Feedback is rolling in on our Scamville post last night. Even more people are coming forward to talk about their experiences getting ripped off by Offerpal and SuperRewards, or how they were pitched by these companies to add offers to their apps.
We’ve got a lot more to say about this before we’re done. And we’re hoping that Facebook and MySpace make the right decisions for users and begin to enforce their own rules on subscription and other scams. Even if it means a huge drop in advertising revenue from the apps that rely on scams to make money.
But in this post we’re going to let two other people make their points. In a comment to the post yesterday HotOrNot founder James Hong talks about how his company tried, and quickly removed, scammy offers from their site. He says “In a nutshell, the offers that monetize the best are the ones that scam/trick users.”
And PlentyOfFish founder Markus Frind talks about being pitched by companies like Offerpal and SuperRewards. He also follows up with a post on his own blog.
James Hong:
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.
Markus Frind:
I’m surprised it took this many years to be reported by the “media”. These kind of scams have been going on for years and I get several emails a month from these vendors promising to make me millions of dollars a month. I’ve no doubt I could make millions a month off these scams, but they are scams and will eventually bring government regulations. Michael mentions tattoo media look up tatto media sued on google and you will see all the government agencies sueing them.
Michael, is just barely scratching the surface, these scams are extremely far reaching and deep. Some of these scams are charging users over $1 million dollars a day, and many of these middle men/networks are nothing more than smoke screens.
There are a number of comments from anonymous posters saying that there’s no fire here behind the smoke. The thing is, they’re lying.
So we’re talking about the possibility of downright organized crime operating under the cover of these legit companies, now.
Thanks a ton Mike to bring this out.
I am also surprised how long it took for this scam to come out widely. This had been going on for far too long and has the potential to kill great legit business models that the well-intentioned companies like the two mentioned here are trying.
I truly hope that someone from Facebook and myspace reads this and takes some action.
This is a fight for the legit models to survive. This has the potential for most of the users tuning out of the social games.
yes, it is. I am surprised no lawyer has filed class action law suit against these people. They will win. And I also think they should spend some time in jail.
so sad that “facebook” blogs like insidefacebook and allfacebook are having dilemmas on taking about this since their ad space is riddled by offerpal, superrewards and the like.
Show me one of these offers that is, in fact, illegal. If you find any, i ‘ll remove them from my apps just to save my ass.
Illegal is an arbitrary distinction that can change overnight. The way our legal system works, pretty much everything that is illegal today, was at some point legal, until a court ruling, or a new law changed that.
There are any number of ways to skirt the law, without braking any current existing law. If you care so little about your users, that your only concern is the legality of the ways in which you take advantage of them, then I hope you make a lot of money in the short amount of time your business is in operation, because eventually you will either run afoul of new laws, or run out of new users to burn.
Either way “just show me how it is illegal” is not the winning attitude for building a successful long-term business, it is the attitude of a snake oil salesman, trying not to end up in jail before he can move onto the next town and find a new group of rubes to bilk.
thanks for clarifying that people go to jail arbitrarily. and if you have a list of all things that may be forbidden in the next century, i ‘d like to take a look.
@igniman: so in your mind sleazy and scammy are OK; it’s just illegal that’s not? I pity you.
how exactly did you come to that conclusion? spare me your pity, please
Maybe it’s the “Show me one…that is…illegal. If you find any, i ‘ll remove them from my apps just to save my ass.”
So that’s the only reason you would remove them, even if they scam your users? What a loser you are…
I’m surprise just two have responded so far. The story is getting traction among Facebook users tonight, enough that someone in operations should notice by now. Good piece by the way.
Anybody want bet a couple Congressmen will jump on top of this by lunch Monday and threaten to cut farm subsidies to Farmtown if they don’t clean-up their acts.
two on the record
There a lot of gaming companies relying only on direct payment, many of them outside Facebook (on the “open-web”) to build sustainable businesses. Honesty toward player communities is a key to monetize via virtual goods, it is I think the normal behaviour, most companies probably don’t think they need to declare it
Such a scam. This is why I ignore any requests to take quizzes or join someone’s Mafia family or other games…anything that involves handing over my own personal information or that of my contacts, family & friends.
Once you’ve handed over your personal info, you can’t get it back or have it deleted. It’s like getting back your virginity. Well, kind of like it.
yeah, except you can always lie about your “number” lol
NotOrNot should be HotOrNot..
I’m enjoying these posts – lets hope it does some good…
We are in the process of developing a social game and your previous post about these scams was timely. Had we not seen it, we might have gone down that dark road too, without realizing it. We’ve taken a conscious decision to avoid giving in to monetizing schemes such as these. They look plain unethical. So you can count us in as another “company that said no to social media scams” .
Well, we aren’t much of a company yet, though.
Hong: “We ran offers like this … until we realized what was going on.”
Exactly, my point. I wonder how many developers have stepped into this unknowingly.
Very interesting! Is not there any monitoring system ?
Mike,
Remember the “get a free ipod!” ads you used to see everywhere, that you don’t see so much anymore?
That was an even bigger scam that got mostly shut down by the FCC.
http://www.medi...p;art_aid=74301
The gov’t is on your side. Shut these fools down too.
