Last night we wrote about the lead generation scams within social gaming networks. This is a guest post by Dennis Yu, the CEO of BlitzLocal, a privately held 50 person advertising agency in Denver, Colorado, specializing in local search engine marketing for franchises and professional service firms via Google and Facebook. BlitzLocal is no longer in the business of spam, but they do specialize in Facebook advertising and are now using the platform they’ve developed to run campaigns for big brands and small businesses. Dennis writes a blog at dennis-yu.com
Did you know how Mark Zuckerberg supported Facebook in the early days, before he got venture funding? Casino ads. And how about those advertisers who were making over $100,000 a day selling Acai Berry and other weight loss products – they are friends of mine, pioneers of new advertising channels. You see those ads saying “Inbox (5). Nick, someone in San Francisco has a crush on you!” (with your name, profile picture, and city in the ad). I generated millions of dollars from these offers on Facebook – I am not proud of it, but it was very lucrative.
I will walk you through how these online scams work on Facebook and other social networks – the mechanics of how the money is made, some of the people involved, and who is actually clicking on ads. If you’re reading this article, there is a good chance that you are not the type of person actually clicking on these spam ads, but are you curious as to who actually is?
In June 2007, Facebook opened up their application developer platform so that anyone could build games on top of the social network. By having access to user data, game developers could instantly make engaging, viral games. Rate who is hottest among your friends, share quizzes, race cars, grow vegetables, and so forth – all with a click of a button. Users in one click gave the game permission to access their profile data and they didn’t think twice about it.
Facebook hadn’t consider what was possible when the game developer passed on user name, profile picture, and personal details on to an advertiser – and the kind of deceptive ads that were possible.
These ads looked like they were from Facebook- the blue button, white background, same font. And, of course, they had your profile picture, your name – plus that of your friends, in the ad. If you’re a 15 year old girl, would you know what’s being served by Facebook, the game developer, or the ad network? These same offers have been running for years on MySpace, using tactics such as fake Windows system messages and pop-ups.
But the perfect storm being able to dynamically insert user data into an ad, disguising the ad to seem like part of the application, lack of enforcement by the social networks, and billing the parents’ cell phone – well, it’s no secret what happens next.
By early 2008, the platform was generating 400 million impressions a day, as people poked, bit, slapped, kissed, and drop-kicked each other to the glee of a college-age crowd of game developers. These developers weren’t professional corporations – they are college kids who build a game for fun over the weekend and now discovered they could make over $10,000 a day in ad revenue. Yes, we wrote some big checks. The numbers today are much higher. Given the choice of making money versus being ethical, these kids chose money in nearly every instance.
When the Facebook platform first launched, developers used Google AdSense, which was paying 10-15 cent eCPMs, meaning that developers were earning 10 to 15 cents for every 1,000 ads they shown. But soon, ad networks, such as the one I operated, stepped in to show that by using social data and some clever ad copy, we could raise this to well over $6—that’s 60 times better than AdSense. AdSense was getting a 0.1% CTR and earning 15 cents a click. Our ads were getting up to a 4% CTR and also earning 15 cents a click. You do the math.
Believe me, I tried to do honest optimization—running legitimate flower ads on Valentines Day, Walmart ads on Cyber Monday, auto insurance offers on car racing games, and so forth. For months, I went through over 150 offers across a dozen networks, systematically testing offers, ad copy, targeting, creative templates, and so forth. I couldn’t get a single one to work. And in a previous life I worked on Yahoo!’s internal analytics team—our job was to optimize traffic.
I finally came to this realization: People on Facebook won’t pay for anything. They don’t have credit cards, they don’t want credit cards, and they are not interested in shopping. But you can trick them into doing one of three things:
- Download a toolbar: It could be spyware (such as Zango) or something more legitimate, such as Webfetti or Zwinkys.
- Give up their email address: You’ve won a “free” camera or perhaps you’ve been selected as a tester for a new Macbook Pro (which you get to keep at the end of the test). Just tell us where you want us to ship it.
- Give up their phone number: You took the IQ Quiz, so give us your phone number and we’ll tell you your score. Never mind that you’ll get billed $20 a month or perhaps be tricked into inviting 10 other friends to beat your score.
Method #3, getting their phone number, has been the most lucrative thing on Facebook, even more than the fake weight loss offers, for the last 2 years. As an ad network, we were at the mercy of what the game developers want—more money. Here’s what ad networks struggle with—to either run what ads make the most money or else be forced out by other ad networks willing to be shadier than them.
Publishers (game developers) chose whoever makes them the most money.
And that led to things like:
Showing personal data on landing pages: This got a couple ad networks banned—they took the user name and images and put them on landing pages, which increased conversion. This is the equivalent of steroids in Major League Baseball.
Cloaking: This is when you show a different page based on IP address. We and most other ad networks would geo-block northern California—showing different ads to Facebook employees than to other users around the world. One of the largest Facebook advertisers (I’m not going to out you, but you know who you are) employs this technique to this day, using a white-listed account. Our supposition is that it makes too much money for Facebook to stop him. Believe me, we have brought this to Facebook’s attention on several occasions. Here’s what this fellow does—he submits tame ads for approval, and once approved, redirects the url to the spammy page. To be fair, players like Google AdWords have had years more experience in this game to close such loopholes.
Sharks who smelled blood: I was contacted by every major ad network to either run their offer and/or help them optimize their ad platform. One CEO (not saying his name, but they’re on Comscore’s list of the top 25 ad networks) threatened physical violence if we didn’t cooperate with him. I got wined and dined like you wouldn’t believe. That’s how much money was at stake—whether on the game inventory or the self-serve ad platform.
