Last weekend I wrote about how the big social gaming companies are making hundreds of millions of dollars in revenue on Facebook and MySpace through games like Farmville and Mobsters. Major media can’t stop applauding the companies long enough to understand what’s really going on with these games. The real story isn’t the business success of these startups. It’s the completely unethical way that they are going about achieving that success.
In short, these games try to get people to pay cash for in game currency so they can level up faster and have a better overall experience. Which is fine. But for users who won’t pay cash, a wide variety of “offers” are available where they can get in-game currency in exchange for lead gen-type offers. Most of these offers are bad for consumers because it confusingly gets them to pay far more for in-game currency than if they just paid cash (there are notable exceptions, but the scammy stuff tends to crowd out the legitimate offers). And it’s also bad for legitimate advertisers.
The reason why I call this an ecosystem is that it’s a self-reinforcing downward cycle. Users are tricked into these lead gen scams. The games get paid, and they plow that money back into Facebook and MySpace in advertising, getting more users. Who are then monetized via lead gen scams. That money is then plowed back into Facebook and MySpace in advertising to get more users…
Here’s the really insidious part: game developers who monetize the best (and that’s Zynga) make the most money and can spend the most on advertising. Those that won’t touch this stuff (Slide and others) fall further and further behind. Other game developers have to either get in on the monetization or fall behind as well. Companies like Playdom and Playfish seem to be struggling with their conscience and are constantly shifting their policies on lead gen.
The games that scam the most, win.
And some users aren’t dumb, either. For every user who gets tricked into some fake mobile subscription, there’s another who can beat the system. That’s where the legitimate advertisers, like Netflix and Blockbuster, get hit. Users sign up for a free trial with a credit card, get their game currency, then cancel the membership and start over. Netflix has a policy of only paying for a user once. But game developers use a complex set of partner chains to launder these leads and try to get them through for payment. Netflix sees an overall lowering of quality and pays less for leads. Game developers, desperate to monetize, then search for ever more questionable offers to make up the difference. In the end, the decent advertisers are out, and only the worst of the worst remain.
Left alone, the system really will slide into a full blown disaster. The platforms (Facebook and MySpace) are in a position to regulate this, and even have rules prohibiting some scams. But those rules are routinely ignored by developers, and are rarely enforced by Facebook and MySpace.
There can be only one reason Facebook and MySpace turn a blind eye to user protection – they’re getting such a huge cut of revenue back from these developers in advertising. If they turn off the spigot, they hurt themselves.
Zynga may be spending $50 million a year on Facebook advertising alone, fueled partially by lead gen scams. Wonder how Facebook got to profitability way ahead of schedule? It was a surge in this kind of advertising. The money looks clean – it’s from Zynga, Playfish, Playdom and others. But a large portion of it is coming from users who’ve been tricked into one scam or another.
And recent moves by Facebook to shut down application spam only make the problem worse in some way – game developers have to spend more money on advertisers to get users now that the viral channels are shut down. That means the games have to monetize even better. Which means more scams.
It’s time for this to stop. Facebook and MySpace need to create and enforce rules against it so that game developers aren’t tempted to get a competitive edge by scamming users. And if Facebook/MySpace won’t protect users, then the government will have to step in.
There’s an easy way to determine if something is a scam or not. For any particular offer, ask yourself if anyone would buy the product or service if the terms were clearly spelled out for them, and they weren’t being bribed with in-game currency. The answer for many of these is a resounding “no.” A few examples are below.
Examples Of Scams:
A typical scam: users are offered in game currency in exchange for filling out an IQ survey. Four simple questions are asked. The answers are irrelevant. When the user gets to the last question they are told their results will be text messaged to them. They are asked to enter in their mobile phone number, and are texted a pin code to enter on the quiz. Once they’ve done that, they’ve just subscribed to a $9.99/month subscription. Tatto Media is the company at the very end of the line on most mobile scams, and they flow it up through Offerpal, SuperRewards and others to the game developers.
As you can see in the image below, nothing in the offer says that the user will be billed $10/month forever for a useless service.
Another scam: Video Professor. Users are offered in game currency if they sign up to receive a free learning CD from Video Professor. The user is told they pay nothing except a $10 shipping charge. But the fine print, on a different page from checkout, tells them they are really getting a whole set of CDs and will be billed $189.95 unless they return them. Most users never return them because they don’t know about the extra charge. Woot. Again, sites like Offerpal and SuperRewards flow these offers through to game developers. See here for more on the Video Professor scam.
Of course, there’s no mention of any of these payments in the offer itself:
An Industry In Denial
Yesterday I attended the Virtual Goods Summit in San Francisco. In the Q&A session of one panel I asked Offerpal CEO Anu Shukla to explain the ethics of her business, and outlined my ecosystem of hell argument above. Shukla went on a tirade, calling my points “shit, doubleshit, and bullshit” (yes, really), but never really addressed the points. A video of the exchange is below, care of Alexa Lee.
Offerpal now has a blog post up on the exchange, but they still don’t address the issues. They offer misdirection, denials and a shield of rules that are never actually enforced.
Sadly, most of the audience of game developers was on Offerpal’s side. Many of these developers see quick dollars with lead gen scams and they don’t really care about how users are affected.
In one session earlier in the day, IGG Cofounder Kevin Xu recommended that game developers “get users in the door to play free, then monetize the hell out of them once they’re hooked.” Sadly, it’s simply human nature to push the rules until they break. It’s time for Facebook and MySpace to protect their users from this stuff and make sure it stops.
p.s. – An interesting development. Offerpal defended their mobile survey scams on stage and in the blog post referenced above, saying there was no scam involved. But today those offers have quietly been pulled down from all the games I’ve checked. If there’s no scam, why remove them? At least some good is coming from my ongoing rants.
Update: Two Companies That Said No To Social Media Scams
Update 2: How To Spam Facebook Like A Pro: An Insider’s Confession
Update 3: Scamville: Zynga Says 1/3 Of Revenue Comes From Lead Gen And Other Offers
Update 4: Zynga Takes Steps To Remove Scams From Games
Update 5: RockYou Joins The No Scams Parade. But What’s Facebook Up To?
Update 6: MySpace Says Zero Tolerance For App Scams, Changes Terms Of Use
Update 7: Tragedy Of The Social Gaming Commons: A Blueprint For Change
Update 8: Offerpal Tries Out A New CEO. Shukla, Queen Of Scams, Is Out.
Update 9: Facebook To Increase Enforcement Of Anti-Scam Rule
Update 10: ScamVille: New Offerpal CEO Admits Mistakes, Makes Bold Promises
Update 11: Zynga CEO Mark Pincus: “I Did Every Horrible Thing In The Book Just To Get Revenues”
Pincus’ response: to zwink or not?
Update 12: Time Magazine: Are You Getting Scammed by Facebook Games?
Update 13: Is Facebook a Paradise for Scammers?
Update 14: “Horrible Things” Slink Back Into Zynga
Update 15: Zynga’s FishVille Sleeps With The Fishes For Ad Violations
Update 16: Zynga To Remove All In Game Offers
Update 17: Zynga’s FishVille Gets Out Of The Penalty Box At Midnight
Update 18: The ScamVille Lawsuit: Facebook, MySpace, Zynga And More Face Possible Class Action Suit
Update 19: Scamville Shakeout: Was Gambit The Right Fall Guy?
Update 20: Video Professor Tries To Bully Washington Post, Fails
mike…
if your assertions are true. please provide actual data/numbers to back this up.
in all honesty, if you put some of your $$$ into developing/researching, producing solid data on this, you’d have a serious amount of really great cred…
so.. where’s the real data to support your thesis.
From the video, Mike is not talking about _every_ single user falling into those two categories. He is talking about the two extreme scenarios. It makes sense to me to ask what the system does at the edges. Oh and even without any figures, I can assure you it is more than 0.00001% of Offerpal users on either side of the nice bell curve “normal” portion.
Did fb 4get to pay TC?
I agree with Arrington – those scam offers need to stop. My favorite is the IQ test (the one that requires your cell phone number, and dupes you into a $10 monthly charge), tells me half of my friends have already taken… when I know in fact they have not.
Total bullshit.
So I guess the IQ test really works! Too funny how this stuff keeps going around. What I amazed with is how addictive these games are to the normal person. I am doing work in China and it is just as bad over here if not worse. Amazing that people can last behind the PC so long as they run through these games and it is beyond me how some people get any work done throughout the day. Social networks are a great tool but these games are complete crap.
