The latest from TechCrunch
- Two Companies That Said No To Social Media Scams
- Scamville: The Social Gaming Ecosystem Of Hell
- Stealth Startup Zkatter To Launch Real-Time Broadcasting Site To Capture "Live Moments"
| Two Companies That Said No To Social Media Scams | Top |
| 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. Crunch Network : CrunchBoard because it’s time for you to find a new Job2.0 | |
| Scamville: The Social Gaming Ecosystem Of Hell | Top |
| Last weekend I wrote about how the big social gaming companies are making hundreds of millions of dollars in revenue on Facebook and MySpace through games like Farmville and Mobsters. Major media can’t stop applauding the companies long enough to understand what’s really going on with these games. The real story isn’t the business success of these startups. It’s the completely unethical way that they are going about achieving that success. In short, these games try to get people to pay cash for in game currency so they can level up faster and have a better overall experience. Which is fine. But for users who won’t pay cash, a wide variety of “offers” are available where they can get in-game currency in exchange for lead gen-type offers. Most of these offers are bad for consumers because it confusingly gets them to pay far more for in-game currency than if they just paid cash (there are notable exceptions, but the scammy stuff tends to crowd out the legitimate offers). And it’s also bad for legitimate advertisers. The reason why I call this an ecosystem is that it’s a self-reinforcing downward cycle. Users are tricked into these lead gen scams. The games get paid, and they plow that money back into Facebook and MySpace in advertising, getting more users. Who are then monetized via lead gen scams. That money is then plowed back into Facebook and MySpace in advertising to get more users… Here’s the really insidious part: game developers who monetize the best (and that’s Zynga) make the most money and can spend the most on advertising. Those that won’t touch this stuff (Slide and others) fall further and further behind. Other game developers have to either get in on the monetization or fall behind as well. Companies like Playdom and Playfish seem to be struggling with their conscience and are constantly shifting their policies on lead gen. The games that scam the most, win. And some users aren’t dumb, either. For every user who gets tricked into some fake mobile subscription, there’s another who can beat the system. That’s where the legitimate advertisers, like Netflix and Blockbuster, get hit. Users sign up for a free trial with a credit card, get their game currency, then cancel the membership and start over. Netflix has a policy of only paying for a user once. But game developers use a complex set of partner chains to launder these leads and try to get them through for payment. Netflix sees an overall lowering of quality and pays less for leads. Game developers, desperate to monetize, then search for ever more questionable offers to make up the difference. In the end, the decent advertisers are out, and only the worst of the worst remain. Left alone, the system really will slide into a full blown disaster. The platforms (Facebook and MySpace) are in a position to regulate this, and even have rules prohibiting some scams . But those rules are routinely ignored by developers, and are rarely enforced by Facebook and MySpace. There can be only one reason Facebook and MySpace turn a blind eye to user protection – they’re getting such a huge cut of revenue back from these developers in advertising. If they turn off the spigot, they hurt themselves. Zynga may be spending $50 million a year on Facebook advertising alone, fueled partially by lead gen scams. Wonder how Facebook got to profitability way ahead of schedule? It was a surge in this kind of advertising. The money looks clean – it’s from Zynga, Playfish, Playdom and others. But a large portion of it is coming from users who’ve been tricked into one scam or another. And recent moves by Facebook to shut down application spam only make the problem worse in some way – game developers have to spend more money on advertisers to get users now that the viral channels are shut down. That means the games have to monetize even better. Which means more scams. It’s time for this to stop. Facebook and MySpace need to create and enforce rules against it so that game developers aren’t tempted to get a competitive edge by scamming users. And if Facebook/MySpace won’t protect users, then the government will have to step in. There’s an easy way to determine if something is a scam or not. For any particular offer, ask yourself if anyone would buy the product or service if the terms were clearly spelled out for them, and they weren’t being bribed with in-game currency. The answer for many of these is a resounding “no.” A few examples are below. Examples Of Scams: A typical scam: users are offered in game currency in exchange for filling out an IQ survey. Four simple questions are asked. The answers are irrelevant. When the user gets to the last question they are told their results will be text