– An anon ad guy you know
err, FTC (not FCC)
Further reading:
http://www.ftc....07/11/free.shtm
Thank you for the info and the links adGuy!
Government may be on your side, but how fast can they act?
And if they squash one, will another just pop up.
We need the channels to cut off the flow of money. Facebook, MySpace, game developers, etc.
Then you won’t need the gov’t.
http://www.traderbots.com
Like I asked (rhetorically) before in your Intelius post, are these legally or Morally wrong? Unfortunately they are just morally wrong. Like lobbying= Bribery, but legally right.
Like Anu Shukla said, Netflix is not complaining, so it will be hard to fight for them
I think your best bet to stop no, reduce this is to make the consumers aware of what is going on. If they still insist on going broke so they can plant digital corn on a digital farm, I am afraid you have to let them be.
People will always find a way to bend the laws, the best we can do is to educate the consumers. If Facebook changes their terms, these crooks will bend it in other ways.
We don’t hear about who is complaining or not, that all takes place behind the curtain.
I would consider these posts ‘educating consumers’
You’re journalists, right? Get Netflix on the record and see what they have to say.
Is Netflix aware of these scams?
I doubt they would want to be associated with these no matter how many subscribers they gain.
Well, given Netflix’s track record, I wouldn’t be surprised if they know.
Back in 2002, Netflix was spamming people itself. (I can vouch for the truth of the linked account, because I got the same spam messages.) And, in fact, Netflix publically admitted they spammed.
So now they’ve just outsourced their marketing efforts to other companies with those same low morals, just updated for the Web 2.0 era.
BOYCOTT NETFLIX!
I cancelled my Netflix account because of the unending popups, popunders and spam I was receiving from them back in the day — and it’s only gotten worse.
Internet users are born every day.
Correction: The best we can do is get laws created that make scam businesses illegal.
Keep preaching, Mike.
admire your apparent respect and trust on what “The Law” could do.
Politicians are the same slimy bunch everywhere…
In the US they could easily [they do!] say that they work “for the people,” when the reality is that [if] they do any kind of work, it is only to line their pockets – and of course, always try to get re-elected…
If you haven’t noticed, widely disseminated information is power. Social influence is power. A handful of vocal proponents is quite a different thing than an idea entering the societal lexicon.
Govt intervention is not a bad solution. The rest of the consumer market is far better regulated than the “wild west” of these internet offers. And if some of these offers are scammy or use “fine print” to lure people in. It can be and should be regulated.
I really detest stuff like this. My mother loves playing FaceBook games with her sisters and scams like this are something I could see one of them falling for. They are well intentioned grandmothers who are not uneducated by any stretch, but easily able to fall for a ploy like this. Likewise, children are able to fall victim to such crimes (I’m just going to call it a crime, outright) as well. Many teens have cellphones and I am willing to bet a large number of them are the ones who are victimized.
Regardless of the morality of the situation, which at best can be called shady, what really surprised me was the crude, unprofessional, attitude laden response that Anu Shukla had to Michael’s comments. ( see video: http://www.tech...system-of-hell/ ). If you’re going to dodge questions and equivocate around a topic, at least do so with wittiness and style.
Let’s face it, these types of businesses will always exist–just like those free macbook ads that require loads of subscriptions. I guess it’s just appalling to see them be so successful and lauded for their work.
“… what really surprised me was the crude, unprofessional, attitude laden response that Anu Shukla had to Michael’s comments.”
But if M.A. is right about Offerpal being powered by scams, it’s exactly the kind of response you’d expect. Consider the nature and character of anybody who has no moral qualms about ripping off millions of individuals.
Sadly, Anu Shukla’s use of “French” in the video only reinforce the idea of Offerpal being a scam.
I have never bought anything off of Offerpal but I am wondering if I am supporting the wrong guys by even installing Mafia Wars and Farmville. I had installed them on my friends’ insistence thinking that a big company like Zynga would have some kind of check and balance.
This plays badly against your reputation, Zynga. You already had a bad rep for pretty much copying any successful idea (but that is OK because Redmond does the same thing).
Participating in scams, on the other hand, is not cool at all. Please suspend from all transactions with Offerpal pending further investigation, Zynga. I hope to hear good news soon. If you don’t, you have lost me forever!
We started a social ad network (Triana Global) at the same time that Pincus and the rest started their monetizable applications. We fell behind the eight ball for this exact reason. How can you compete as an ad network against Acai Berry, Teeth Whitening, Ringtones, Crush offers and the lot.
Every year at Ad-Tech you see it. The companies who make the most from these scams (e.g. Tatto Media) are the ones that end up hosting the crazy extravagant parties. We all know where they are getting the money from… and for the first time a spotlight is being shone. Good job Mike!
Smiley Media (http://www.smileymedia.com/) another example of some shady sign ups.
Mike, Its great that you are doing what you are doing. If other blogs take this up too, maybe Facebook and Myspace will have to ‘clean up’. I really think this will continue though, only to provide the precursor to the next generation of social networking and social gaming.