I just wonder if Facebook accounted for all this underhand money in their valuation!
Well its not exactly a scam. For 10 bucks that goes to your cellphone bill, youll get your virtual points, vs buying via paypal or credit card. also, youre not obligated to keep the subscription, and you can cancel at anytime. to what points are you saying that it’s a scam?
Is the user clearly notified that $10 will be charged to his cellphone bill? Even if that is understood by the customer the scam part is undoubtedly the subscription. While there are some who carefully examine every detail of their bills, these companies are literally banking on the customer just paying unrelated bills like these for some time before discovering bogus items like this.
Interesting how many of the cpa affiliate networks are running facebook traffic only offers:
http://www.find...d-facebook.html
Determinately facebook are profiting from these applications, from Shukla using such harsh words to make people think othwerwise is not a good debate.
It’s proof in itself just from the $150 fee or whatever it is for your application to be approved is enough in itself to say they are profiting!
And from profit comes greed and evil. They don’t care if facebook turns into a big spam box, they are only interested in the numbers in both users and revenue!
quote – From the video, Mike is not talking about _every_ single user falling into those two categories. He is talking about the two extreme scenarios. It makes sense to me to ask what the system does at the edges. Oh and even without any figures, I can assure you it is more than 0.00001% of Offerpal users on either side of the nice bell curve “normal” portion.
we aren’t talking about bell curves here. And these 2 extreme scenarios happen alot more then you think. I personaly play some MMO’s that work with these types of companys and maybe about 20% of the CPAs even work for myself. I personally know people that dont work at all for them. These companys only care about making FREE money. This isnt about cutting costs, or increasing revenue, or increasing their costumers. They want FREE money, and these companies will continue to get it unless people speak up and demand something be done.
Obviously, Mike can’t get that data. How do you expect anyone other than the game developers, advertisers, Facebook and Offerpal to know what % of users are getting scammed and how many times these scams show up? All he can do is say, hey, I play these games and I see lots of scams on them. He can’t tell you whether users see the same scams as he does, but its a fair assumption that Offerpal isn’t targeting Mike Arrington’s Facebook and specifically giving him the most scammy offers.
Offerpal should be providing us with numbers as a means to defend onself. Anu Shukla could easily say: “we’re aware of these scams and are trying our best to eliminate them via X, Y, and Z methods. We’ve reduced their penetration by B%” etc. etc.
Why dont Mike write about google’s practice of writing “Sponsored Links” in farthest corner from the actual links in the main column. Why cant google just write “sponsored” at the start of ad link? Everyone praises google’s text ads, but i see novice users clicking those links thinking it is a search result. If any magazine publishes ad looking like content they write “Advertisement” at top, not in some distant corner.
If it looks like an organic search result, it’s probably an ad for something the user is looking for. Win-win for advertiser and consumer.
Your point would be marginally relevant to a story about bloggers taking kickbacks or something along those lines. This story is about scams. The user fails to read the fine print, so ends up signing up for some $10 / month recurring phone bill charge. Very different situation than mistaking a text ad for a normal search result.
Hello, even i’m talking about fineprint. Writing ’sponsored’ in far corner is worse than very fine print. Both mislead people, they leave website after visiting and knowing it as wrong place. Win-win is simply not, lose-lose for both advertiser and customer, only win is for goog. Just because goog got money no blogger dares to write against.
This post isn’t about google. Keep your comments on that till one on google show up. But even then, ur point remains irrelevant. Clicking on a sponsored ad isn’t the same as a survey which fools you into signing up for money.
You’re comparing apples to oranges here, buddy, and frankly, you’re coming off as either a troll, an idiot, or both.
Both don’t wind up with the user being signed up into hidden contracts that cost them a fortune. At worst, you wind up at a website where you can do something. If there’s something specifically wrong with the site, it hosts malware, it’s really deceptive, report it to Google, they tend to be incredibly quick with removing them from the advertising pool (from my experience)
I call bullshit on Kevin’s comment. I watched my boyfriend type “Nike” into the Google search bar and then the first sponsored link was for Nike (where Google makes money) and then the next real link for Nike, which was a real search result (Google doesn’t make money). This is a scam. Google makes money off my boyfriend because he simply clicked on the first link he saw, which read “sponsored link” at the far right. I watched him click the sponsored link, Google made money, Nike paid money, even though he already knew what he was looking for. When I asked him why he clicked the sponsored link he said “I picked the first search result.” So Kevin, how is it that Google makes money and that is win-win? I see it as Google Win, Advertiser lose (he already knew what brand he was looking for, just didn’t know the URL) and Consumer LOSE (has to pay more money for product to cover the payment to Google).
> This is a scam. Google makes money off my boyfriend because he simply clicked on the first link he saw, which read “sponsored link” at the far right. I watched him click the sponsored link, Google made money, Nike paid money, even though he already knew what he was looking for.
Uh, bullshit, that’d be Nike’s fault, for placing Google ads for their site under the ‘nike’ keyword. How is it a scam if that’s what they set it up to do?
So, your boyfriend wanted to know the right URL and Nike wanted to get the dumb users to the right url. So, win-win.
Thanks for the support. Why cant google write “sponsored” at start instead of far right? They actually want those ad links look very similar to search links. That is nothing but deception. Bloggers are afraid, very afraid.
Your boyfriend didn’t pay any money to click on the Nike link. Nike did. Who got scammed? Nike? Thats what I thought. Next time you take the time to post, think first.
@Ray, she made it clear that he has to pay goog-premium to nike, next time he buys a shoe. You either did not read her comment or did not, of course, think.
Now Bing/Yahoo should first make changes and force goog to show “sponsored” explicitly. If i were in US i would have sued goog for this daylight robbery.
The thing being ignored here about Google is that not only does it say “Sponsored Link” in the corner of a sponsored search result, but sponsored links are also in a different *color*. I mean, come on… How much more is Google supposed to do to let you know the link is sponsored?
Nike can easily blacklist their own search term – but they don’t WANT to. Why? What if “SuperCool™ Nike Shoes Made With Slave Labor In Nigeria ” gets mega-linked and suddenly becomes the number 1 google search resort for “nike supercool” – now what % of people will click on the article Nike DOES NOT want you to read?
As a handler of more than a few adwords campaigns, I INTENTIONALLY make sure a search for my brands and company names have adwords ads, and I’m willing to pay more for them than any other ad. Why? Because if they are looking for me, I don’t care what it costs – they’d better damn well find me!
If you make shoes, how valuable is someone looking for ’shoes’? Now, if you make “xyz supa moon shoes’, how valuable is a search for ‘xyz supa moon shoes’? The more specific, the more valuable – you want your ad first, before Nike’s asses post an ad for “SuperCool Better than XYX Supa Moon Shoes, Says Everyone”.
Nike can handle themselves, and if you think you pay more for Nike shoes because of Google then you need to rethink your grasp of economics.
Wow, I can’t believe the ignorance displayed from goog scam and ceejayoz.
First of all, if I type “Nike” and do a google search, I would expect the nike website to be the first result returned. And it is. In fact, nike didn’t even pay for this, cause they’re not in the sponsored links! I would expect them to be in sponsored links for a search on “shoes” or something maybe.
As for “Everyone praises google’s text ads, but i see novice users clicking those links thinking it is a search result” – wow, a few google newbs click on the Sponsored Links area, even though it’s a smaller font and size, not always related, off to the right and clearly says “sponsored links” somehow it’s a scam??
You two need to understand what a “scam” is. You completely miss the point of this whole article, where people are PAYING MONEY for services they don’t want. When they enter their CC number or mobile text and get charged for a service they didn’t want, that is a scam. Spending 5 seconds browsing the site you searched for is NOT a scam.
Wait…your boyfriend had to do a Google search to figure out how to get to nike.com? You both sound like idiots. Please don’t breed.
Let’s assume that 100% of what you say is true, and despite all evidence, you are not idiots.
Even in that case, what does that have to do with the discussion about social gaming scams? None of these claims is mutually exclusive!
The claims that 1) Google is scamming someone (who?), 2) Arrington/TechCrunch are in love with Google and overlooking this, AND 3) companies like Offerpal, Tatto Media etc are all scammers are all compatible with each other.
wow, welcoome to the world of advertising! i guess we all get hosed by paying extra for our coke or pepsi because they run tv commercials? if he had googled tennis shoes, that sponsored link(ad) would have shown up as well, along with other paid ads. the other links show up too, what is the problem?
as fasr as the leads gen scams, i play the game mafia wars on fb, took advantage of a netflix offer, and have manged to not fall for the iq test scam, or others. but they do piss me off, the way they hide the real terms in superscript.