Weak enforcement: Paul Jeffries, who enforced (or didn’t enforce, depending on your view) the platform rules, wanted to allow a laissez-faire economy, stepping in only when the violations were so egregious that his call center was getting flooded with complaints. He called me into a meeting and told me that my ads were costing him more in customer service than any revenue I was possibly generating. That pre-supposed that he knew what we were generating – in the high 5 figures a day. And most of that was profit, since we paid out only a fraction of what we earned. Remember that we had to beat only what Google AdSense generated.
There was no way that Facebook—and definitely not the Federal Trade Commission—could keep up with the “innovation” happening. Witness the virtual currency scam, where users complete the offers mentioned above to earn points in a game. It doesn’t take a genius to know that the quality of such leads is garbage—these users are filling out forms just to get the points.
They sign up for Netflix, a platinum credit card, get an auto insurance quote, whatever. The industry term for this type of traffic is called “incentivized”. The underlying advertiser is paying for these leads much like they would if they were coming from paid search. They may be told they’re getting incent traffic—or maybe not. Or maybe the ad network, the middleman between the advertiser (company paying for traffic) and publisher (source of traffic) is mixing PPC, email, and incent (also called social) traffic to hit certain quality thresholds.
Either way, the advertiser is usually blind—they can’t see the referral data (which is understandably masked) and they probably can’t figure out what’s going on anyway.
The three major ad networks that deal in incentivized (or virtual currency) are OfferPal, SuperRewards, and Q Interactive.
OfferPal is run by Anu Shukla—she and I have sat down before, where she flatly claimed that most of her offer inventory was unique (it was actually brokered from MemoLink, a company down the street from us in Denver). Ms. Shukla also touted her optimization technology, but couldn’t discuss it because of the proprietary nature—I’m sure you understand. You can watch her video with Arrington to judge for yourself.
SuperRewards is run by Jason Bailey (aka ChickenHole), who was able to quickly morph himself from Millnic Media to this new company. This fellow would call me up and yell at the top of his lungs, as I wouldn’t refund his money for setting up multiple accounts to game our network. I did refund his money, only once he agreed to a ban on our network.
Q Interactive is the quietest, but largest player of the group. Formerly coolsavings.com, it’s run by Matt Wise, and is, in my opinion, the most reputable of the bunch. They have Fortune 500 clients and a more massive bankroll and sophisticated technology platform. You won’t find information on their virtual currency platform, as they work with large publishers only.
The offers across all of these networks are similar. There is a lot of money to be made if you’re a game developer on the MySpace or Facebook platforms, so choose your ad networks wisely. Ad Networks are not going away soon, as the big brands aren’t there yet and someone must fill that vacuum.
In case I have thoroughly disillusioned you of all social advertising, let me prognosticate about a slightly brighter future:
When any new platform opens up, the spammers are there first: Traffic is cheap and their untargeted offers are profitable. But as legitimate advertisers come on, they bid the price of traffic up and squeeze out the spammers. The most powerful bit of social advertising, unlike traditional PPC, is the ability to target by interest and by location. And local represents 74% of Facebook’s ad revenues in 2009. That’s a deceptive stat, as it likely includes dating, which is technically “local” – but the point still stands.
Facebook will either clean things up or become a MySpace: Users loved the “trust” and “clean look” of Facebook. I believe Facebook will put controls in place on their fledgling platform, as told to me by the executive in charge of their online marketing. I honestly believe from my meetings at Facebook, that they’ve all drunk the Zucker-koolaid and are putting the user experience ahead of earnings. That’s why, if you’re a UK resident, you’re not seeing those sexy Russian dating ads from a couple months ago—but man, were those profitable. But you may continue to see these girls:
Deceptive ads will be gradually replaced by trusted ads: The underlying premise of all the advertising techniques we’ve discussed so far is that trickery is profitable. Fool them into thinking the new friend request is from Facebook, lie to them that the miracle skin crème is actually free, tell them they’ll earn points if they just click this button – which then puts their email address on a list that’s resold to the top spammers in the world. Incidentally, if you hate someone, sign them up for one of those free offers – it will burn their email to a crisp. Just kidding – don’t do that.
The local and big brand advertisers are slow to react, but will eventually shift their ad dollars to Facebook, as they figure out how to advertise effectively. Facebook is the “other Internet” and represents 25% of all pageviews in the US. What’s possible right now:
Imagine getting an ad on your birthday, saying “Happy Birthday, Nick! Mention FBCAKE and get a free slice of cake today at Jim’s Coffee Shop” (yes, you can target people on their birthdays).
What if you’re a B2B company and want to hit small businesses? You can target by job title and company. That’s not possible in traditional PPC, where a search for “massage” can be a consumer with stiff muscles, a student looking for a massage school, or a practitioner looking to buy massage supplies.
What if you’re Maggianos and want to target folks who like Olive Garden? You can hit precisely those fans—and even narrow down to where they live, how old they are, and if they are married. Then send them to the nearest location to book their wedding anniversary party. Are you a Denver liposuction doctor and want to target middle-aged females in upperclass neighborhoods who watch “Desperate Housewives” and like to eat chocolate?
What if Farmville could be sponsored by Albertsons and offer real fruits and vegetables on sale? Wouldn’t that be more powerful than clipping coupons from the daily newspaper?