But perhaps you should also take on companies like Google which also thrive on things like these. While not doing lead gen scams, their adwords and ads that blend in with the rest of the site also trick easy users into getting them revenue.
I love the way Google showcases itself as a good company with Microsoft being the evil one. Microsoft may be making shitty products and minting money off them, but Google is killing off innovation by buying every small innovative company that comes out. If Yahoo would have purchased Google for the 1M they had asked, search might still have sucked. Imagine how many great companies they have killed just by negating risk and buying, instead of building – just because most entrepreneurs just want to make quick bucks and are happy building iphone apps rather than something truly ambitious.
This shit will still go on, but Im proud the valley still has guys like you. We still have a long time till we get consumed by the Wall Street culture.
Good job TC. Which brings the next question – so, what really are the options for game developers who are looking for legitimate+moral ways to monetize their games – which ad companies to look for? That would be helpful for many.
why go with ads at all?
Check out Dungeons and Dragons online. I was worried when I started playing it that it was going to be yet another scam like those talked about here.
But while you can indeed spend money to buy items, you can EARN the same DDO coins IN GAME by doing quests and simply playing the game. I haven’t played long enough to earn much, but Turbine and DDO made a good setup IMHO. Game for free. Earn points in game or buy them, your choice. No scam offers, and the “best” items are not IN THE STORE but have to be earned in game. It’s not only minimizing the problem of UBERpowered chars who got that way using mommy and daddy’s credit cards, but keeping the game fair and balanced for everyone regardless of wealth. It’s a system I hope to see more MMOs and games take advantage of.
Well DDO online is free in limited access. To play the full game with all of its features and characters it requires the usual mmo fee of 15.00 a month just like Blizzard and the rest charge.
Not true. DDO offers free unlimited (non-priority) server access and initially limited content access. Although the quickest, easiest, and generally most convenient way to access ALL of the content available int the game is to pay either a monthly fee or purchase blocks of spendable points it is definitely NOT REQUIRED. It is actually quite easy to earn enough point to acquire additional content just by playing casually.
Classic and high quality TC right here.
This is silly
First, disclaimer: I am posting anonymously not because I have anything to hide but because I do am going to share actual confidential numbers from an actual Facebook application that I really should not be sharing.
Over the past 2 years we have used many of the offer providers, Offerpal and SuperRewards among them. Our revenue this year is going to be over 2 million.
We have for a long time had a customer support staff that has answered every single email coming our way.
There are definitely complaints about offers but, in our 50,000+ answered tickets, none were parents complaining that their kid made unauthorized charges on their cell bill/credit card and only a handful who reported unexpected charges on their credit cards or cell phone bills.
Part of that may be my application’s demographics. We hardly have any kids using our application; it is mainly women over 35 years old.
The fact of the matter is that these charges *are* disclosed. The “misleading” screenshot of the offer wall that appears in the original story does not show you the numerous other offers that surround it that are prefaced by “FREE” (or the ones that are in the “FREE” tab of the offer window. And does not show the landing page which specifically and clearly states that it is a contract and what you will be charged.
The only complaints about offers that we get with any consistency are people claiming that they have completed an offer and did not receive the award. These are interfaced through the customer service at the offer company for verification and the user ends up credited and happy in most cases.
Regardless, these mobile quizzes are not very big money makers. From what I have seen, they account for between 5% and 10% of the revenues coming in through the offer walls. And in fact, we will be phasing them out shortly because users are put off by them and don’t return to the offer wall (not because they were scammed but because they chose not to do the offer after seeing the terms — that’s one thing you are right on, the terms of these mobile quiz offers are pretty ridiculous.. but they are clearly disclosed).
What does make up the majority of our revenue is direct payments. Upwards of 70% of our revenue comes from users who are making payments via Paypal or their Credit Cards. There is real value being provided here and users are willing to pay for it.
they aren’t contacting you – they are either contacting their carrier or they are contacting the provider of the offer. you’re way down on the food chain when it comes to the charges and more on the “did i get my virtual currency?” side of things.
I posted this article on facebook last night and it was removed. I wonder why ?
The concept of awarding points for surveys and other types of affiliate offers isn’t bad or unethical business in principle. It has clearly been exploited by many reward-offer companies through what I called “advert-scams” in a recent post about dissecting the success of social gaming companies: http://digitalp...-social-gaming/
To the same degree that third-party apps are vetted by Facebook, so should the “fourth-party” services who currently piggy-back their way in through gaming and other apps.
Swoopo story next?
just a matter of time on that one.
On the internets, money is made up of large ponzi schemes (eg. ok, look around you) and then covered up with business models, surrogate products, multiple rounds of fund raising and even IPO.
When I first joined Facebook & subsequently started seeing articles about Zuckerberg in the mainstream media (particularly Fast Company) I was a huge fan…I thought that this kid had the vision to be the “king of all media.”
We then started hearing about his classmates who claimed that this was there idea. I then saw an interview with him on 60 minutes…where he came off as being arrogant…yet unsure of himself.
My crush on Facebook started to fade the more I realized that Mobwars and Vampire invites were taking up my feeds…which was fine. Perhaps facebook wasn’t for me.