So your boyfriend clicked on the link that says sponsored link to the right, did you also notice that it was yellow and the rest of the page is white?
MTGirl FTW.
um… they are highlighted as yellow (which I automatically ignore) or all the way to the right column its pretty obvious
Hi Janet,
There are sponsored links for EVERYTHING you search for, and not just on Google. On Google, there are two or three links at the very top are highlighted with a light yellow background to make sure they are easily distinguishable from normal links. The first link in a Google search is what you get when you use the “I’m feeling lucky” button, not the first thing on the results page.
Also, Nike spends a certain amount of money on marketing. They budget for that. Some of it goes to TV ads, some of it goes to newspaper and magazine ads, some of it goes to sponsoring athletes or sporting events, and some of it goes to Google and Yahoo and Bing.
Your boyfriend did not pay for clicking the link, Nike paid for it. The price of Nike products will not go up because your boyfriend clicked on the link (affecting everyone on the planet, by the way), because the prcie of marketing is already factored into the price of Nike’s products.
@MTGirl, lol. You read people’s mind or what? That’s exactly what I was thinking. I love it…lol
Google isn’t purposely doing it, but benefiting from these scams as well, probably more then the games and fb site put together. I can find 100 of these pages in 30 seconds in organic search results.
The sponsored links are highlighted in orange and say sponsored link. What else do you want? It’s not Nike’s or Google’s fault your boyfriend can’t figure that out.
“The user fails to read the fine print”–Shame on the end user. If you enter into a contract, you dang well better know what is on the contract.
a) Why don’t you use correct grammar.
b) Low quality clicks don’t cause injury: users click back when misdirected, and advertisers factor poor click quality into their bidding. It’s not at all like signing up someone for a permanent fee.
That’s the most ridiculous thing I’ve heard. The ‘Sponsored Link’ is extremely clear and most users know the difference between a search result and an advertisement. No one’s getting conned – majority of the users know what they’re clicking on and advertisers know precisely what they’re paying for. Get your facts right.
4 thumbs up for Michael Arrington in discovering the Social Gaming Scam Ecosystem. And 8 thumbs up for brave enough to post it. That’s why I read TechCrunch in the first place.
Are you an octopus with thumbs?
Are you NOT?
I lol’d
Very Cool Mike:
Thanks for exposing this scam. It is really killing the legitimate models around social games.
OfferPal competitor Peanut Labs takes Mike’s post seriously and went out and asked 11,000 Facebook users this weekend what they thought:
http://peanutla...-to-cpa-offers/
you are an idiot. you’re one of the fags who high fives your friends in public for hitting level 200 in Mafia wars. a game that takes 0 skill and you dumped hundereds of dollars into. don’t be angry at the author of this article just cause you’re retarded.
Why is Offerpal CEO defending everyone from Zynga to Facebook? Rather confusing.
that way they aren’t alone, by bringing up facebook, they make it look like oh facebook says it’s ok, so we aren’t doing anything wrong.
Because Offerpal is part of the channel between Zynga’s revenue generation and Facebook’s accountants. If Zynga didn’t act as alleged here, and Facebook cleaned up its act, Offerpal would suffer.
it’s a form of argumentum ad populum, “see? these major players don’t have a problem with it so STFU.”
Time for techcrunch to take on these types of scammers
Kudos to you Mike!
Finally, a great TC article.
This takes TC back to its valley roots.
Expose these scammers and let’s shut ‘em down before they grow to be “too big to fail”!
sounds like they are applying similar biz models from bank and credit terms!
Mike – start up “techconsumer” or “techconsumerism”
You might have a real blog idea there writing about technology startups who misuse and abuse the tech consumer.
wow… i guess only in SF they answer people like that… lol…
Yeah, that was… quite a lot of swearing, for a business person to use.
I guess we can only assume she was really infuriated by this – which tends to suggest Mike is on to something.
….shady businesses are founded by shady people….
It should be noted that sh*t isn’t really a bad word in India — children use it. That said, it’s not good form while operating in the US.
you got to be kidding me.
who is stupid enough not to know that “shit” is a bad word for a business person?? that shows a huge lack of business rules and etiquette, and, yes, a shaddy business.
Try to read between the words; even her tone says “shit, they found out what we are up to!”
exactly. just like eating a burger at a conference in mumbai probably wouldn’t go over so well. “when in rome”…and all that!
Regardless of who is right/wrong – it’s a fascinating discussion and glad to have TechCrunch bringing it to the front page.
Totally agree. I’m glad someone like Arrington has the balls to bring this up at a conference.
Get the conversation started. Way to go!
ahhahahaha…
There was a mention of that facebook $9.99/mo txt msg scam in Canada’s national media in the past week. The Canadian feds are looking into it.
The scammers always scam until their wrists are slapped and they will move on to the next MAKEMONEYFAST opportunity
Oh hey, here is one article: http://www.cbc....xting-scam.html
this is one of the best TC post ever…. I applaud Michael Arrington…..
stand up!
ditto.
+1
+! Thanks Michael for keeping the bad guys in check
+1
damn straight. ++
+1
Very Cool Mike:
Thanks for exposing this scam. It is really killing the legitimate models around social games.
+1.
Michael, it may be a scam in some sense but I am just thrilled to see a game developer like Zynga making money hand over fist. Plus, the games they make are fun and addictive, something I enjoy.
I play all of Zynga’s games have been for about 9 months and I have never paid a dime nor have I been bugged to do so. I think it is truely amazing that these games are offered for free. And thanks to all of the people that do pay as I’m sure that that is what keeps them coming up with new bigger and better gaming ideas. Game on!
Someone needs to keep the Zynga employees from making comments.
Really? Do you really think that a positive review can only be written by an employee? Obviously, there are many people who have not tried to gain extra virtual money through these scams.
Zynga games bug you to buy points or complete offers all the time. The games are OK, nothing innovative about them, the just rip them off from whatever is successful e.g. mafia wars is almost a full copy of mob wars.
The review could be written by anybody, which is the problem. Astroturfing negative articles like this is a common PR technique, so if people want to be taken seriously when defending companies, they need to use real names. Otherwise, the safest assumption is that they’re on the take.
Well, I’m certainly not paid by anybody, and I largely agree that the games are fun and addicting and can be enjoyed without spending any money. The only obviously false claim is that you’re not bugged to sign other people up or pay for things — the games constantly remind you of what you could get if you spent money or pestered your friends into joining.
I agree that they’re not innovative. However, bringing video games to the masses (even if it’s just by advertising) is just as important as making innovative games. It’s not always the inventor who makes the product a hit.
However, none of this justifies *any* of the companies involved tolerating these outright scams. And, frankly, I think they’d all be better off (including FaceBook and Zynga) long-term if they clamped down hard on them.
Zynga’s probably not making a large fraction of their money from these scams. Most players probably pay them directly. And they don’t need the taint.
And FaceBook would likely see a higher quality total experience if they got the scams out. That would make them more competitive.
Regardless of whether you like or don’t like Zynga and their games, or think they’re brilliant or rip off other people’s ideas, there’s no excuse for them tolerating the scams and not clamping down on their partners. It hurts their reputation if nothing else.
Wow, a non-existing, anonymous Facebook user defending the company he works for!
Good job Mike. I always had my doubts regarding such services. Not a sustainable business model. Essentially like you pointed out they are “shifting” the money around.” It is one huge bubble waiting to burst. it is surprising how everyone is talking about millions of $, but no sort of statistics is revealed. Not a transparent business I mean.
Good on ya Mike. Keep it up.
Important story.
mike, kudos on telling this industry off. everyone gives praise to the companies that make a shitload of money running the offers, you should instead recognize the companies that refuse to do this kind of stuff. These are the companies that realize that the concept of screwing the user is rampant among those who are shortsighted and ultimately do not have the mindset to create sustainable businesses. They refuse to do it even though they know they would make more money doing it. These 2nd gen scam companies should be asked where the 1st gen companies like adteractive are today (adteractive powered freeipods.com offers)
There isn’t much difference in my mind from offering these offers to users and spamming… because everyone knows the dirty little secret that the offers that monetize the best are usually the ones that mislead/screw the user. I’d be interested to see the breakdown of revenue from legitimate services like netflix versus the types that attorney generals will eventually go after.
