TechCrunch/OfferPal Drama - Much Ado About Very Little

*** 11/04/09 Update: OfferPal CEO Anu Sukla has been replaced by George Garrick ***

So the inevitable "offers are scams" story finally blew on to the scene last week at the Virtual Goods Summit when TechCrunch's Michael Arrington attacked OfferPal's Anu Shukla for having misleading offers (e.g. sign up for Netflix, get 10,000 coinz) as a core part of her business.  Anu responded with the now classic line “shit, doubleshit, and bullshit”, and the fun escalated over the past few days (see TC post here).   At this point, market leader Zynga has thrown itself on its sword, saying it had made some mistakes with offers but was correcting them, MySpace has rushed out a press release against scam-like offers, Hot Or Not is proclaiming its saintliness by not accepting offers, blah, blah, blah.

Is there an unseemly, unethical and possibly illegal aspect to some of the offers seen in social gaming, virtual worlds and MMO's?  Of course.  Does this mean the end of social gaming as we know it?  Of course not.  As I discussed in an earlier post about payment methods (here), offers are only a portion of revenue for online publishers, and of that portion, some of those offers are clearly misleading and need to be purged.  We all have known this for months and months, and at publishers like Meez, we individually spend time doing so since the damage to the brand and the inevitable charge backs/customer service issues just aren't worth the cash to keep a bad offer up there.

This type of blowback is no different than what happened to Jamba in Europe a while back, as well as with the "Win an IPod" banners a couple of years ago.   I believe that CPA/direct response style ads have a place in everyone's payment options since there are some people who wish to trade time or other types of subscriptions for the currency offered in your game or world.   But the inevitable pressure from users, publishers, press and eventually, attorney generals, will force the sector to reform itself and a set of rules will emerge, making it clearer for everyone what the trade-off is.   However, let's not get all that excited as if this is some amazing or recent discovery.

The key issue is that the misleading offers are often the higher eCPM ones vs legitimate ones, so some online publishers need to get used to a lower eCPM than they formerly enjoyed, but in the longer run, it will be healthier for everyone (BTW: Meez gets less than 2% of revenue from offers).  The advertisers will be happier as well since they will be getting more legitimate buyers, making those CPA deals worth more to them than a bunch of lousy ones.   And users will be protected from some of the more scam-like issues that we've been seeing for the past 18 months.

These issues go in waves, and the pendulum is swinging correctly back to more enforcement and away from "Greed is Good" being the answer to everything, just it as with some of the scam-like issues in the broader financial system.   However, this drama obscured the much bigger news last week in social gaming, which was the changes to the Facebook news feed system, obscuring many of the common game updates, and forbidding automatic news feed insertion.  THAT is a BIG CHANGE - the offer drama is a way to sell a bunch of display ads.

Comments

[twitter.com/bigdoormedia]

Great post Sean. Our take on the whole thing is here if you are interested: http://www.bigdoor.com/blog/the-great-debate-over-the-exchange-economy/

[www.facebook.com/profile.php?id=675346322]

Great insights, Sean. Thanks for being the voice of reason.

[Prepaid Game Cards]

Great post. Thanks for sharing this.

Looking forward to read more from you.

[Tom Foremski]

Much ado about very little. Are you serious? This is affecting huge amounts of revenues for many companies.

[Sean Ryan]

To Tom's point, just do the math before running around with your head cut off. If offers are 30% of revenue (on high side), and you have to pull down the 20% "bad" offers, AND you can't replace that revenue (unlikely), it's 6% of revenue. bad, but not end of world. However, looking at the changes to the viral FB channel last week, that is BAD....

[hindol]

Great post. A few years ago, a lot of direct response companies used the offer page or email or co-reg for lead gen - redirecting traffic to get credit card or some identifiable info to be monetized later. Virtual currency distribution is same wine in a different bottle, I guess! With one notable exception -- gambling. Online gambling is discouraged because you buy into potential future winnings and more and more. Previous campaign strategies that I allude to did not. Virtual currency to some extent falls in the grey area - gambling and the old offer bait page. Thus one must wonder -- what appropriate legislation should guide the future evolution of this industry.

[Free NX Cash]

Amazing post, thanks for this. Virtual currency has come a very long way, and I agree with what you've said. Thanks.