I no longer felt as though Zuckerberg was this genius that had the vision to one day take traditional media online (tv, radio, etc). I felt as though he was creating a portal for those who never outgrew their Dungeons and Dragons phases as kids. My thought was that if Facebook needs these aps to pad their user #s and traffic….so be it. However, I had no clue how important these apps were to their revenue….and was particularly shocked last night to learn how dirty this money actually is.
I wonder how many users innocently entered their mobile #s etc to find out who had a crush on them etc….and if like me they don’t check their mobile bills in detail, have fallen victim to these scam. This is a much bigger issue then pissing off a couple million users by switching up newsfeeds, or having questionable terms of use etc…this comes down to a question of ethics or lack thereof.
What ever became of those classmates of his?
Well they became $65M richer, naturally…
http://latimesb...ctu-facebo.html
If the argument is that these offers are propogating “scams”, then that begs the question – what about the advertisers themselves that create the recurring charges and subscriptions? Are they scammers too? The importance is to make these terms clear to the end user so they can make an informed choice about whether to complete an offer or not, and the networks have already made improvements in these areas.
I also dont think that their CEO’s comments were off the mark, considering that Michael made a bunch of false accusations without really doing his homework the industry or what differentiates the offer networks. Trialpay and Gambit run exactly the same offers as Offerpal.
Mike – Starting a just war is noble indeed. But what matters in the end is achieving the goal in starting a just war.
If you have no intention of winning and realizing a goal of protecting millions of consumers, give this issue a rest.
Else, take it to the ends of the earth and bring reform.
TC will gain my respect.
You have shown courage while others merely attend these meets to network for their own personal gains.
My hats off to you.
Sometimes you don’t know if you’ll win, but you do the right thing anyway. Intent has basically nothing to do with its success.
Right on! This is way too big of an issue to sweep under the carpet…kudos for bringing this to our attention…
Exactly, the world would be quite a different place if the prevailing notion always was “well, we may not win this war so let’s sit on the fence”
Facebook has indeed responded to these kinds of issues. For example, there was a high volume of IQ Quizzes all over Facebook that would pull data from your friends list and then create an ad that stated “Your friends have taken IQ quizzes and scored x. See if you’re smarter than they are and take the IQ quiz”. To get their faux IQ score, users had to sign up to a mobile subscription of some sort that they’d likely never actually use.
Facebook pulled these ads due to the fact that they were utilizing friend data and creating misleading ads.
If you look at TC adds in left pannel, there are many advertiesments which can be considered scam, they are offering 30 days free trial offers, which will continue after signup if you do not cancel. I think all online website makes monery by doing such ads and have their bread and butter. (Free trial online video, Free trial hosting service)
Michael should clean TC first before he complains for others. TC has lots of reader and they make lot of $$$ out of these advertisement and revenue share from the user subscription.
In short nothing is free in this world. You can name it as a scam or ethical. There is a thin line between these two.
enjoy free goods
Why The Face on all the hubbub about this stuff? It’s lead-generation advertising, people, and it’s the same low-response offers that have been around for ages. I give some credit to the Gambits, OfferPals, SuperRewards of the world for taking that existing model and making it fit into gaming and beyond.
But the core offers has long been provided by people at NetBlue, NeverBlue, Azoogle, and all these companies that you don’t hear much about, unless you happen to be a marketer looking to acquire masses of customers. They’re the same guys powering the ads on some of these networks. And if they’re not using the third-party, they’re definitely talking directly with the same exact advertisers.
The quality of leads are often terrible. The methods are spurious at best, but when you’re dealing en masse, the ROI from customers through these low response rates can actually make these cost effective.
I think it’s a little too easy to line up the social gaming companies and shoot at them for using these channels. Why not line up the hundreds of mainstream consumer services and marketers outside of gaming who have used the same exact offers from the same exact clients in lead-generation and affiliate marketing — they’re just doing it directly via the ad networks and not through the game-reward go-between. Look at any major subscription service, especially those in mainstream gaming, personals, hosting, photo services, personal finance, etc. — you’ll see many of them using affiliate systems.
And so the problem really is mostly with the advertisers, often affiliates. While they’re supposed to be held to a higher standard, it’s very difficult to police all of their methods, especially again, when you’re doing it at such large volumes. Thankfully, they’ve gotten better than they used to be, but there are always new affiliates and advertisers, and these are some of the most aggressive people you’ll meet in marketing.
I wouldn’t credit to the social-rewards companies for inventing a brand new way to make money, but I don’t think it’s necessarily fair to single them out. It’s in their best interests to weed through the chaff, and the ones I’m working with or have talked with are earnestly trying to do that. If you don’t have good offers, you won’t get repeat users, and the companies will stop integrating them. Customer satisfaction will force a finite lifespan on those who don’t weed the junk out.
Ah, another person arguing for a passive solution, “let the future sort it out.”
the problem is in hiding what’s really going on.
GambitS, SuperRewardS and OfferpalS of the world?
There’s only a few of them. Silly “of the world” phrase.
So, um..how is this gonna #$?!!⊗∑*! the Zynga ipo that seems to be slogging down the pike..?
