Jessica Rovello: From Cashville to Scamville
Wall Street ethics are alive and well on Facebook. In early October I wrote a post on social games and examined the hype vs the reality. One of the realities I mentioned was that roughly 1/3 of these companies revenues come from offers, many of which are less than reputable. This week TechCrunch shined a light on the “offer scams” that games like Farmville are using to generate millions of dollars per month. In his article “Scamville” Michael Arrington detailed how Zynga and the other large social game makers are blatantly selling their users out in exchange for quick revenues. The article, along with follow up stories, has caused a tidal wave of reaction, including the replacement of Offerpal Media’s CEO.
A few days after the maelstrom started, Mark Pincus, CEO of Zynga, the largest social games company blogged “we need to be more aggressive and have revised our service level agreements with these providers requiring them to filter and police offers prior to posting on their networks.” Facebook quickly followed with a post on the efforts they plan to make to better police these scams. Now everyone is falling all over themselves to applaud Zynga and Facebook for taking proactive measures to stop this, even if it means reduced revenues. To me, that’s like applauding Bernie Madoff for saying he wished he would have been caught earlier.
The relationship between the social game companies and Facebook is incestuous at best and monopolistic at worst. You see, Zynga, is likely the largest advertiser on Facebook with estimates of their yearly ad spend between $50 and $100 million. These companies knew how they were making their millions and have continued to do so without regard for their users (you can see more on that here). Now, a year later when called out by the media they scamper to blame the ad and offer networks for their failures. Should we expect more? I suppose not. We’ve allowed ourselves to become a country where the term “business ethics” is an oxymoron. Why play fair when you realize your competitors won’t, you’re investors care about nothing more than your growth and VCs claw at each other tooth and nail to invest in the “next big thing” without bothering to look under the hood. The sad part is that in a month this will have been completely forgotten, and Farmville will still have 61 million monthly users. Our short memories are a perfect match for our short attention spans.
Facebook and the social game companies are never going to man up to the fact that they made a conscious effort to build their businesses with this dirty money all along. The new wave of apologetic postings and new policies are no more genuine than the stars who get into drunk driving accidents and run off to rehab in tears. Both know that all will be forgotten after 30 days of “treatment.” If we expect to see a real change one of two things will need to happen: users will need to start logging off or the FTC will need to get involved.
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