Contrary to popular belief, the sky is NOT falling on the adult Internet industry. That was the consensus of the panelists at the Internext Billing Roundtable last week. They all agreed that Webmasters face more regulations and additional hurdles to making money, but it’s NOT yet time to pack up the tent and get a job in the mainstream.Contrary to popular belief, the sky is NOT falling on the adult Internet industry. That was the consensus of the panelists at the Internext Billing Roundtable last week. They all agreed that Webmasters face more regulations and additional hurdles to making money, but it’s NOT yet time to pack up the tent and get a job in the mainstream.

Highlights of the session were:

1. There is NO “conspiracy” by the credit card companies to put adult Webmasters out of business. In other words, Visa has no objection to nudity.

2. To reduce charge backs, Webmasters should proactively fight fraud, run an honest business, and fulfill promises made to consumers.

3. “Verified By Visa” and other anti-fraud tools will make a big impact on the industry.

The panelists included Ron Cadwell, CEO of CaveCreek Hosting and CCBill, Christopher Mallick, CEO of Paycom and Epoch, Karen Campbell from Netbilling, and Sean Macias of the law firm Leader, Kozmor and Macias as well as General Counsel for Tri-Tech Internet Services, operator of adult verification services. The session began as each panelist was given a moment to introduce themselves and make a statement regarding issues they felt were important to the industry.

In his opening statement, CCBill’s Ron Cadwell said that charge backs are the most important issue facing Webmasters today. He felt that it’s up to Webmasters to regulate themselves and comply with the new regulations created by the credit card companies rather than taking chances and hoping they don’t get caught.

However, Epoch’s Christopher Mallick felt that “reseller fraud” is the biggest problem that leads to the charge backs Cadwell warned about. He described how unscrupulous criminals with stolen credit card numbers are developing “new and better ways to find new and better fraud.”

The panelists all agreed that it is in the Webmaster’s own interest to take steps to reduce charge backs. An estimated 80% of charge backs are “friendly fraud”, otherwise known as “buyer’s remorse.” When asked what Webmasters can do to reduce charge backs, Cadwell replied, “Run a quality site. Listen to consumers and give them what they want in terms of content and service.” Mallick added that Webmasters should “follow the Golden Rule. Tell the truth. Watch for fraud.” Campbell added, “Don’t be greedy” and Macias suggested Webmasters should “intend to be in the game a long time.”

Another suggestion to reduce charge backs is to “know your customers.” If your logs show that a customer joined but never entered the protected area that should raise a red flag for possible fraud.

The panel dispelled several rumors that have been running through the industry. An audience member asked if Visa was working to eliminate recurring billing, to which Cadwell replied that Visa does not have an aversion to recurring, “as long as you comply with their rules.”

Another rumor dispelled was that Visa had plans to create its own version of PayPal, to which Campbell replied that companies like Netbilling are already able to perform the same services as PayPal. The panel also dismissed the notion that PayPal got out of the adult business for moral reasons. The truth is that PayPal could no longer manage the risk of high charge back rates in the adult industry.

Another audience member asked if Webmasters have any recourse after a charge back if they can provide documentation proving that the customer actually used the site. Sadly, the response was that Visa doesn’t care how much documentation you can provide. Credit card companies actually run TV commercials ENCOURAGING customers to charge back any questionable purchases, especially “card not present” charges. Credit card companies see it as a marketing tool to make customers feel comfortable about their purchases.

Attorney Greg Piccionelli, a surprise guest in the audience, suggested that the adult industry should take a more aggressive approach to fighting charge back abuse. On the assumption that material within membership sites has copyright protection, anyone who uses the material with the intent to charge it back would be in violation of that copyright. He suggests that Webmasters should follow the lead of the music industry and their recent threats to file suit against individuals involved in peer-to-peer file sharing. Rather than fight the deep pockets of credit card companies, he proposes that Webmasters sue the individual consumers that abuse their charge back privileges. The panel tended to disagree with Piccionelli’s approach on the basis that it runs the risk of alienating consumers.

Mark Kliem is currently developing his own gay porn empire starting with his flagship site, LavenderLounge.com. He runs a news and gossip site called GayPornBlog.com, a porn video review site called ReelGuys.org, writes a monthly column for BananaGuide.com, and offers a revshare program at LavenderLounge.biz. Before that, he was Webmaster at Naked Sword for over 5 ½ years.