messaged to them. They are asked to enter in their mobile phone number, and are texted a pin code to enter on the quiz. Once they’ve done that, they’ve just subscribed to a $9.99/month subscription. Tatto Media is the company at the very end of the line on most mobile scams, and they flow it up through Offerpal, SuperRewards and others to the game developers. As you can see in the image below, nothing in the offer says that the user will be billed $10/month forever for a useless service. Another scam: Video Professor. Users are offered in game currency if they sign up to receive a free learning CD from Video Professor. The user is told they pay nothing except a $10 shipping charge. But the fine print, on a different page from checkout, tells them they are really getting a whole set of CDs and will be billed $189.95 unless they return them. Most users never return them because they don’t know about the extra charge. Woot. Again, sites like Offerpal and SuperRewards flow these offers through to game developers. See here for more on the Video Professor scam. Of course, there’s no mention of any of these payments in the offer itself: An Industry In Denial Yesterday I attended the Virtual Goods Summit in San Francisco. In the Q&A session of one panel I asked Offerpal CEO Anu Shukla to explain the ethics of her business, and outlined my ecosystem of hell argument above. Shukla went on a tirade, calling my points “shit, doubleshit, and bullshit” (yes, really), but never really addressed the points. A video of the exchange is below, care of Alexa Lee . Offerpal now has a blog post up on the exchange, but they still don’t address the issues. They offer misdirection, denials and a shield of rules that are never actually enforced. Sadly, most of the audience of game developers was on Offerpal’s side. Many of these developers see quick dollars with lead gen scams and they don’t really care about how users are affected. In one session earlier in the day, IGG Cofounder Kevin Xu recommended that game developers “get users in the door to play free, then monetize the hell out of them once they’re hooked.” Sadly, it’s simply human nature to push the rules until they break. It’s time for Facebook and MySpace to protect their users from this stuff and make sure it stops. p.s. – An interesting development. Offerpal defended their mobile survey scams on stage and in the blog post referenced above, saying there was no scam involved. But today those offers have quietly been pulled down from all the games I’ve checked. If there’s no scam, why remove them? At least some good is coming from my ongoing rants. Update: Two Companies That Said No To Social Media Scams Crunch Network : CrunchBoard because it’s time for you to find a new Job2.0 | |
| Stealth Startup Zkatter To Launch Real-Time Broadcasting Site To Capture "Live Moments" | Top |
| British stealth startup Zkatter is launching a real-time microblogging service in the next few months that could be a hit. Similar in theory to Twitter, Zkatter asks users “What do you see now?” vs. Twitter’s “What are you doing?” The service, which has been in development since 2008, will allow anybody to broadcast and archive ‘live moments’ comprising location, media (image, video and text) to ‘friends only’ or ‘the public’ which can then be discovered instantly via search and friends time-lines. Zkatter’s focus is towards capturing information that you physically see live which offers a interesting addition to the real-time space. Zkatter, which has received $1.5 million in Series A funding, is also developing iPhone and Android apps to work in conjunction with the standalone site, with the platform updated in real-time across all devices. So if you post an update on your iPhone, it will automatically show on the site. And Zkatter will be integrated with Facebook and Twitter, so you can publish you updates to both social networks as well. There are additional features to the site but this is the general idea of what the Zkatter will be able to do. We took a little test run of the site, and it’s impressive. Not only is the user-interface easy to use, but the seamless real-time integration between mobile and the web. But Zkatter will still face competition from Twitter and the plethora of content-sharing Twitter applications, like TwitPic or TwitVid, which also let you broadcast “live moments.” The site is also similar to DailyBooth. Zkatter’s founder Matt Hagger tells me that there is still a good amount of development that needs to be done for the site but he’s confident that Zkatter will find a place in the real-time space. There’s no doubt that the rise of real-time streams is fundamentally altering the way we communicate and interact with one another, which is why we are holding our second RealTime CrunchUp on November 20th. You can buy tickets for the event here. Startups will be launching their latest real-time products and we are bringing together a host of notable panelists to share their thoughts on the realtime stream. Crunch Network : CrunchBase the free database of technology companies, people, and investors | |
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