It’s going to take a few years, but these legitimate advertisers will push out the scammers and Facebook will put more rules in place. Enforcement will tighten, but spammers are clever with shifting their entities, enough to make us all “dizzy”. We said that when these platforms first launched, earnings were in the 10 to 15 cent range. Then spammers raised the bar and could afford to pay $6 per thousand impressions (or about 20 cents a click) for the same inventory. But when the legitimate guys come with the hyper-targeted local ads, they can afford to pay $10 or even $50 per thousand impressions for that inventory. The spammers will be forced out of this particular game and onto whatever is next.
I appreciate this post…thanks for sharing this info with us. Scams don’t last long. its unfortunate that these scammers have hurt those who were developing real social apps on facebook.
Looks FB may already be listening Mike, just got an email from an advertisement company for app developers saying FB is sending out notifications and will be cracking down on things.
Speaking of spam, what do you call an advertisement for a book disguised as a techcrunch article from a ‘guest author’ today?
Why are you spamming us with all those links to your clients, Dennis?
old habit
Can’t Help It… ROFL….
LOL!
LMAO
Wow.
This is a very helpful post for me. I am very interested in how online advertising works and how it works on blog networks as well as social networks (not to mention everyday websites with logged on users). This has actually opened my eyes allot.
I agree that these spammers have hurt people, but I do wonder if this is the norm for any network that is new?
I don’t have a network, but I do have advertising on 2 of my blogs (from Google Ads) and almost half are currently ads from spam sites, fake merchandise sellers and the like… I keep blocking them and more show up.
How do you win?
Phil,
The offers will improve in quality, as do the apps on the network. This is a natural progression. What are you running now, and how much traffic do you get?
All the SCAMS belong to us.
The Real story behind most of most of these offers starts from MYSPACE founders, ClickBank offers and many others.
Interesting stuff. I am wondering though… Is it really the 15 year old girls who are tricked by this or is it the totally tech and e-scam unsavy older crowd that is present on facebook? hehe
Kids convert. The older the demographic, the harder they are to convert. That’s my experience.
Excellent write up Dennis. It’s nice to see a real insider’s perspective on this. I think we’re all looking forward to the day when the economics push out the scammers.
Nice post Jeremy, very strong. By the way, how did you start in this game? (rhetorical question)
The advertising industry is full of “gurus” who used to be spammers, used deceptive practices, used cookie stuffing, installed spyware, etc, to get their start. Once they get the big paydays, then they can go legitimate and start selling their books on how you to can be rich by making money online. Eventually even if they get caught doing something, all the bad presss goes away and they are still knocking it down using their following, other gurus testimonials, etc, to generate big money. The author of this article is a prime example, by outing some of these practices today, he can say we changed and no longer do business this way.
I know a guy right now who is held up as one of the examples of how you should do business online, but he got his start working at one of the big affiliate companies and, using insider information such as which keywords to target, created websites in other peoples names to make big money online. He eventually retired to do “affiliate marketing consultation”, etc, to the big disapointment of the people he was actually stealing info from.
PS I know nothing about Jeremy, so dont think this is concerning him, although, knowing this industry, I wouldn’t be surprised if he didn’t start out the same way.
amen.
this guy still sounds slimy as all hell, telling people how to clog up “people you hate”’s email box with spam.
is it dennis@blitzlocal.com?
Well put.
That’s how Myspace started, too. The ***holes were spamming everyone and their dogs through “affiliates” and supposedly independent companies conveniently run by relatives or business associates…all the while denying the whole thing and laughing all the way to the bank.
That sounds like how most of todays famous Hollywood start start their careers, posing nude and such. Once they are popular, you don’t see them doing so.
Every once in a while some fishes out a old photo, publishes it, gets sued or paid (or both) and soon the bad press is gone.
There’s no way to weed out the sleaze industry either, just like the scam industry. You pull them out from one system, they will find another system to scam.
There’s no economic system that naturally pushes out scammers. People go to whoever pays them the most money in every economic system; that’s why the publishers settle for deceptive advertising, if you believe/care that it’s deceptive.
Thanks for all the insight. Because you seem like a nice guy I can place my trust in you. Last month my uncle, who was a prominent member of the Nigerian government passed away. I need your help to get his savings out of the banks here. If you are interested let me know.
hahahaha!
lolz…
Comic timing
hahahahahaha
hahaha
Jeremy,
Thanks for the kind words. See you at ASW in Vegas?
And it’s not to say all ad networks are scammers– there are good and bad ones, just like in any industry. You just have to watch out for certain types of offers and business practices.
The whole point of social networks was to filter out this kind of bullshit. Facebook is directly complicit in letting this happen. I’ve never had an account with them, and I never will.
Also, check out this great Bill Hicks’s video: http://www.yout...h?v=gDW_Hj2K0wo
@mrgunn, I think the whole point of social networks “to begin with” was to make money, whether by directly monetizing or selling the company to someone else who would. I’m not sure why/how anyone going on these things thinks or thought otherwise – and I am actually on a couple social networks, I just have no illusions.
This is one of the best posts I’ve read on TC in a long while. Thanks for all this insight.
With the type of ultra-precise ad targeting that you say is becoming possible, do you feel the overall digital ad industry is headed for brighter days? Can this type of ultra-precise targeting save ad dependent institutions like the NYTimes, etc.?
Daniel,
Social and local targeting are the long-term salvation of not only large pubs such as NYT, but social networks. It’s going to be a while until they can figure out how to use these new tools. The ability to target by location and interest is the key to making online advertising effective for locally-focused businesses. Traditional pubs don’t realize the power they have in existing customer and advertiser relationships– they have user relationships and the data from that locked in their systems.