So does this mean Facebook employees do not get a fat bonus this year?
(
“Regardless, these mobile quizzes are not very big money makers. From what I have seen, they account for between 5% and 10% of the revenues coming in through the offer walls”
Thats because the publisher often gets only 5 to 10% of the actual CPA the vendor is providing the middle man pockets the rest. I remember 3 years ago my site was flooded with love crush ads and we were getting 30 cent CPM’s via adsense. I went to some networks and ran it direct and saw $9.00 CPM’s. I disabled it once I realized what was going on. To this day I still can’t use networks like right media because the instant I do all i see is love crush ads on every single page and a lot of angry users.
i am running a group to expose scammers on facebook and other places. i and my family has been threatened several times. I asked facebook cooperation but they never answered. they don’t care they announce 300 million users and we all know that easily 20% are bogus scammers. i met scammers with 10 and even 15 different profiles.
Governments do nothing because its private money, companies do nothing as it will effect their numbers but its easy to eliminate or at least to reduce considerably the amount of scams. nobody bothers. i have 25 years of experience online and 15 of them i am hunting these guys. I just wonder if its not time that security measures will be forced on ALL social sites !
What does Mark Pincus have to say about all this? You’ve essentially indicted them for fraud, which i have no doubt is happening. Does this now prevent them from getting bought out? My guess is that it does.
Connecting the dots.
This issue illustrates the responsibility of the “being a platform” business model.
Gov2.0 is government-as-a-platform and the difficulties of a government promoting business in an effective platform manner has been given a lot of thought and discussion.
However, the problematic governance and government-like responsibilities of a firm building a platform and leading an ecosystem is rarely discussed.
I hope this discussion will continue and that it will escape the back-and-forth blame game tendencies. It will benefit users, future platform businesses and maybe even add some feedback to the gov2.0 debate.
One thing you should make more clear is the fact that many developers have no idea this type of scam actually occurs when the monetize their platforms with these offers.
All the network tells the developer is “A user just needs to fill out their Name, Address and confirm their mobile phone number” and we will pay you $XX.XX for each lead.
What they fail to tell you is that they will re-bill your user none stop and make it nearly impossible for them to terminate the re-billing.
The only way the developer will be able to find out is if they, themselves, do the offer and get re-billed none stop.
How do I know this? I’ve been there, done that and now have stopped and working on a different method of monetizing.
that’s true. i don’t even know what offers are displayed to my users, because users in different countries are presented with different options. and because these offer companies also handle the support requests for the offers, i don’t even get their complaints.
Let’s not forget the fact that Markus Frind takes in hundreds of thousands if not millions for the acai/diet scam ads displayed on plentyoffish…sigh.
Michael, those 2 apps have little incentive/monetization potential. obviously the owners found out it was not worth it so they could afford to throw the offers away. i don’t think they ‘d do the same if they saw real monetization potential in offers.
For the average small-to-medium game developer who can incentivize these offers they can provide a great additional source of revenue that almost doubles our (ad-only) revenue.
for us these companies also act as the middle-man who processes offers and payments so we don’t have to devote time for support related to paypal or offers , which is a very tedious part of the job.
If facebook thinks these offers are scammy they can talk to those offer companies to ensure they comply to some terms, just like they did with advertising companies a month ago.
finally, i see this kind of sms service ads on both facebook ads and google adsense . while i don’t agree with their model, they seem to be ubiquitous. the thing to do here is first, inform people that it’s cheaper to use your credit card instead of giving your phone #, and second, talk to mobile providers in order to provide an sms payment service that is actually worth it. sms payments typically yield a max of 40% to the developer, while the networks withhold the rest 60% . If i were to blame someone for creating this situation here, it’s the phone companies who fail to provide a decent sms payment service until now.
dating sites have low monetization potential? online dating drives about 1bn a year in direct transactions from users.
their facebook app has zero monetization potential because there is nothing to buy there. (we are talking about facebook apps here; offerpal et.al. operate only in facebook)
yes but both markus and i were talking about not putting offers on our (at the time) respective websites. it sounds like markus has been hit up many times by offerpal to put those offers on his site, off facebook.
this talk is about facebook, where all these games reside and grow virally. we know they exist ouside facebook for thousands of years, but that’s not news. the problem mike mentions is that because of the volume of facebook, these scammy-but-not-illegal advertisers have found a safe haven and a very profitable one
i still believe the 2 apps mentioned, while popular, don’t mean much. average developers simply cannot afford to remove these offers
i agree, the wireless carriers are just as complicit in all of this as anyone.
they are actually the first to blame. they not only allow these schemes in their networks but also benefit greatly from SMSs (mobile carriers typically keep more than 70% of the SMS cost)
offerpal & the rest use CPA ads from affiliate networks so they’re last in this chain
@jhong– much credit to you. The exercise of determining the “guilty” party is moot– is it the game developer, the ad network, the advertiser, the affiliate, or wireless carrier? They can all blame each other, yet they’re all guilty. But certainly it’s a red flag that the carriers take 50% of the revenue and look the other way.
“obviously the owners found out it was not worth it so they could afford to throw the offers away. i don’t think they ‘d do the same if they saw real monetization potential in offers.”
