The digital goods problem

I am starting a website soon which will be selling digital goods, to be more specific it will be php scripts and the like. It is easy for me to simply e-mail or provide a download page for a customer once I have been paid however I am not sure what to do when a chargeback occurs, which is a possibility.

Even though I can encode my scripts and also run checks with my server to confirm that the script follows the license agreement and has been paid for and then prevent the script from being used or even destroy itself there is still a problem with chargeback fees and reputations with merchants.

How many have in fact sold digital goods before such as scripts and found ways to overcome and minimize the problem? What proof do you show when a chargeback occurs? How many reverted to sending a CD so that it becomes tangible? Are there any merchants you know that protect the retailer with digital goods?

Hey Travis,

Have you ever considered selling them the product in a different form? You mention the CD but that's also alot of hassle and increases your overheads. I think a better solution might be to sell them membership for your website where they can download the product and recieved updates/support, similar to what alot of the major sites do e.g Vbulletin.

I guess this would allow you to prove that they have had access to their account by way of username/password, if paypal did investigate it they could login...see all that users personal information and what not. You could also have e-mails sent to yourself and the client confirming the order.

Either that or.....you send a freebie product (related to the theme of the site) something cheap, tangible.....and then have the script as like the bonus. I don't think you will encounter many problems though. How about contacting paypal and asking them what they feel are the best measures to take?

I contacted paypal and they said that sending CD's would significantly help because they are tangible goods. I was actually thinking of offering both a CD and a download because the CD Will take longer to reach the customer but would provide proof of shipping. However you are right it is more hassle and I would have to spend more money shipping especially to overseas and most likely it would end up costing more in shipping then in chargeback fees.

I was thinking of having a download centre protected by a username and password like VBulletin and some others. In fact I have used this reasonably well on other sites but I don't think that it really prooves much and it might be a breach of privacy if I let out some ones username and password to paypal. However this could be a clause in my Privacy Policy that they need to agree to.

I contacted paypal again to ask what sort of proof I would need to give to proove that some one had received there digital goods. Will be interesting to see the answer.