Thanks Dennis. All the shady ad practices aside (which most in this business know about) I do get the sense that we’re about to see a shift towards greater success of digital advertising due to what you’ve termed social+local targeting.
What an underworld this can be though.
It was one of the best posts because it was not written by the fanboys who ‘work’ at Techcrunch
I have to agree, this is the single best article written on TechCrunch in ages. Dennis is kind of like Jerry McGuire here outing the spammers.
Sweet!
Chad,
Thank you. The article’s goal is to show how deceptive offers are first on the scene in any new medium and are gradually pushed out, replaced with wholesome, lasting offers. I know Facebook and MySpace are making great strides in cleaning up the scene.
In the last 24 hours, I’ve had a number of death threats and complaints, but also praise. The nature of your reaction probably says something about what you do.
+1
Spam pays, get used to it. Tell google to stop.
Good post. Its very interesting to read about the skills that these talented people possess. Opportunities for big cash moneeyy are endless!
Wow, made money (a lot of it) and now trying gain immunity with a post like this. Not a bad tactic. Willing to give some of that money back?
Those who know Dennis know how dirty he plays (note: present tense). Techcrunch, PLEASE be careful with the guest posts.
that’s why you stay anonymous ???? shady
no, what’s shady is this kind of stuff from your blog:
http://www.blac...r-account-only/
ok anonymous .. you work hard
thx for the love
I agree 100%.
BTW. Dennis did most of this stuff at SocialMedia, one of the early social advertising networks which was crushing it with those ringtone ads during the platform heyday.
For the record, SocialMedia did almost zero in ringtones, but we did experiment with nearly every other lead gen offer under the sun. If you want ringtones, go see ringtones.net or ringnrock.com. You accused the wrong guy here.
Actually Dennis why don’t you tell everybody about how you kept DB access and continued to do unethical things in there UI with crush+other misleading offers even once you left the company. Social media knows all about that though :p!
Or about how you got kickbacks to run Crush + other mobile offers exclusively and giving ‘friends’ (partners you kick to the ground) priority on the adserver for a rev share
… Or meetings where you brag about “writing the most misleading ads anybody writes”
You failed in this business and now are STILL trying to make internet friends, HILLARIOUS
even more:
Or about how you ran the marketing for Ten.com a porn site?
Or about how you buy peoples domains because your a broke peasant who needs to pay your design bills and payroll or PREPAYS YOU CAN’T PAY BACK FROM MONTHS AGO HAHAHAHAHA
I don’t believe Dennis is trying to gain immunity from this post. He is simply trying to help educate those who aren’t familiar with our space on how the backend monetization and targeting works.
Although you can read his post again and see how difficult it was to try to promote other things. The problem is that legimate advertisers are not able to compete with theses shady offers and the way they are being marketed. Most performance marketing products/services aren’t profitable on the back-end if they are paying out $6.00/CPMs, but the shady offers and the way they are marketing can be profitable.
This super high optimization on the front-end is making it harder for the legitimate stuff to be ran. It has also happened on media buys where things like Acai Berry/Resv/Teeth Whitening products are getting such good eCPMs that traditional advertisers can’t compete against them in a bidding war now. They are so highly optimized/effective/shady that legitimate advertisers are being pushed out.
The last two posts are starting to shine some light on the topic but there is still alot of cleaning up to be done. But as mentioned above it’s hard to change all of this when some people are doing well from it and the increasingly difficult task legitimate advertisers have competing with the shady offers.
Wes has a unique and expert view as the fellow owner of an ad network. The ad network sits in-between the advertiser and the publisher– a middleman, really. The ad network optimization logic will show whatever offer makes the most money. If it’s shady, then that’s what happens provided that…
… the ad network is okay with letting certain offers into the network– or at least grading them into categories that can be selected or opted out of by the publisher (developer).
… the publisher is interested solely in making money. We had options for publishers to opt-out of certain categories of offers. As I alluded above, few ever did.
This post has over 244 comments; Techcrunch has no incentive to be “more careful” than they’re being.
Great article. I often wonder who clicks on ads in regular, non-Facebook pages. No one I know deliberately clicks on an ad, but some of my non-technical friends have accidentally clicked due to placement of ad, how sensitive the edges of the ad area are to stray mouse clicks, and confusion about which content is an ad and which isn’t.
@killerbunny– that is the topic of another in-depth article– who actually clicks on ads. You might be surprised what the answer is and what data you need or don’t need to be able to find these folks.
I’m halfway done writing it and this has very little to do with ad positioning or placement.
Can’t wait to read that article.
I’m also interested in seeing that article… there is a similar phenomenon of “trying to figure out who these people are” in the paytv biz with QVC, HSN, etc.
I am extremely interested in that article as well, looking forward to it.
Dennis- thanks for the great writeup- in addition to writing this article, will you give all the money you made from this horrible practice back?
back to who? these rhetoricals make no sense.
Welcome to the real world…. This is a huge test for facebook. Pull up their pants and act now or stay blind and end up like Myspace.
My only question is who let those advertisers run those kinds of ads. Second nobody at facebook and Myspace ever ask the question why those developers are making that money so fast…
Now I understand way more why those social game developers was terrified by the new rules of facebook… less viral means less traffic= less new people to direct to those ads….
Act like apple and sell your game… and then sell virtual good if people love your game… must be another way to make money fast……
by the way not like google is innocent too…. spam and scams pays ….. very well..