What a sad statement for you. Back when I was developing software, I had plenty of people willing to pay me very well to create software that did all manner of unethical things (usually revolving around lead generation and various infotainment trojans), and I turned every one of them down. I didn’t do that because I didn’t think the money was worth it. I did it because it was UNETHICAL!
I really shudder at the all too common attitude that if you think something is unethical, they must have just not offered you enough money. I’m really not a particularly upstanding citizen, but even I know a scam is a scam, no matter how much it pays.
i insist in my statement – spare me the sadness please. the 2 stated apps don’t use offerpal or super rewards or anything because they have NO USE FOR THEM. there is nothing in their apps that requires real payment. so their “confessions” are irrelevant. i believe none of the most popular social apps would ever want to remove those offers.
look around this page. do you see unethical ads? I do. 90% of facebook ads on international sites lead to this type of SMS-scams and make money onthenet sites.
at least i know the leads generated in my apps are checked by some company for compliance with the law – the fine print. i have no time to do that myself that’s why i use an offer provider. and i have never ever in 2 years received a complaint from a user that the offers are scams. not even in the discussion boards. but maybe i was just lucky
Well first off, I was responding to tenthings, not you, so there is no sadness for you.
Secondly, I could rattle off ten ways to make a fortune right off the top of my head that probably aren’t strictly illegal, or at least not something you could be successfully prosecuted for, that doesn’t mean they aren’t scams.
Honestly, you seem to have a hard time getting your head around what “ethical” means. It isn’t really a big surprise, since we live in a society that has been stressing that nothing matters but money for so long, that I suspect most young people think the word has something to do with environmentalism, or clothing manufacture, not anything to do with business.
Still, most people don’t get it, but business ethics don’t exist because everyone wants to be all fluffy and nice, they are combined maxims (no that isn’t just a soft-core magazine), of how to run a sustainable long-term business. I maintain that any unethical person can get rich quick, provided all they care about is making money, the question is, how long can they sustain it, and what options will be left open to them once they’ve burned all their marks?
These are things the ethical businessman doesn’t have to worry about. Sure, it might take longer, and be a lot more hard work, but the relationship built up with the customer over years of doing business give him or her a much better chance of seeing sustained revenue, and finding real financial security.
Believe it or not, for some people, there isn’t this constant war between what is ethical, and how much it pays. They do what is ethical, AND get paid for it. They might not make as much in as short a period of time as the scammers, but then they don’t have to spend their entire career staying one step ahead of the law like a Colombian drug lord either.
I have promoted pSMS mobile advertising in volume in multiple channels and have worked with many pSMS advertisers. All the companies that operate in this space are constrained to operate by carrier guidelines, which can be followed to the 80% level (yielding one conversion rate) or higher (yielding lower conversion rates). In the US, the guidelines are established by the Mobile Marketing Association; in the rest of the world similar bodies exist. To get the most number of subscribers with minimal chance of being shut down or penalized by carriers, most advertisers loosely operate at the 80% level of compliance. The difference between 80% and 100% is how bold and large the pricing disclosure is made, whether there is a checkbox on the key final page, and so on. Over the years I have seen millions of people subscribe to these services worldwide in multiple channels. The fact is, even at the 80% level of compliance there is considerable disclosure. At the 80% level, there about 5 things that a consumer ignores when they sign up — terms of service, pricing, PIN messages, and so on.
Most advertisers know that the consumers are actually “in on it” because the 24 hour drop rates on subscribers are at 70-80% instead of 30-40%. So its likely that some kid is scamming their parents or is just trying it out for the first time. What is happening is the industry is teaching people to treat their mobile phone like a credit card, i.e. if you pull it out, you will be paying something.
In the virtual currency channel (MyOfferPal and its competitors), I have seen several tricks in pSMS offer that push the aggressiveness boundary in non-compliant manners:
(a) terms of service that require scrolling to see or are invisible until after the first few pages
(b) “stacked marketing”, where you actually end up signing up for MULTIPLE offers, one right after another
This increases RPU by a serious factor, and there is zero doubt that everyone — from Facebook through OfferPal and the developer — is in on these new tricks that are way non-compliant. Everyone is incented to push this boundary as far as possible. Just as the tobacco companies have to lie that smoking doesn’t cause cancer to operate their business, in the same way, everyone has to do this: The money is enough to lie just enough to make it work. In the pSMS case, the difference between 70% and 90% is so unclear its easy to actually believe in what you are doing+saying, almost exactly like it was easy for a mortgage broker to sell 1 year Option ARMs.
When I hear how Zynga is going to go IPO next year, how Playfish might be acquired, etc. its quite clear someone is going to lose a lot more. In the next few years, the next people to be scammed are the public market investors who don’t see the unsustainability of the “virtual currency” business model and have been pumped up by Techcrunch et al press business because they didn’t understand that the business model was built on just a few of these tricks. They will have skipped over that part of some prospectus pretty much exactly like the pSMS “subscriber” did, for reasons of greed.