The real question is; how much of this is acceptable, and if not at all – then how do you replace it?
In order to make any money on Facebook at all (other than cheap ad money from small systems that can’t use much if any data to display the ads) you have to have some system to exchange real cash for in-world currency and lets face it, Users don’t want to pay anything for games.
Advertisements don’t make the gaming companies any money, and people won’t pay for games, so how are the bigger developers (much less us small time developers) supposed to make any money off the system?
None of it is acceptable and its on you, the developer, to figure out how to turn a profit from it. It’s just plain stupid however to build a business on a profit gained from scamming unless you don’t plan on being around for long.
“people won’t pay for games”, this is actually wrong; There are a lot of sustainable social game businesses making money off of players paying via credit card, sms, prepaid card, etc… I hope people won’t associate these bad practices to the whole social games industry…
Regarding the advertisments, you’re right, imo it can only be a bonus revenue, but you need to find a way for the player to pay you (and not by misleading him).
I play one of Playdom’s games and I pay for special points all the time. It’s darned cheap compared to other forms of entertainment.
The better question is: why do you feel so entitled to peoples’ money?
Take what the market gives you. If it isn’t enough, change your business model or try something other than a game. You don’t have the right to scam people just because you think you deserve more.
And I’m a fellow developer.
– The better question is: why do you feel so entitled to peoples’ money?
Hear, hear. This is exactly the attitude of the games developers.
A big part of the problem is the phone system that allows these recurring SMS without your consent – sometimes it’s written in the small print but this doesn’t count as consent. And it can be near impossible to cancel them once they are set up.
We ran offers like this back in 2005 for a very short period of time at HOTorNOT, that is until we realized what was going on. In a nutshell, the offers that monetize the best are the ones that scam/trick users. Sure we had netflix ads show up, and clearly those do convert to some degree, but i’m pretty sure most of the money ended up getting our users hooked into auto-recurring SMS subscriptions for horoscopes and stuff. When I hear people defending their directory of deals by saying Netflix is in there, i am reminded of how hotel pay-per-view has non-pornographic movies. Sure it gives them good cover, but we all know where the money is made.
In the end, we decided to turn the offers off. Quite frankly, the offers made us feel dirty, and pretty much on the same level as spammers. For us, the money just wasn’t worth it. On top of that, we relied on our goodwill with users and focused on growing by having a product and company that our users liked. Our sense was that using scammy offers would make good money in the short run, but would destroy our userbase in the end. Perhaps apps on facebook don’t feel this pressure because facebook is so huge, and there are always new people to burn.
I’d like to point out that there are some game companies out there who are holding out on using offers to monetize their users. Personally, that makes me 10 times more likely to pull my credit card out for them.
PS. I don’t think the concept of letting people fulfill offers to get credits is structurally a bad one. I for one would like to see the offer networks work together to create some set of public agreement on what types of practices are banned from their network, and perhaps they can evan have some sort of certification logo. These practices will only stop when companies are not competitively crippled by NOT doing them. In effect, we need a nuclear non-proliferation treaty among the offer networks.
I do, let them buy with cash or not at all. The offer is a bribe and they wouldn’t have taken it otherwise.
All advertising is designed to make you an offer you wouldn’t have taken otherwise. The problem is not that there’s a bribe in the offer, the problem is that the user is deceived about the terms of the offer when he or she investigates and accepts it.
James, I can completely empathize with you on this.
While our community browser game, StarPirates.net, may not have the millions of users that some companies do, we also looked into implementing a system like this.
We were very hesitant to do so as, like you, we rely entirely on the goodwill of our customers. But many of our customers were asking about alternative methods to earn in-game resources.
So, we looked into it and went with a company that came highly recommended. We told our customers that we were testing it and wanted their feedback.
A week later, the results were as clear-cut as could be. Despite the the fact that most of the surveys/adverts were legitimate, the few scams that came through obviously left a bad impression. We ended the experiment and are looking into alternative methods.
I’m shocked to see this. Thanks for the post.
Right on Mike! You nailed it. They are scamming users, and everyone in the games industry knows it.
The real culprit is facebook who knows this is happening and does NOTHING about it…. almost all facebook ads are scams…
I suspect this would be very difficult for Facebook or Myspace to control.
Isn’t this what the BBB was designed for?
James is absolutely right. What will come of Zynga when people stop falling for the scams and realize they’ve been scammed.
they control access to the platform, easy enough to control. A) someone complains b) You check it out c) You see the scam offers d) you shut down the game until they fix ti.
Zynga is hiring for an Oracle admin right now, so it seems they predict the cash to remain flowing.
well, they are hiring a ‘Fraud manager’ as well, so maybe they are plugging the boat. Just kidding, this is just someone to answer charge backs.
Zynga is in no risk to go bankrupt, but it is amazing how inept they are, considering their scope, revenue and funding.
The real question here is whether or not we should take Facebook Connect users seriously? .. no one does really..
THANK YOU for bringing this out into the open. Anu Shukla is the woman-equivalent of a prick (I’m not sure what you call it). And, prickish people hire prickish people. Call me a prick for saying this.
It’s only a matter of time until Facebook clamps down on this the same way they did on banner advertising.
i believe the female equivalent of prick is bitch. pardon my french, bitchez.
Then maybe she’ll hire you? jk
WOW – Thanks for being the whistle blower on this fraud… unbelievable.
Facebook, MySpace and other social platforms that support these game products, need to step up and enforce regulations to protect their communities from out-right fraud and sly, deceptive practices.
It is disturbing to see scammers squeeze out the ethical gaming companies – very wrong and needs fixing asap.
Thanks for sounding the alarm!
@SusanBeebe
With Vaughn Gaming, we are against the idea of such ways. Those “offers” are a joke and a ripoff. Hopefully there will come a day where either these companies wise up and pull such offers to protect their players, or, the players just stop using said offers to the point of them having to be pulled.
http://theoffic...e_Refrigeration
I don’t always agree with everything that you say, but bravo for standing up for the user experience and straightforward business practices. Honesty and integrity are rarely rewarded in this business or this world, but it would be nice if they were.
-Don
At first I thought that this was just another rant, but inactually checked it out and DAMN it’s misleading! You people asking for the numbers to back it up obviously have never played farmville or are on the super smart side of the bellcurve because an average idiot like me would have fallen prey. Good job Mike
These are incentivized offers. The user knowling opts into purchasing the sms service.
WHERE IS THE SCAM?
the scam is that the user does not know too obviously that the offer is $9.99/month
are they stupid? dont you read before you submit ok?
The scam is that they tell the user they are sending a text for one thing (the answer to a quiz or some such nonsense), but in reality the user is signing up for a subscription which was not disclosed. It is essentially the same scam as the $5 ‘rebate checks’ mailed out to unsuspecting people. When you deposit the check, the sender takes advantage of the fine print saying that depositing the check signals your approval for the company to automatically withdraw funds from your account for some worthless service.
It is really as close as you can come to virtually mugging someone online.
Except it *is* disclosed. I’ve seen all of these offers too. And the $5 checks in the mail. It is always disclosed. That’s why it is LEGAL. If you don’t like that it’s legal, then let’s change the laws so that notification must be larger or refunds must be easier.
This article shows two specific examples where the terms are misrepresented.
I know, right? I mean, who wouldn’t just JUMP at the opportunity to buy $170 worth of Virtual Professor?! Frankly it seems unfair that you even have to play a game in order to get such an AWSUM deal like that.
Well said Mike.
Would like to see TC doing more of this to expose the shadier and less ethical ends that some of the new media darlings actually go to so they can prop up a business model they’ve not actually thought through.
If Zygna etc are actually good companies they’ll start policing some of their sources of revenue and put these parasites out of business
+ 1 parasites – haven’t heard that term in ages – but yes that is exactly what they are dealing with here.
I speak with an upward inflectiooon. Just like thiiiis.
In all honesty, she did a pretty terrible job of defending herself on the spot, ambush tactics or not.
It’s the role of journalism to take on such investigative endeavors, and I’m glad Mike’s on the beat.
I was there, and I actually think she did a marvelous job countering each of Mike’s points. I don’t know which was more accurate, but Arrington came off as a giant antagonistic tool who, when answered point by point came back with nothing more than “You’re the bad guys! I’m the good guy! Ima write you up and you will witness the power of my blog!”