PS: I saw some shady ads on TC too .. thanks to the geo targeting
Ricky,
Thanks for the thoughts. In fairness to Facebook, they are largely aware of the issues. It’s just quite difficult to deal with folks who are trying to short-circuit your systems day and night, especially when you don’t have an army of engineers and the sheer growth of the platform makes it a daunting challenge to even keep the system stable and operational.
Someone needs to give Facebook some massive applause for being able to operate a social targeting ad server– no small feat given the amount of data that has to be crunched and volume of traffic. Easy to complain from the consumer’s side– now consider the technical challenges.
Great write-up Dennis. Thanks for being willing to talk about stuff that few people are willing to discuss.
That’s a really cool post.
I do hope the optimistic future he paints actually happens. However, in order for legit advertisers to drive out spammers . . . well.
If a spammer can get your number, and charge you a recurring $10 a month for almost zilch (pure profit), can a legit company ever want to pay more for an ad than the spammers?
http://www.traderbots.com
Michael,
It’s not pure profit. The carriers take half the revenue, the networks take something, and then you have to account for the cost of traffic. It’s not like a ton of affiliates are making millions here. Most are drawn in by the lure of profits, but actually lose, since ad optimization is NOT simple. You need some engineering talent and ideally a background in statistics to make it work in a scalable fashion.
Folks might not like what these folks do, but you should give credit to their technical chops– which are usually far more advanced than traditional agency and brand advertisers.
Nice job Dennis!
Wonderfully descriptive post, thank you. I developed FB apps and posted lots of ads in my day too, and your details make total sense.
I disagree though with your idea for the future of Facebook as a legit ad platform. You are assuming that every user will upload all their personal information onto Facebook. In fact, I am finding the opposite – as I start to add more business contacts on Facebook, I take down more and more personal information.
The most information that any advertiser can depend on getting is Age, Sex, School and Location I think.
I’m not finding that the case at all – I find that users consistently create a more detailed and detailed profile of their life.
New restaurant opens in town – at least half of my local friend’s will have “fanned” it (and post a review) if they enjoyed it.
New TV show you enjoy? Fan it. Love that new video game? Fan it.
That data, age, sex is all I really need. Location would be nice, for local advertising, but ultimately not that large of a requirement.
I’ve been making my income off social network applications and affiliate marketing for the past ~2 years. I’m not a big player, but I can pay my rent, and afford a case of PBR. Your former company is responsible for quite a bit of that.
I too have made more money than is damn well justified off SMS scams.
Bravo on telling all about how the internet actually works.
Nathan,
Congratulations on making a living on the social app platforms. There are hundreds of folks who have been able to quit their day jobs and experience the freedom (and headaches) of entrepreneurship.
I’d appreciate hearing your viewpoint, as that of a pub, on monetization versus shadiness. If you want to provide the pristine user experience, you’re taking a massive hit to your earnings, maybe can’t pay your mortgage, or whatever. How do you feel about that?
Please send me a note to dennis@blitzlocal.com and I will compile into my next article from the publisher’s point of view.
People are throwing the word “scammers” around a little too loosely. Most Facebook app developers are completely legitimate. They build-in the most profitable advertising that is available to them, and shouldn’t be labeled scammers for that. That is just common sense – is this Michael Moore’s site or Michael Arrington’s?
In many instances, just as with Facebook and Google, it is not possible for a developer to go over fine-print details of every single offer that they integrate into their apps. Many CPA networks (Cost Per Action, which is driving all of this) have hundreds of offers that a publisher can choose from, and the smartest developers simply use XML feeds from the network that automatically plug in the most profitable ads. This means that they depend on the networks for advertiser quality control, just as average web developers depend on AdSense not to show porn ads.
There are obviously scammers who are running offers through CPA networks that wind up being displayed through Facebook Apps – but that is a far cry from saying that the App developers themselves are scammers. The responsibility for screening the quality (and, for that matter, legality) of ads falls squarely on the shoulders of the CPA Networks.
The game developers ARE at fault. In fact it is hard to argue that they are creating the games for fun and the ad model comes later. I think it is clear that the games are 2nd thought to the scamming.
Much like in a pyramid scheme there is always a product, whether it be pills, or legal advice. But we all know in the end the company is not about the product, thats just for show.
Ah, yes. Game developers should create games for the altruistic motive of “fun.” Just like a painter should give you two coats on your house just for its expressive beauty.
Games don’t get made if there’s no business model, unless you can afford to live as an indie.
But still, these developers aren’t saying “hey we need a channel to run scams through. How about a game?” They say “Let’s make a game. How can we do our best to make sure it’s profitable?”
Here’s the simple answer– EVERYONE is at fault here. The ad network, the game developer, the underlying advertiser, and the affiliate (if brokered).
This is the classic drug dealer or gun defense. Who in the chain is most guilty is the wrong question. Can the developer claim ignorance and just blame the network? Can the network claim that the pub should have reviewed the offers– or blame the advertiser, saying that ad networks are just middlemen? Wrong question. We’re all responsible for knowing.
It doesn’t take a genius to know that a crush or Acai berry ad probably isn’t 100% legitimate.
Man, this Dennis Yu dude is really engaging. What about 50 comments so far?
Chicken, meet egg… Egg, meet chicken. Which one of you two came first?
Perhaps there are too many games then…
Games don’t get made if there’s no business model, unless you can afford to live as an indie.
Is there a way to charge for games? I can see that as a way to stop scammer ads.
From a user – who would pay for a game with the thousands available for free?