Obviously, this very same thing happened in the entire mortage + financial sector in the last decade, where risk was spread among about 6 different parties — instead of Moodys through the mortgage broker its Facebook et al, the developer, the advertiser, the virtual currency company, the CPA network, the carrier.
Great topic, good discussion thread too.
Might it have been appropriate to also ask the gentleman to the left of Anu from Zong about his service, user base and affiliation (believe partner of offerpal and facebook – meaning fb directly benefits in some cases I presume). I am guessing likely users of Zong, atleast in the US, are kids who full well understand they are scamming their parents by charging money to their family phone plan to gain pts in some silly game.
I think Michael you are right too that Anu does not know her business, mobile quiz offers are total scams that prey on young kids playing these games (so parents are indirectly scammed I guess in this instance). Swearing for affect does not help her cause either, just terrible.
Offers I believe have a place on the Interent (including to benefit a gamer) but only offers from reputable companies (meaning NOT mobile billing based or fake weight loss subsciption, fake money making scheme related, fake teeth whitening subscription, etc…) and they must have fully disclosed terms especially if the offer involves a recurring billing scheme.
Lastly James can be applauded for not having offers on HotOrNot but isn’t Avid Life also the producers of AshleyMadison a site that helps unethical married people cheat on their spouses. People probably full well know when/what they are paying for on that site but does that make it an ethical business? Personally I say no.
It’s true, the holding company that bought HOTorNOT also own Ashley Madison, but nobody involved with HOTorNOT has ever had anything to do with that site afaik, and we were told that HOTorNOT would remain a separate property/company. I have never been involved with Ashley Madison in any way. Not sure what you are trying to pin on me here
you seem to have invested in slide (remember slide funwall everyone?) . now that’s a stigma
What you describe about SMS is not scam. The point in this post is about misleading users, i.e. not telling him exactly how much they have to pay at the end.
This is not the case of most sms payment provider like zong who clearly display the price before. Nothing wrong with that.
there are open marriages, you know
The developer ‘FB Developer’ that produced $2 million in revenue says that they get 70% over PayPal and Credit cards. I sure hope you don’t have a poker or casino game. Zynga, by taking a cc or paypal is in actual violation of the wire act.
That said: Why do you believe that 70% choose to use CC’s? The true number, with descent leads and micro-monetization done right, should be 10% cc’s/paypal and 90% leads.
Zynga have about 1/50 of their users making a revenue producing action per day, which just show how poor offers, forcing users to cc’s and paypal is causing much lower retention and hardships for developers.
We are developing an answer to these ills as we see them – an ethical – and more profitable – solution to the problems that we all see and feel.
not at all. in fact users should use 100% paypal/CC because that is most cost effective. developers only get a tiny fraction of the cost of sms offers. typically only people who don’t have /can’t use paypal/CC end up completing offers
Interesting. Zynga said that they got about equal parts of their revenues from cash deposits (cc/pp) as they did from offers.
i’d like to know if there’s data that shows what triggers a user to fill in cpa leads/offers vs using cash deposits.
I come from the gambling world, where for obvious reasons, cash is king. But that it would be the same in social gaming, well, that’s more than a surprise for me.
I actually believe that is due to the poor offers and that people know what scam that it is. 15-20 minute marathon surveys, at the end they still don’t get their ‘freebie’ and on top of it all, ends up getting spammed!
it’s because those offers cost a lot more to the user – the subscription costs $10, but they only get $2 worth of virtual good. those that have CC prefer to use CC and get the whole $10
It is very difficult to monetize the internet from consumers unless you produce a product that people are willing to pay for or is a physical good. The internet is primarily a marketing technology infrastructure
Thanks Mike for bringing this up… I went to check my wireless bill right after… and voila, I have been charged on additional average of $20-30 / month. Anyway, I also want to bring up that carriers like ATT has been guilty of not informing their customers while they know all these are going on. In fact, they are giving me a 3-month refund on this to soften the blow…. Why didn’t they simply tell their customers ?
I’ve been working in the FB space for a couple years now and wanted to throw in a few points.
1. The mobile offers in question are starting to be contested in US courts. Tatto Media was sued by the WA Attorney General and settled for $500K earlier this year (http://www.atg....e.aspx?id=22284). In countries outside the US, mobile offer regulation is MUCH more stringent. FB actively allows these offers so long as a few basic criteria are met (price disclosure above fold, price disclosure in pin text, etc.), and it is unlikely that FB would back away from these offers without further legal pressure. In addition, there have been only limited class action suits, but Mobile Messenger (a key middle-man for mobile content) coughed up $12mm last year (http://www.mobi...ivacy/1540.html).
2. FB has recently gone to considerable lengths to crack down on misleading ad creatives and they are now working on types of advertisers. While devs and networks in the past just operated with a “comply for a day, they’ll go away” approach, most are now making a point to actively communicate with FB on an ongoing basis. Developers themselves are also asking for higher quality and transparency given that FB has over the past few weeks disabled some leading apps for violations re: creatives and landing pages.