I haven’t exhaustively gone through every single offer provider out there to see which are the scammy ones and which are the legit ones – neither has Arrington, if I guess right. But to pull out something like Video Professor….why not take late night TV to task then, Mike? I see them scam that all the time! But I guess a TV viewer who chooses to buy is somehow more intelligent and informed than a poor game player who must be being duped into this!
As far as the offers being pulled down, she said point blank that offers that are flagged as suspect are taken down, and if that behavior persists, the networks that offer them are removed. If there is any blame to it, it could be that they should be more proactive than reactive when addressing that sort of filtering, but it’s no different than dozens of ad networks who do no different. I doubt the magic presence of Michael Arrington’s wit and logic had much to do with it.
If these offers are scams, then they will fall apart. Scams can’t last forever, and facebook is a reputable company – if their brand becomes associated with scams, they’ll damage themselves beyond any ad revenue Zynga might give them. Saying that facebook is turning the screws on the viral channels to try to wring more money out of Zynga is just dumb, and assumes a complicity and level of ignorance at facebook I don’t think their track record supports. By cutting the viral channels down, all facebook has done is hurt Zynga, at least in the short term, which may result in short term gains but will ultimately result in lower ad budgets. This is conspiracy logic at its most infantile.
Really what this all amounts to is that a blogger saw a way to start a beef and get some traffic going.
“Really what this all amounts to is that a blogger saw a way to start a beef and get some traffic going.”
I can’t help but notice that this has now become the mantra of anyone trying to discredit any criticism of any company on the web.
And what, in your estimation, SHOULD a blogger be doing? You seem to think that anything approaching any sort of questioning of the status quo is just a tactic to get more traffic, so what is the proper role of a blogger? To quote press releases and sing the praises of any company that turns a profit, no matter how they do it?
I, for one, commend the author for doing something that at least approximates some sort of journalism, albeit informal and not well researched.
I suppose a blogger, or “journalist” as he was so graciously referred, with an interest in the subject he was intending to write about, would have attended more than one panel, the one he was set to beef about. I would suggest a blogger would have asked something other than the most hostile and loaded question I’ve ever heard, so that he could at least put on a show of getting facts, as opposed to being a crusader.
Any blogger/journalist worthy of either title would have actually asked decent follow up questions backed by research, rather than rushing to follow up what was literally a point-by-point refutation of his argument with what was literally nothing but accusations – no questions present.
Let’s turn Mr. Arrington’s approach back on him, shall we? Mr Arrington, all blogs do is try to start hostility and confrontation to drive up traffic! it’s gotten to the point where if other bloggers who try to have some journalistic integrity refrain from starting confrontations, they don’t get the same traffic they need to make money. So the honest blogger/journalists are getting squeezed out by those big-time bloggers with a bullhorn and axe to grind. It’s a conspiracy! Conspiracy!
I would welcome an invasive, thoughtful and isightful expose of the offer system. This, and Mr. Arrington’s braying, spotlight-stealing performance at VGS, was not it.
No blogger or journalist who holds themselves to any sort of standard could look at the piece written here and see anything more than rabble rousing and crusader demagoguery.
That must have been some pretty creative editing of that video then, because I didn’t see anything I would call a “point-by-point refutation of his argument.” In fact, what I saw was
1: Some clearly made up numbers. Seriously, you really believe that out of 112 million users, there have only been 5 complaints about improper billing? Even completely legitimate businesses who have absolutely no questionable practices have more billing complaints than that. I can absoluetly guarantee that number was pulled directly out of her ass, right along with all the “shit” she was talking about. Seriously, any credit card company will tell you that any vendor has far more than .0001% of their customers trying to dispute charges, just as a natural matter of doing business.
2: A complete evasion of the issue by saying that they can’t be screwing big companies, because big companies won’t let them screw them, which in no way addresses anything that was said, followed by some lame attempt at moral relativism by trying to claim that Netflix itself could be seen as a scam because you still have to pay them even if you hold onto the same two movies for a year.
3: The patently false claim that Facebook isn’t making any money off of these social media games. Once again, do you actually believe that the game company is making all these tens of millions of dollars, and Facebook isn’t getting anything out of it? That would be a pretty stupid move on Facebook’s part, but then maybe you think the people at Facebook are idiots.
4: Admitting flat out that many of their offers are the product of “shady characters,” and a full admission that they have done nothing, and intend to do nothing, to police it, other than the bare minimum Facebook required them to do.
Now as I read that, you have obvious lie, evasion, obvious lie, admission of guilt. How do you expect anyone to respond to that, and how does that even count as a refutation?
anu, is that you?
what you don’t seem to acknowledge (or realize) is that your laissez-faire attitude to letting the system work itself out is that a lot of people are getting ripped off in the process and those participating in the ripoff are benefiting from it, thus making the “working out” process slower due to conflicts of interest. “scams can’t last forever,” is true, but they are damaging while they do last. you don’t even handwave any collateral damage, you simply don’t address it.
and the ranting against “bloggers” is really distasteful. save it for glen beck.
go ahead and turn the tables on arrington/TC, i know i try to from time to time. he can take it, and he’ll be the first to tell you that he’s not a journalist.
I have no problem with bloggers. I do have a problem with demagogues and people who wear the mantle of journalist who don’t behave in journalistic integrity. It’s Mr. Arrington who is displaying Glen Beck-ian like outrage while giving only a minimum of corroborating information. Burn the offer wall witches, Michael says!
Arrington does not “wear the mantle of journalist,” and in fact (if you had read my comment) is the first to cast it off.
You’re trying to kill the messenger (look it up).
It doesn’t matter how he thinks of himself. The fact is, he’s reporting this as news and people taking it as news. Saying “I’m not a journalist” doesn’t make Glen Beck any more believable either.
Gimmie facts. Gimmie more than one or two cases which were allowed to propagate, instead of being taken down like they were supposed to.
I think some offer providers probably are crooked. I think there probably are scams. But a blanket accusation like this is useful to no one. It’s definitely a legitimate business model, and to decry it all foul is disingenuous when there may be only a few bad apples.
the only “blanket accusation” is against providers of scam offers. you may have a problem with OP/playdom/etc. being the face of it, but them’s the breaks. if you play with pigs you get dirty. for someone who holds details so dear as to read between the “journalist” lines, you’d think you might be able to get the point of this story. but hey, fine, if you think it’s no big deal, then that’s a value judgement you’re entitled to. one wonders why you’re so aggravated by this story, though.
So meh, let me get this straight, your position is that if a company only gets a small percentage of their income from going out on the street and mugging people, then that is fine, as long as the numbers don’t show that the majority of their income is made from mugging people?
In my opinion, if a single penny is being knowingly made from ripping off or scamming customers, then the business needs to reevaluate their business practices and network partners. Saying “well, only a few of our offers are blatant and unabashed scams, but not most of them” is no defense at all. Your business is either above board, or not, arguing about what percentage of your business is above board is the province of mobsters, not tech companies.
Shall I join you at your protest of Google’s ads then? Will you boycott local NBC affiliates because they show Video Professor ads? By your logic, these companies too are not above board.
To talk about your earlier points:
1. “Some clearly made up numbers.” She didn’t say five complaints, she said, like 150,000, if I recall correctly. I don’t expect everyone to remember all their metrics, but to say she didn’t address the point by saying she must be lying is pretty thin. If Arrington thought she was wrong, he should have come back and said “that number can’t possibly be right.” She knocked him back with her answer and he didn’t.
2. “A complete evasion of the issue by saying that they can’t be screwing big companies, because big companies won’t let them screw them”
That’s not really an evasion. If Netflix was being screwed for two whole years with no benefit whatsoever coming from lead gen, do you think they’d still be doing it? That is at least common sense proof that companies are not routinely screwed on these deals.
3. “Once again, do you actually believe that the game company is making all these tens of millions of dollars, and Facebook isn’t getting anything out of it?”
Of course they are, in ad buys. But assuming that they’re allowing this solely because they don’t want to lose their cash cow flies in the face of their most recent platform announcements. Arrington must think facebook is full of idiots if they think that tightening the screws on the viral channels is going to make them more money from the likes of Zynga.
4. “Admitting flat out that many of their offers are the product of “shady characters,” and a full admission that they have done nothing, and intend to do nothing, to police it, other than the bare minimum Facebook required them to do.”
I guess any auto salesman who admits their industry has some shady characters is admitting to colluding with and enabling such shady characters. She said that offending networks are shut out of the system.
“Now as I read that, you have obvious lie, evasion, obvious lie, admission of guilt. How do you expect anyone to respond to that, and how does that even count as a refutation?”