That horse has left the barn…
Very interesting, answers some questions I’ve always had about how these things make money, since I never click on anything.
However, the introduction said “I will walk you through how these online scams work on Facebook and other social networks – the mechanics of how the money is made, some of the people involved, and who is actually clicking on ads.”
This was all well documented except for the “who is actually clicking on the ads” part. Unless it’s all 15 year olds?
Andre, the folks who are clicking on mobile offers are typically teenagers. I have another post of similar length that is nearly ready which covers the mechanics of this– who is converting, what the traffic costs, what intermediaries in the chain are taking along the way. This first post was already quite lengthy.
How does an honest person make a living?
Or has it always been this way and I’m only seeing it now that I’m self-employed?
Dave,
Don’t despair. There is a healthy living possible by setting yourself up as social advertising agency and helping businesses drive exposure and new business via Facebook. You’re not going to make millions necessarily, but it’s a steady, respectable living. You just need to learn a few techniques on how to do it right. Our goal at BlitzLocal is to teach folks how to do this and operate essentially as their own agencies under a franchise model using our tools. If you’re serious about pursuing this, ping me. We currently don’t charge a franchise fee.
“We currently don’t charge a franchise fee.”
BTW, It doesn’t take a genius to know that this is a scam.
That so many have difficulty determining the difference between a legitimate offer and a scam explains why so many scams exist.
Assisting a legitimate business – your local mechanic, favorite restaurant, small independent bookstore or gift shop or any other real business operating near where you live or work is an honorable thing to do – not a scam.
When will the public realize we can now assist each other in knowing what businesses are worth patronizing and which are best avoided?
Take the time to write a good review for businesses you visit and ask your clients to do the same for you. Make the world a far better place where small businesses online and off can thrive! There are many of us who will share what works and assist you.
Number 1 reason why I hate Facebook the stupid games and apps. It’s only a matter of time before Facebook becomes a shit hole like Myspace.
Tom,
MySpace and Facebook are now completely different platforms with different goals. Facebook’s #1 priority is the user experience and that’s way ahead of making money. Fortunately, they happen to be making money, too.
I can’t speak directly about MySpace, as I don’t know their new executive team as well, but it would seem that MySpace is more interested in monetization than Facebook.
There’s a saying that business and ethics don’t mix.
Well written.
I used to be into affiliate marketing, turned about 800k in commissions in 2yrs, it was fun, but we faded out as it became clear that the ONLY way to get people to do such offers is to hide as much of the billing details as possible, and to create landing pages that deceived. Not a road we wanted to go down. So we took that money and funded more legitimate companies that didn’t need to play that game. Everyone we met in the “game” was total sleeze like Anu Shukla. They just can’t see past the money, no morals.
Sounds like you made the precise right move…Wouldn’t say Anu Shukla has no morals. This really isn’t about ethics. It’s a higher unrequired level of what you might call “honor.” To me, being ethical is a list of required things you shouldn’t do…I.e. it sounds like you did what you had to do to make money and create a business for yourself, and then you got it out as soon as you can. If “doing what you had to do” was killing people, than I’d say you’re full of shit and that’s unethical. I think you were dishonorable for a time (as was Denis, according to his own admission), and then chose to become honorable. But don’t get it twisted: being dishonorable is a lot different than be unethical.
Jonathan,
Thank you– and the Row Show is quality entertaining content. I like to think of the line being between what’s legal and ethical. You can be legally compliant but still unethical. The law is a low bar. Unfortunately, as most affiliate marketers know, profitable and ethical is a rare combination, especially if the rules on Facebook allow cheaters to “win”.
We need to see Facebook step up enforcement, since it will likely be a long time before the FTC can figure the game out and how to enforce it. Some folks will go to jail over it, but most affiliates will press their luck.
Not saying that all virtual currency networks are scammers– just saying to evaluate carefully. It would be like saying that all auto mechanics are crooks– can’t blanket judge like that.
I applaud the post though almost everyone in the online ad industry is playing, has played or will play in these dark corners, even the big boys.
Late in 2008/early 2009, I had a client come to me ask to run their “weight loss story” ads on Google Adsense (content network). I recall having a conversation with our rep at Google who told me that due to complaints from publishers, these offers were no longer allowed on the Content Network. I did a quick couple of searches and found these still running in Google Adwords (keyword search). So I asked him “does this mean Google has lower standards than its publishers?”
He was a bit taken aback and said “well… uh… I guess right now that is true” and I could just laugh. These specific “aggressive practices” will pass and it will be on to the next thing. Sunlight takes a while to reach some of these darker places. Again and again.
Deceptive ads don’t qualify as SPAM.
Unless the message is sent via the FB “Send Message” function, it is not Spam – Facebook or otherwise.
Most of what you are addressing is a different beast. Long range some of the emails gathered feeds into data used for SPAM. SPAM issues on FB have been isolated, considering.
Last point: FB audience has long been touted as a far more sophisticated online audience. What works on MySpace, doesn’t yeild the same results on FB. As such, the defined “typical FB user” has a more advanced comprehension of the ads. Perhaps the range given to advertisers by Facebook reflects that as much as anything.
Interested to know your thoughts.
Sparrow,
Definition quibbles aside, the real issue– whatever wordsmithing you want to use– is about the user experience. Are they being deceived or could they potentially not understand what they’re signing up for? The fact that there’s 5 point font in white on white below the fold explaining that they’ll get billed for signing up is “legally” complying but perhaps not accounting for the fact that a 13 year old girl is not likely to understand what it is.
