise, some companies limit the availability of their services by region.
For example, veteran adult processing specialists Humboldt Merchant Services provides direct merchant accounts exclusively to North American-based businesses.
“If a European merchant wanted to do business with us, they would be required to incorporate and have an operational presence in the U.S.,” Adam McDonald of Humboldt Merchant Services told XBIZ. “This could be a tremendous benefit to a European adult merchant with a large U.S. customer base, as they would not be required to pay cross-border fees. Unlike a lot of the other billing companies who solicit adult merchants, we are a direct provider of U.S. merchant accounts, registered with BMO Harris N.A. out of Chicago.”
Having the ability to process a transaction is not the only consideration, however, as some regions may not be as profitable to target as others, for a variety of reasons.
“Regarding ‘not so profitable’ European countries, I feel it is very important for merchants to monitor their transactions and flag countries, products and traffic sources that are leading to undesirable results,” Melody L. concluded. “Whether those undesirable results are claims by consumers of unauthorized use of their payment instrument or a high occurrence of inbound calls, cancellations and refunds, when a negative trend is discovered, you should evaluate the impact and decide if it should be eliminated from your offering.”
However you look at the pie, the European market represents a juicy slice that is worth pursuing; but your ability to profitably bill these consumers for your products and services will remain at the heart of this opportunity. Seek the help of experts and focus on what you do best.