She answered all his points. If he didn’t think her answers were valid, he should have challenged her on her points, just as you have done. But he didn’t. He called people names and ran.
Ok, first off, let’s just leave TV out of this. Certain FCC regulations (and odd interpretations of said regulations) make it more difficult than you might think for a license holder to refuse to run an advertisement, provided it does not violate any FCC regulations itself.
Now, as far as Google goes, I have never personally had Google give me a paid search result that was not relevant to my query. I have no doubt that if I were to search for common scams like diet supplements or how to make money off of Nigerian princes, Google would return paid links that were clearly scams, but I have never done a search for processor specs, and had Google hand me a bunch of Viagra ads. More to the point, I have never seen Google do a single thing to get around my ad blocker, or force me to disable my ad blocker to use any of their services. In fact, while sitting at home on my own computer, I don’t think I’ve ever seen a single Google ad, thanks to using Firefox and ad blocker. Still, Google seems more than happy to keep providing me with free services of all sorts, even though they don’t make a dime off me. I think it would be very difficult to lump Google in with a company who does nothing but serve up questionable offers, and even more difficult to equate them to a company that requires you to sign up for a subscription service before they will give you the result of the quiz that directed you to them. Does Google take money from bad people? Sure they do. Does Google do anything to direct me to those bad people under false pretenses? Let’s put it this way, as I type in “video professor” in the search field, the first auto-complete that pops up is “video professor scam.” If that is Google’s way of pushing Video Professor on me, then I would say that they are pretty squeaky clean.
Now, on to the other stuff.
1: No, she most definitely said that of the 100-150k of trouble tickets they log every month, the vast majority are people asking why they didn’t get their points, and that only 5 trouble tickets (or at a different time she said .0001%, which by the way would still ad up to more than 5) in 2 years have been about billing issues related to an offer.
2: It is an evasion, because the issue was not whether or not Netflix sees value in their service, it was whether or not the service is designed to build or destroy value. What he said was they they have a system that facilitates gaming of the offers. Her response was basically “well, Netflix hasn’t complained yet.” That isn’t an answer. That is like someone asking if you have ever broken the law, and you answering “well if you mean have I been convicted of a crime, then no, I’ve never been convicted.”
3: The form the revenue comes into Facebook is irrelevant. Her exact words were “Facebook is not making a lot of money out of Zynga. Facebook is not making money off of Offerpal.” That is a flat out lie. There is no room for prevarication here. You are either giving them money, or you aren’t. She says that they aren’t, which would apparently mean, if she is to be believed, that Facebook is either giving services away for free, or they have found some way to exploit the system to prevent paying Facebook. Now, clearly Facebook is generating revenue off of these games, so her comment is just a simple lie. Whether or not you choose to call if revenue sharing, or ad buys, the money still spends the same.
4: You analogy is flawed. It would be more like the owner of a car lot saying “yeah, some of my salesmen are real scumbags, but what are you going to do? They work on commission, and they haven’t actually been busted for anything illegal, so it isn’t like I can fire them.”
Lastly, I’m not Michael Arrington, so I can’t sit here and tell you what was going through his head, but I can tell you that standing in front of a room full of people hissing and booing at you is not exactly the most optimal time to get into a point by point debate over someone’s prevarications, misdirections and lies. He confronted her with his concerns, and rather than try to assuage those concerns, or even answer them, she chose instead to literally say he was full of shit, mock him, and then blatantly lie and basically dare him to call her a liar, while the room booed and jeered at him. Now I SERIOUSLY doubt that in the same position you would have gotten out your notepad and started questioning exact numbers. He did more than I think most people would, which is to get back up there to hisses and scorn, state clearly that he wasn’t buying what she was selling, and then leave, as the panel ended.
At least that is what was shown in the video. If something else dramatically different happened that wasn’t shown in the video, then please fill us in.
It wasn’t nearly that hostile a crowd. There were no hisses and boos that I remember, just cheering for Anu’s response, mostly because I think no one expected her to be able to stand up so well to an ambush attack like that. There were quite a few people there who agreed with Arrington.
Nobody was about to lynch him. He had just not been prepared for someone to actually answer him back with the same hostility he showed them.
Bravo meh! It was funny to see Arrington run away in the video.
Must be more of that incredibly well done creative editing then, because you can clearly hear people hissing and booing in the video, which sure looks like it is being shot live.
Hey Meh, how much are you being paid to defend the business practices of this shady company?
I know you libertarian types are against all forms of regulating any business in any form whatsoever, and that businesses can do no wrong at all in your eyes, but seriously, even after all that’s been shown you STILL defend them?
You have to be getting paid to write this crap.
How much does it pay? I could use some income. If these companies are scamming this much money from users, they have to be able to pay pretty well, and if they pay enough, I’m willing to do as you are, and throw away any sense of ethics, to defend these misleading thieves.
Because you were there, is it safe to say you have an interest in social gaming/virtual goods? I think it is.
Is it also safe to say that it is profitable for these social gaming companies to serve these sorts of ads? I think it is.
So it is safe to say it is in your interest to keep the status quo, because it is profitable, which makes you biased.
Brilliant Mike, well done, very well done.
Perhaps your heading should have been “Facebook finds a business model, legalized scamming”
I know first hand how this has become a slippery slope in the lead gen space. These aren’t leads, its just data that is monetized for monetization sake. There is no there, there.
I applaud the effort, but why stop there? Really you could say this about 60-70% of all the advertising mediums out there (such as Google’s Adwords or the in App advertising on Smartphones such at the iPhone) and see this exact behavior going on. And everyone not only turns a blind eye at it but throws money at these companies because they got the next great ad vehicle. However there is no real value they offer and more than not they slip into this abyss.
Again, Its refreshing to see you draw a spot light on these guys, but I wish it was a great part of the equation in your coverage.
The article is spot on. To say that it needs ‘numbers’ to back it up – they are out there. Even offerpal and other companies will state flat out: A user that fills out a lead will only get an average of less than 50% conversion – often 30% or so.
That conversion comes from a ’scrub’ that the lead offer does, which is very common: they use a whole set of criteria to say the lead is invalid – and yet they keep the data AND spam the user.
The fact is that Offerpal and the other middle men have misunderstood the lead business: It’s all about quality.
I thought that this could be the answer for the lead business but it looks like the opposite. We did isolate a number of key points in cleaning up the data. First is that the user must be verified: Facebook make that almost impossible. Second is that the user must be well informed that ’scamming’ is not ok. The lead buyer will also need to be made aware that screwing users is not ok – they clear the lead and if they don’t – they are not used any more. We did take this on to consideration and built systems accordingly.
The facebook – offerpal middleman chain doesn’t work for the lead industry. It is counter productive and naive to believe that it would. Whomever thought so, is just plain not knowing the business.
Facebook and Offerpal is to content with this status quo so that is what they will try to maintain. Just look at facebooks platform changes they are implementing: they are trying to freeze out new developers and maintenance the status quo before they get a meltdown.
what a hilarious idea anyway, the longer you stay idle away from the game the more money you make on your investments…I just went back to a Mafia Wars game that I haven’t played in a long time and I had over 6 million dollars for me waiting…lesson learned. Patience is a virtue…
Great post! I agree that the disclosure for users on these offers is way below where it should be and they are often useless and scammy. Though I do want to point out I think these guys are probably in the same category as folks like Cash4Gold that TC vehemently defended recently: http://www.tech...dly-profitable/
It is kind of odd how on one subject the attitude seems to be “taking advantage of the uninformed or desperate is the very definition of capitalism” yet on another subject the same behavior is considered reprehensible, isn’t it?
It puts me in an odd position regarding this story. On the one hand I really applaud someone calling out scammers, yet on the other hand I can think of any number of practices this site has applauded, which to me don’t seem to be ethically any different that the scam they are calling out here.
Cash4gold is not even close to a scam.
ha, ha.. just google “cash4gold scam”.
Did you ask Facebook, Myspace and their advertisers to comment?
BTW, that’s a good question.
He doesn’t need to provide further proof for anyone that has been on-line since hotmail came out already knows that scam/spam advertising (barely legal/unethical tricks/blackhat) is all over the Internet. However you can’t deal with the whole Internet crime scene in one go – there are different levels of ethical behavior on-line – you have the out right criminals that are involved in real organized crime both on-line and off-line that work from off-shore servers so they can’t be shut down by law – then you have the big companies that got big back in the old days using spammy methods – many of them have now gone legit – some still use similar methods of getting leads – then you have start-ups that copy all they know from the big guys – including the trashy methods of getting leads.