True, SPAM is clearly defined in the CAN-SPAM Act, so I’m taking some liberty in bucketing deceptive practices in with spamming. If you’re a spammer (oops– or a high volume email deployer) then my apologies to you.
I agree, sparrow. Fraud is fraud and spam is spam. There’s no reason to confuse them unless you’re trying to write a sensational article.
Rule: Do right by people or leave them alone.
Don’t criticize the ethics of other’s – business or otherwise – when your sole intention in doing so is completely self serving.
Incite them with the term “Spam” in the article title, how’s that any different than exciting them with the word “Free” in ad title…
A calculated manipulation… this whole thing is contrived.
Dennis glad to know that “BlitzLocal is no longer in the business of spam”….
Why should we believe you anymore than any of the other scammers?
When was your big “aha moment” when you decided that you would no longer pursue a business that is “based on spam”?
If I had to guess it would be when you reached a financial level of comfort and could “get out of the business”.
All this bogus moral posturing in the name of the consumer is a joke.
Jon,
Perhaps consider the client base we have now, plus the company we keep, and let the facts speak for themselves. Look up my name on Google and see what we’ve been up to. That should speak louder than any “bogus moral posturing” or even your “higher than thou” judgments.
And, if we were making so much money in spam now, then why reveal how it’s done?
But I can appreciate your cynical attitude. There is a lot of scamming going on and the best practice, as is yours it appears– is guilty until proven innocent.
Yea, Dennis I’m with Jon Myers, but in a slightly different way. It’s not about the consumer. You’ve figured out that going a more straight-laced route actually means more money.
And also, as you’ll read from my comment up above in response to Jonathan Dusing’s comment Anu Shukla being immoral, I don’t think it’s about being unethical. It’s just not. Is it kind, loving, helpful to the world. I’d say no. And that’s “dishonorable”–a word I’m using for a different category of decision making.
In conclusion, you’ve gone the honorable route now either because A) you’ve personally decided you rather make the world a better place; or B) because the big name advertisers go that route.
I’m not going to make the judgment call. In life it’s probably just easier to take the straight-laced route, and that’s a 3rd contributing factor. I.e. you don’t have to deal with people annoyed with you and on your back all the time. I’m not saying you’re not an honorable human being that doesn’t want to give back to the world. Again, I don’t know you and have no idea. For me personally, the 3rd factor I just mentioned is good enough reason.
One last note: the big corporations have to be straight-laced because their under so much scrutiny. But believe me, if they were doing all the cell-phone signup scams, you’d still be doing it. Or at least companies like yours would, and who knows, maybe you’d be out of the game, creating a startup like Kiva.org. You tell me.
James,
You hit the nail on the head. We’re going the “straight-laced” route because it actually will make more money in the long run. When you’ve built up a good client base, the penalty for burning your brand is progressively higher. If you hide in the shadows, you have nothing to lose. In the long run, we think there is a lot more sustainable money in local, and that’s not even factoring in the stuff you have to do to avoid going to jail if you’re spamming. Why even deal with that headache when you can do something you’re proud of and still make a good living? If you’re a player that I’ve mentioned, then you know the kinds of people I’m talking about and how difficult it is to work with them. They’re not evil– just intensely focused on the money.
Dennis is brilliant for leveraging his experience on ‘the dark side’ to build himself up as an authority on social/local advertising while promoting his new company at the same time.
And now that he’s blown the cover of those who were operating ventures that are still on the dark side, he has essentially no downside as those opportunities to exploit gaps will now be plugged due to his pointing them out.
Kind of like the Geosign story if you remember… As soon as someone went public with their arbitrage play – in that case it was the founder himself via Frank Schilling’s blog – Google killed their model shortly after…
Dennis is wise for getting out first, building a credible business that offers a real service, telling his very compelling story and killing off his ex-competitors that weren’t wise enough/were too greedy to do the same thing sooner…
Well played and great story Dennis… Lots of interesting nuggets in there… And kudos on going legit and recognizing a massive market opportunity at the same time…
All the best,
Colin
Colin,
Thanks for the compliment. Facebook, of their own admission, is bullish on the local opportunity– so I applaud what you’re doing with shopcity.com. Sure, the “scammy” stuff will always be around so long as there are people trying to lose weight or get rich quick and folks who have no ethics– but I believe that local will be the story in 2010.
Let these other folks try to attack what companies like you and I are doing to prepare for the future, while they are counting short-sighted riches now.
That doesn’t answer my question.
One of the points I took away from this post is that one’s client list does not legitimize a business’s illegitimate efforts.
I could also look at Offerpals client list and assume they’re an ethical businesses because of “the company they keep” based on your response.
Ironically, that’s how many of the scams go down. Big name company names are thrown around to create the appearance of legitimacy.
too bad you couldn’t actually be smart when you started out and figured out a way to make money and be proud of it.
congrats on taking easy street and bilking thousands of people out of their money. that’s gootta feel good.
Exactly,
So those of us who chose NOT to scam people, helped thousands of people file complaints against the scammers, and even spent our own time helping law enforcement document cases are supposed to be impressed with your “righteous” turns.
It’s interesting that you point to your “client list” instead of saying “I changed” and also say, “We’re going the “straight-laced” route because it actually will make more money in the long run.”
I think your clients might want to read your posts and explanations very, very closely.
Very nice post. There are a few #lbl here
Great article, good stuff!
dang Dennis, why you gotta f*ck it all up for us…
Really good and interesting article.