3. FB’s advertising guidelines were in the past only applicable to Social Ads. FB recently asked that ad networks and devs also comply with them. One of the issues at the moment is that a considerable percentage of active Social Ads are currently in direct violation re: types of advertisers. Any time you see a gift card offer, a tattoo download, or one of those “cartoon yourself” ads, you are seeing a situation in which FB isn’t living up to its own policy. If the company didn’t actively approve each Social Ad that comes through the system, this would be easier to understand; however, at the moment this is one of the chief frustrations for devs and networks.
4. The health of the FB Platform re: user experience as it pertains to ads is *much* better than it was even three months ago. Each iteration (removing user data from ads, enforcing creative guidelines, etc.), while maddening, has ultimately created a more stable system. Furthermore, remember to note that FB is planning to eventually allow devs to run Social Ads on their canvas pages.
What about the bigger picture:
PlentyofFish droppd adsense and launched their own ad network – they accept just about anything and therefore their site is flooded with ads for teeth whitening scams, acai berry scams, make money with Google scams…etc
Facebook – same thing, bigger scale. Facebook too is flooded with ads for teeth whitening scams, acai berry scams, make money with Google scams. Look at the complaints and comments on complaintsboard.com and note how many of the comments say they saw the ad on facebook. See how many scam sites advertised on facebook:
http://wafflesa...t-website-list/
The CPA networks and their affiliates are the guilty parties here as much as the companies with the ‘offer’ (scam). They all run these offers: go to findaffiliateoffers.com and enter a keyword like ‘IQ test’ , ‘teeth’ ‘acai’ ‘google’ or whatever and see how many CPA networks are running these offers. They may have ‘recognised’ companies like netflick on their offers lists, but the vast majority of their income comes from the hidden negative option recurring billing ‘free trial’ type offers (rebills) which are deceptive and in many cases outright scams.
same old, same old this has been going on for YEARS, what FB developers have to do is take responsibility for what kind of adverts they choose to blast at their potential customers – i.e choose ethical affiliate networks that don’t allow adware, spyware and scams.
- However the reason you are currently choosing trashy adverts is because they offer the highest commission right ? – so you are thinking of quick conversions and high payouts putting your user base last.
You are doing this obviously because you want to make money, the reason this still goes on today is because trash must pay, if it didn’t pay you wouldn’t join it – but by joining it you are agreeing to be unethical then blaming it on someone else.
The method people in UK used to clean Affiliate networks of crap was by top affiliates and advertisers threatening to leave the networks that have scammers on their books unless they removed them – from my understanding this action was successful at the time.
Maybe it is time for another clean out of the trash – but are affiliate/advertising networks prepared to do it ?
If the FB developers all threaten to leave the networks unless they clean up, it could work
Zynga – are the people with the keys to the city on this one – if they threaten to move to a ’scam free’ rival network, they will put pressure on networks to do the right thing – if they can cope with a pay cut.
The best response to this is for users to boycott Facebook for week and demand that they strictly enforce rules against these games. Long term, we need to find a Politican to champion (demagogue?) the issue until we shift the attention to the social networks and the ad platforms.
As Aaron Wall (SEO Book) frequently points out,
“In an unregulated auction-based advertising market place, fraudulent offers can often pay the highest bids for keywords.”
In his article titled FTC Going After Bloggers – Epic Fail, Mr. Wall observes that ad networks that syndicate ads based on “maximizing yield efficiency“ are well suited to syndicate fraud. Advertisers of scams can afford to pay top dollar for ads because their profit margins are nearly 100%.
Ad networks are morally responsible as collaborators in interstate and international frauds perpetrated upon hundreds of thousands of victims each year. Google, Facebook, Yahoo, AOL, Microsoft and many others are culpable in consumers being defrauded and we need regulation that put the onus on those who are making the profits.
http://www.seob...ine-ad-networks
The Plenty of Fish guy is a success story.
One can start with the slime at the bottom, focusing on the scammers, but really the entire stack, from small companies, up to the social network companies and on up to the top with Google, all rely to a greater or lesser extent on this revenue stream.
Many of the ‘free’ services we enjoy are paid for care of the many who were fooled into a lifetime subscription to some useless newsletter.
I don’t doubt that some day, the government will intervene, but we will all end up footing the bill. Enjoy it while it lasts.
Exactly! I mean i feel bad for the so called “victims” but again it’s their choice to use these services in the first place. Don’t use them if they harbor “scams” . At the end of the day you get what you pay for . And freeloaders can not be choosy.
WE NEED MORE INVESTIGATIVE JOURNALISM WHILE THE INTERNET & TECH SPACE MOVES MORE INTO EVERYDAYS’ LIFE.
The two that go on record as avoiding scams are both in the dating business, which is much easier to make money at. What other businesses have made money by avoiding scams?
Most Facebook developers would stop using these offer networks if they could monetize their apps otherwise. It used to be that a decent app would pull $0.30 CPMs, and even that was not enough to justify all the work behind it. Nowadays you are lucky to see $0.10 CPMs, and as ad dollars dry up in this recession, scams are some of the only revenue streams left.
Maybe Facebook could fix this problem swiftly by just offering a cut of their own ad revenue to app developers. If I get 100k impressions per day on my application, and the sidebar has 2-3 Facebook ads, why not give me a piece of that? I’d take down my own ads & offers for a share of the real ad money.