So what I believe is being highlighted here is one small pocket of a much bigger problem. The problem is these kind of scams pay networks a lot of money, in times of recession – the sharks in the trade get desperate so offer BIG money for networks to turn a blind eye and let them on.
An example of fighting back against the crooks is Ophra – she’s reclaiming her personal brand and suing a number of the big Acai berry type networks that are using her brand without permission or paying her. The kind of people she is suing are the same kind of people that are filling their pockets/ hood winking the public, by hiding terms of service and using misleading advertising – then blaming the end user for being dumb for not reading the contract, governments have had to bail out banks because of these type of practices.
Ha. Beat me to it.
I esp. like the video prescence of Mem Sahib Shukla vs. the 1991 version on her profile…
This is why I read TechCrunch.
Great job Mike! People like Anu make my skin crawl. Hopefully someday soon the laws will catch up to her and her ilk.
-1
Stick to the argument otherwise you allow them to win by default
i think i actually deleted the comment you said -1 to. Offerpal’s going for my throat on this one, but i won’t have comments attacking their CEO’s race, looks or gender.
+1
Even now, the first free offer in FarmVille is to download a Zwinky toolbar which is known to encourage spyware downloads http://www.goog...search++spyware
That is mob mentality- the toolbar at least says what it is, it isn’t trying to dupe anyone into paying money and at least is upfront that you are getting the software. I download and it wasn’t spyware that I could tell.
This is so true, you’re right on
I agree with ekc,
This is also why I read techcrunch daily. Honest and NON Bias reporting.
Thank You Mike.
Non Biased reporting?
You obviously don’t read TC that often.
I guess he takes Fox News’ “Fair and Balanced” at face value too.
I’d like to specifically address Mike’s comments that the advertising for “the legitimate advertisers, like Netflix and Blockbuster” is low quality. Netflix is one of the most successful “dot com” companies around. Despite the turmoil in the stock market, NFLX stock is at a 5-year high. They have built their business on lead-generation via “Free trials”. Undoubtedly, if the advertising from these sources wasn’t working, they wouldn’t continue. Unless Mike has interviewed Netflix and Blockbuster marketing execs — have you, Mike? — he cannot make such bold claims. As someone with a decade of experience in online lead-gen, I have little doubt that the back-end metrics work for Netflix and the advertising is an effective, profitable customer acquisition vehicle.
Unless I’m misreading what he wrote, that is the whole point. Yes, obviously this system, at present, offers some value to some legitimate businesses, but it is structured in such a way that the longer the system is in operation, the less value it offers. When it reaches the point where it no longer offers sufficient value to Netflix, then they will, as you say, pull out, leaving nothing but scams. As far as I can tell, he is not saying that Netflix is a scam, or being scammed, but rather that, the more scams are present, the less value the platform offers to advertisers like Netflix.
It is not at all hard to see a point where users become savvy enough that they treat any of these offers as scams, thus completely eradicating any value for legitimate companies, and reducing them solely to platforms to prey on the uninformed. By not policing, or even encouraging, the scammers, these platforms guarantee that legitimate businesses will not want to have their brands tarnished by being lumped in with the scammers.
+1
+1
23
That’s Numberwang!
well said. the scams ultimately drown out the legitimate players if the system rewards scamming.
I am one of the few folks who have actually generated millions in revenue from these Facebook applications, so I sadly have to say that Arrington is right. The way most of these mobile offers work is to trick kids (yes, folks who are under 18) into confirming a PIN number on their phone. The result is their parent’s phone bill is charged $10-$50 a month so that the child can earn points in a game. It’s that simple.
I’m not proud of what I did to generate cash, but at least we can all be honest about how it’s done.
+10
This post has the ring of authenticity, and Anu Shukla reminded me of a spammer/scammer I know. Keep up the good work Arrington.
Don’t fully understand how it’s a scam. There are some pretty redundant surveys out there, that I’d never fill out, but you’d be surprised how much people actually love the stuff. They enjoy the quiz ads, they enjoy tattooing their profile and don’t care that they need to fill out a survey. Honestly though, the business models within the sector are proving rather frail, and it’s only a matter of time before something new emerges. Whether it be CPA, CPS (cost per share), or whatever.
I do agree with Mike, in that Facebook needs to be doing something. The only guy getting screwed in this deal is the application developer. As soon as facebook developers’ allotted banner ad space dries up, or the virtual currency/survey model dries up, the only thing left to monetize in the realm will be virtual gifts (*not virtual currency*), and being that Facebook already has a gift shop, they’ll be slopping up all the revenue. Thus beginning the Ice Age of applications.
Just re-read the part about signing up for a $10/mo subscription without being prompted. That’s pretty ridiculous if that’s happening. Though, this is the first I’ve heard of it.
It really depends on how the ad network presents it; what ad network displayed the example above? And are they they still active, or are they perhaps part of the ones turned off three weeks ago? You remember, right? They were shut off on a Friday night.
Yes people like decorating their profiles and buying virtual currency – I personally love virtual gifts and “silly” things like that and have been tempted to buy virtual credits/currency on many occasions or get it in exchange for filing out a form
- You need to separate the act of wanting to participate in social activities – with the perception that people are asking to be scammed by wanting virtual goods – they are not ! – they are agreeing to complete a task in exchange for virtual goodies to add to their game/social experience – that doesn’t need to be a big red flag with “sucker here scam me” written on it.
The bigger / legit companies need to squeeze out the scam offers – as it will make people trust virtual currency – at the moment it is being hijacked by scammers – virtual currency – like it or loath it – is something people will buy along at they aren’t made to feel idiots for doing it.
Things like Itunes and digital magazines are virtual gifts – it’s best to nip this in the bud on facebook or anyone that deals in digital goods of any kind suffers.
If you want customers to come back to you, you need to link to reputable offers it’s that’s simple.
This is so true, you’re right on
We’re evaluating TrialPay, OfferPal, and SuperRewards right now. Who would you pick as most reputable of these guys?
trialpay is the only one with any shred of ethical standards.
When reading Mike’s comment here, please note that he got into a huge battle with Anu at the conference he was referring to in the above post. It a bummer that I have to play citizen journalist here, but these kind of opinion posts drive me crazy when they are presented as fact. Offerpal, Super Rewards, and Gambit are all very good. I don’t have any experience with TrialPay myself.
Mike: Please tell us the specific experience you’ve had with each of these company’s so we can weigh your knowledge of the space.
I’ve heard good things about gambit as well. as in they are trying to fight the tide of horror washing over facebook. But I don’t know much else about them.
there’s no personal beef with these companies other than i hate seeing scams like this. This string started last weekend. I waited until the event to post again because I wanted to ask these things to Offerpal’s CEO. And of course the video shows the whole exchange, so it isn’t like I’m hiding anything here.
The big problem is that all these companies – facebook, zynga, offerpal – have a financial incentive for this to keep going. Hundreds of millions of dollars a year type incentives. My opinions are based solely on actually testing these products and talking to a variety of experts and participants in the industry.
OK. Firstly I agree with you that bad offers, are bad for everyone: consumer, game developer, and social network. The problem here is that offers aren’t as big of a revenue stream as you think they are for the major game developers. As I stated in my other comment, the vast majority of the revenue these company’s make is from direct credit card transactions. Is there money being made from Offers? Yes. Is there money being made from bad Offers? Yes. Its just not as big of a problem as you are making it out to be. Its not the “downward cycle” you think that it is.
If Zynga pulled offers from their stack tomorrow, they would still be spending tens of millions a year on FB ads. We would still be spending a fortune on FB ads. Everyone would be.
“We would still be spending a fortune on FB ads. Everyone would be.”
bingo. may as well leave comments using your real name from now.
Michael, Gambit runs all the same offers as Offerpal – I’ve tried them both. What kind of testing have you actually done?
The problem here is that offers aren’t as big of a revenue stream as you think they are for the major game developers.
“…for the major game developers.” why artificially restrict your sample?
Are you saying that the examples presented by Mike are false?
I am saying that the examples presented by Mike are a tiny fraction of the offers that are any of these systems. I am also saying that the basic premise of his article is not true. Social gaming company’s do not make most of their revenue from offers. There is no downward cycle here. They make most of their money through direct CC transactions.
Tiny fraction???
