Scamming Users Part of Social Gaming Company Zynga’s business model

 

scamuse1Zynga’s CEO Mark Pincus admits he “did every horrible thing in the book just to get revenues” and that scamming users was part of social gaming company Zynga’s revenue model right from the start.

According to investigative reporter Michael Arrington, Zynga’s revenue estimates are likely “$250 million a year or more. That means $80+ million/year is being brought in from legitimate offers like Netflix subscriptions, as well as the really smelly stuff like recurring mobile phone and learning CD subscriptions that trick users into paying big dollars for little or no return value.

If you aren’t familiar with Zynga, playfish and Playdom, they are the big-3 players in the social gaming sphere and provide the most of the games on Facebook and MySpace, Bebo, iGoogle, iPhone, Android etc… If you or your kids have played games any of these services, chances are you have been scammed.  (In talking to my business partner about this blog earlier today, he said he just got off the phone with AT&T over a $9.99 charge on his phone bill that turned out to be a monthly subscription charge resulting from a scam his son fell victim to when downloading what he thought was a free background).

Arrington’s three-part exposé of the exploitive business practices of Zynga, other big social gaming sites, and the social networks that host the games are must read material for every online user:

Contritely Pincus claims he intends to make sure Zynga’s games don’t include scammy offers in the future. How Noble.
A day late and a Dollar Short – MySpace, Facebook address their role in consumer exploitation
After the public mea culpa by Zynga, other heads started rolling.

MySpace parent company News Corp. has announced, in response to the sharp media attention focused on the exploitive practices of their gaming partners – and News Corp.’s own ‘cut’ of the profits, that it will add new language to its terms of use to prohibit “promotions that include hidden renewals without specific opt-in” features. See MySpace Takes Close Aim At Scammy Offers) How Noble.

Similarly, Facebook’s felt the heat and announced Facebook To Increase Enforcement Of Anti-Scam Rules. In this article Arrington notes that in his talks with Facebook, the company held the position that they aggressively protect users. They blamed their failure to stop the spammy behavior on volume – with so many ads and so many apps, they claimed it was impossible to monitor the entire platform effectively.

Cutting through Facebook’s posturing, Arrington points out “it took me about 10 seconds to find really scammy ads on FarmVille, the most popular social game on Facebook with 63+ million monthly users. If they just start with the big guys, a lot of the problem will go away”.

Remarkably, with the spotlight on this form of consumer exploitation, the “impossibility” of monitoring the entire Facebook platform seems to have magically disappeared. Facebook now says they are building out teams and technologies to address “the problem”. How Noble.

Arrington also outlines the financial symbiosis between these ads and the services that host them in what he aptly describes as “a self-reinforcing downward cycle” of consumer exploitation. “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.”

It is time consumers return the ‘favor’ and do some economic damage of your own

While we’re still reeling from the banking racket, ponzi schemes ala Madoff, and general corporate greed that plunged the economy into dire straights, why make a big deal about one more piece of evidence that respecting – or protecting – consumers is optional? Or that the dollar is mightier than integrity? Why shouldn’t these online companies get away with their scams with no more than a wrist slap and a promise to be good in the future while ethical companies who balk at bilking consumers falter?

If you’re seething, and sick and tired of being exploited with no recourse at hand, here’s the good news:

Online you hold the aces. Collectively, you have the power to bankrupt any one – or all – of these companies – Zynga, playfish, Playdom, Facebook, MySpace, etc. in short order. How? Quit using them.

Want to know exactly which games to boycott?  Scroll to the bottom to see the top 25 games on Facebook and MySpace and who owns them – or boycott Facebook and MySpace entirely out of disgust for their role in this debacle.

Why does Facebook repeatedly roll back abusive features (think Beacon, and their terms of use debacle) when the first few million users complain? Because they are terrified of the collective power consumers wield. Why did MySpace remove 90,000 sexual predators from their service? Because they are terrified of the collective power consumers – and their elected law enforcement representatives- wield.

I am pro-business when business is pro-consumer. For those of you familiar with my consumer facing presentations, you’ll be familiar with two points I make in every lecture:

  • Internet companies make money in three ways – selling access to you and selling information about you…. and now, by deliberately scamming you – move over organized crime.
  • Whether you are a kid, adult, or senior, your biggest risks online are not contact, conduct or content, in spite of the frequency in which these are cited. Your greatest risks come from a lack of understanding:
    • Failure to consider what information you share and making appropriate decisions about whether information should be shared
    • Failure to identify trustworthiness – of people, products, services, Web sites, content, and businesses
    • Failure to understand predatory behavior in its broadest sense, including bullies, stalkers, scammers, hackers, ID thieves, exploitive companies, and other predators

I’ve got a few questions

  1. Where’s the class action lawsuit against these companies?
  2. Where is the legislative focus on protecting consumers against exploitive industry members?  This is a perfect example of where legislation/regulation has a role to play. Without the diligent efforts of investigative journalists, these scams would continue; just “business-as-usual”.
  3. Why did ‘legitimate’ investors, like Kleiner Perkins Caufield & Byers, pour money into companies whose business model included scamming? Companies like these pore over every inch of business models before investing.
  4. Why didn’t the social networking companies test the products they offer their consumers for exploitation? Or fail to adequately address the escalating problem before being publicly castigated?
    Arrington nails it with “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.
  5. What besides utter greed and a lack of decency could convince these gaming companies that offering ‘free’ game currency in exchange for users filling in a moronic survey? The way this works is that you have to give your cell phone number the results via a text message. This is what sets up the scam – by simply opening the text message to see their survey ‘results’ the unwitting user is automatically subscribed to a $9.99 service (like my colleagues son). (read Scamville: The Social Gaming Ecosystem Of Hell for more examples like how they hide the terms of use by making them the same color as the page background so you can’t see them….)

You have a right to an online experience free of corporate exploitation. If you don’t know your rights, read Your Internet Safety Bill of Rights

Make a difference – jilt the companies that betray your trust

Linda

Read more on this unfolding scandal:


Wikipedia Definition of Lead generation: (commonly abbreviated as lead-gen) is a marketing term that refers to the creation or generation of prospective consumer interest or inquiry into a business’ products or services. Leads can be generated for a variety of purposes – list building, e-newsletter list acquisition or for winning customers. A lead is a sign-up for an advertiser offer that includes contact information and in some cases, demographic information.

 

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