Q interactive is def not a top offer shop in the social gaming space, I have never seen their wall on any of the big 3’s games…
Q is one of the biggest spammers around, totally shady incentivized crap.
Q interactive looks very dodgy to me. They claim that we are working with them on their website while I know for sure this is a lie.
Guest Authort seems to be pushing for his own agenda…
people that do lead gen, don’t buy ads on Facebook
People that do real lead gen buy pizza
http://www.technologyb2b.com
Love all the followed links you are throwing out there on nice anchor text – “wedding anniversary” and “denver liposuction doctors”. Do you need to disclose Maggiano’s and Colarado Skincare as clients for your local SEO biz?
Of course – BlitzLocal the spammer no longer spams Facebook with crap ads, it spams TechCrunch with SEO anchor text for clients thinly disguised as an article. And what is SEO anyway, besides link spam? (disclosure: I’m an online marketer and do social media advertising, paid search, and SEO)
Interesting, thanks for sharing the details.
~
“Sign up for fat loss program and help children in third world countries gain some!”.
Even with good client base, it is still worth setting a separate company that donates 90% of spam money to charoty.
dennis has shared his confessions in the past in the facebook developers forum. of course it’s sad to learn that he’s a reborn spammer, but anyway it’s the first time someone speaks so openly about what is not known to developers, especially the ones from outside the US.
pity i didn’t use those networks with $5 ecpms while they were alive. Our adsense revenue, while constant, is low on yield because brand names and large advertisers avoid social networks
which brings us to the big question: why doesn’t anyone start an ad company that offers quality brand advertising for social apps? our apps could even be tailored to specific advertising ‘themes’. why do brands avoid social networks so much?
dennis, did you make those $5 ecpms at socialmedia?? and you paid me shitty $0.05 when i used you? crap!
Igniman– I apologize for my past sins.
But perhaps also consider that we were paying more than everyone else– so consider what those guys were taking (assuming their optimization was as good). Further, if your CTR sucked, then so would your eCPM. How many pageviews per session were in your app? If you were above 30 pageviews a session, then 5 cents is about right.
first “we” and then “they” – which one, dennis?
i hardly believe you apologize – especially with that conniving smiley afterwards. heh.
I interviewed with OfferPal and was amzaed how few who worked there that I interviewed with even rmotely understood how they made their money. When I told them I simply wouldn’t work at a clickthru factory they got all defensive and started to talk about their plan to move to CPA “like Google”. Yeah, right.
You wrote a great article here, Dennis, and many of us appreciate you keeping the “bad buzz” alive!
TV
Tim,
I’d love to chat with you for a few minutes about your experiences. Your site is temporarily down so hit me up at facebook.com/dennisyu.
As they say, once a scammer [spammer], always a scammer. Makes me wonder if you really have become more ethical.
Very nice post. I link it in my blog.
This is pretty much my favourite Techcrunch post of the year. Nice work Dennis.
@Hobbysy– thanks for the compliment!
sad to see techcrunch follow up arrington’s insightful post with this stuff from a former scammer.
don’t let the subject line “insider’s confession” fool you. everybody reading this post should understand that for EVERY affiliate marketer, running these offers are smash-and-grab jobs (get in, get out, and get on with your lives). use the dough and do something new. mr. yu is using his dough for blitzlocal while others that have made their killings either directly or indirectly are doing other things now.
we point fingers to tatto because they are the only company to have large enough cahoneys to stay alive albeit in a simmering way. but the teensy weensy affiliate marketers brokering the offers are like drug dealers with it in their back pocket.
One of the best pieces at Techcrunch lately!
Really fantastic post. Thank you.
Over the last few days I’ve loved the posts Mr Arrington has been posting about this scam. This post was excellently written and really informative. Lets hope Facebook starts to implement changes now its being talked about on such a prominent blog.
Great job Michael and Dennis. These are the kind of posts I love reading on Techcrunch.
Really cool stuff in the article and the comments. Thanks for putting in the effort with the follow up Dennis.
Mike– thanks for the compliments! Do you have a site or twitter? I think you have a typo in your comment.
Take the underscore out and that is probably him.
This is a great piece. I hope that we get to that $10 eCPM really soon
These tactics are called gimmicks and like all gimmicks are intended to prey on the ignorance of people. That’s what consumerism is all about. You need gimmicks to sell and push products/services. You need to create a demand and incentive for people to want your product or service. These tactics are deployed in every business. Just look at wall street and the financial sector as a prime example. Your 401K is one big scam. Moving on to the next new gimmick after your last gimmick has been unveiled is part of the evoltuion cycle of consumerism. The next gimmick in this game will prey on your privacy. It’s called “local” social advertising formerly known as beacon. Netflix is great company until Google figures out a way to give movies away for free.
Well said Mike. People who find Dennis past tactics offending are either naive or foolish. Advertising by definition aims at influencing the attitude of a community toward a certain product or service. No one seems to complain when soft drinks companies advertise their products to the youth. We all know the health consequences of drinking these.
Fascinating post Dennis; I had never understood how this area of the economy worked until I read your insider’s guide.
Glenn– Thanks for the kind words. Have you tried Facebook in conjunction with PPC ads for Redfin? You’ve got a great biz.
Hey Dennis
I’ll be chatting with you at Ad-tech
just read barman’s write up too
WOW! I`m beginning to love TC more and more. Very interesting read.
This post would be just as interesting if Dennis were still doing all these things. Therefore, I don’t care whether he is “truly reformed” – just thankful for the rare inside information
+1