Do you have power over what you agree to? This article is designed simply to stir up some sensationalism that helps this bloggers wallet and ego after being spanked by Anu as you saw in the video.
By stopping by this guys page his advertisers pay him. Are you getting scammed because of this? No, you haven’t paid a thing to be here. Place blame appropriately Mike, get your facts lined up, post them here, then lets discuss the trail of tears you have described.
No game devs were harmed in the making of this post.
After spending years on tracking comment threads, especially at Techcrunch, there is a very common pattern that those who have a vested interest in what they are arguing against float up and become noticeable because they leave numerous rigid and defensive comments that often rinse through the exact same cycle.
You are certainly setting a new benchmark.
There is an interesting debate around this topic. You are diluting your own message with your approach. Pick yourself up, write a post from your own blog or company blog and we will link to it from the main post.
Thats what I was thinking.
It’s like a multinational company having multiple vested interest. 99% of them are legit, but 1% of them involve scams and exploiting people. To not call them out and say “the majority of their interest are okay so it’s alright that they do what they want” is absoslutely insane.
My thoughts at random:
Social Gaming Companies make more money with direct transactions such as Paypal per game on average.
Offers can be misleading and should be investigated. The social gaming ecosystem should address this together from an ethical perspective.
Michael Arrington has every right to embrace this as he wants.
It’s good to see these things happening and becoming clear as the financial and energy industry also dealt with scams, insider trading and other plots.
Philosophically speaking, the bail out is the biggest tax payer heist in history. But how do you affect change in that space? It makes sense to see things and go after them.. albeit in a RANDOM manner.
Google and others might be involved in similar levels of unethical standards/behavior but focusing on specific industries at a time increases the chances something will be done about it.
Companies don’t necessarily behave ethically. Look at the media.. I can assure you if you look at it from a deeply analytical perspective, massive propaganda and noise is spoon fed to us. Media is paid to get our attention, not to give us real news. Our system supports this.. so if they do crack down on these scams.. WE AS A PEOPLE, INCLUDING MICHAEL, SHOULD HELP ESTABLISH BRAODEN THE SCOPE AND STANDARDS of our ethics related legislations. But its good to start SOMEWHERE.
Regardless, one needs to check out the social gaming industry in China as the users behavior in a hyper-social manner. They purchase tons of goods. The chinese are regulating this strongly so look for guidance and innovation to come from that side.
In time this bubble will burst but one thing is for certain. Microtransactions and virtual goods are here to stay. And offers can change. Remember, money isn’t the only instrument of exchange. Time and knowledge can also act like currency so look for the Offer companies to innovate. These companies are empowering the future medium of exchanges.
But ofcourse, the underlying stigma is that the rich get richer and the poor get poorer. Will that ever change?
Excellent analysis. This is really great Mike!
Good post Mike. true, authentic – job well done
I’m a legitimate Facebook developer, and this stuff makes me sick. It may not be illegal, but it is deeply unethical. I went to a Facebook meetup a while ago where there was a guy from one of the advertising companies that deals with this stuff, and he made it very clear that he doesn’t give a damn about the users, and is delighted when some 15 year old kid gets stuck with an unexpected $10/month cellphone charge. He recently sold his company for a lot of money.
Facebook needs to come down on this like a ton of bricks. Put these bozos out of business.
They are already out of the business and working on their next scam/
“It may not be illegal, but it is deeply unethical.”
I can’t see how enticing people into paying $10/month without them actually realizing what’s happening is not illegal.
By extension, promoting the companies that provide such services would also seem to be less than legal
Our standards of what is legal and illegal is determined by our legislation and current system in place.
A lot of people in this post are looking at this from some kind of ‘hunter’ perspective. See something illegal – knock it out.
Will that uncover the bigger picture? You need a systems, macro, holistic view of the situation and then gauge the factors and forces at play.
This is the entertainment industry ladies and gentlemen. Shouldn’t casinos have more transparency as well? What about make money online programs?
Based on my aforementioned statements, this is a war. Remember the war on drugs?
Who here remembers the war on drugs?
Do you think if you saw some drug dealer on the street and went up and arrested him you did something big?
Lets examine this from a psuedo biological perspective where you have a virus. A virus spreads. You have vaccines which supposedly help us develop immunity against these viruses. Think of ‘motives to exploit our current capitalistic and legal system’ as a virus.
This will continue to happen and proliferate. The viruses you vaccinate against may cease. However, a mutation in the viruses DNA may cause some unknown version of the virus to be released, that is supported by the body (think of that as our current system) but the body may not know how to eliminate this particular virus.
I’m not quoting the art of war or something nor am I adept at tackling these issues. But what I see is a Tribe. A tribe being led by Michael Arrington.
Guys, Michael may have certain views on these companies and have differing views on others. He is, after all, human. Our processes are created by humans.
This isn’t a matter of debate. Bad seeds have penetrated good seeds (seeds = offers), and the farmer knows they can make money with these seeds but may or may not act on it depending on the laws of the land (land = social networks). Those who buy the seeds may not know what they are getting. This is a similar case to buying edible items without seeing ‘what’s in them’. Even now – we eat things with ingredients we have no clue what they mean yet we trust our government with them.. little do we know about the FDA’s agendas.
Suppression is an act powered and condoned by those in power to maintain their power for as long as they can. If any of you truly care instead of getting kicks out of a discussion, then do something. Michael, what should we do? lol
When are the drugs getting here?
soon
can I have some of what you are smoking?
“I can’t see how enticing people into paying $10/month without them actually realizing what’s happening is not illegal.”
me either, but it’s representative democracy at work. or rather, lobbying dollars at work.
+1
Good article… Now, honestly, do you really believe that *anything* will change?
Cash will always be a very strong motivator for mischief…
It will necessarily change some behaviour. It is not possible to build a sustainable virtual goods business with this kind of bad offers.
To explain your player they have to pay with real cash for the game, the main argument is that you want the game they love to last as long as possible, and a community perfectly understand this. But if you mislead them with this kind of offer, there’s little chance to build a sustainable business…
“Buyer beware” is as true a lesson now as ever. This really is an old scam with a high-tech twist. Essentially, users are tricked into getting something for free, because the alternative to get the same something costs actual cash.
I saw it everyday in college. Sign up for this card and get a free t-shirt, no obligation. Unfortunately, there always is an obligation if you read the fine print.
Same can be said here. I’ll admit, I was seconds away from being duped into falling for the FarmVille scam. I took the quick IQ test, was punching in my mobile number, and the **FLASH**.. I realized what I was doing… stopped… and saw a link to those long terms and conditions noone bothers to read. Buried in the thousands of words of text were the keywords… $10 billed directly to your mobile phone account.
I consider myself an educated user, and even I almost got duped. Most people, with the belief of something free coming their way, will fail to remember the basic economic principle… nothing is free.
These companies are skating the edge of legality. Taking advantage of the ignorant is unethical… whether it is illegal will be up to the courts.
I’m glad to see this is being reported on. I have my doubts whether it will ever make it to mainstream media. But there is always hope this warning will go viral on facebook… beating these criminals on their own turf.
FYI… I learned about this post off a facebook repost from one of my friends. I returned the favor and reposted. Here’s hoping ethical standards prevail.
great article Mike, I plan to share.
unfortunately, this form of marketing continues to thrive due to the greed of individuals. As Enrique states, nothing is free – but people continue to believe they can have something for nothing.
I play farmville all the time, have never paid a cent, but if I do ever want some extra cash I plan to pay for it direct to the developer like any other good or service.
Paying a developer for a game = totally fine.
Being able to play a game for free = awesome.
Exchanging your personal information in exchange for ‘free’ in-game rewards = greedy.
How will it stop though? I believe it is consumer education. People need to do their homework more. They need to remember that you can’t have something for nothing, its simple economics. And while consumers continue to sign up for silly offers in exchange for getting themselves ahead in a game (read: greed), we will continue to be presented with scam offer after scam offer.
The power is yours! If noone is signing up for ‘free’ offers, marketers will be forced to search for a new approach.
In their minds, dont fix what aint broke… I agree its unethical, but we can only adapt what is within our control – and that means our day to day ‘purchasing’ decisions.
You aren’t a legitimate Facebook Dev. You are a shill. Get off the stage.
For a living, I sue people who commit fraud on consumers in Wisconsin -262-740-1971. If you have been scammed, Wisconsin has laws against it. Judges and jurors, are people who are generally fed with with scams and ready to punish wrongdoers. I hate crooks.