Scamville – Experience from the front lines

Much has been made recently about the monetization efforts of social games within the Facebook environment. Many game makers, most actually until very recently, give users several options to pay for virtual currency and in-game merchandise. These include everything from credit card to PayPal to mobile payments (Zong, MobilePay, etc.), and last but certainly not least, offers. With offers, users can choose to “pay” for a specific amount of currency by completing an offer from an advertiser. In most cases, it’s a win for all involved – the user gets his currency, the game developer gets his revenue, the advertiser gets a new customer, and the payment vendor takes a little off the top for setting the whole thing up. Perfect right?

Well, not always. Many of the offers served up by payment vendors are sketchy at best, and completely fraudulent at their very worst. Such has been the nature of the beast until Michael Arrington brought the whole thing down when he wrote a scathing post entitled Scamville: The Social Gaming Ecosystem Of Hell, and later challenged former Offerpal CEO, Anu Sukla, during the middle of a panel at the Virtual Goods Summit. The fall-out has been immediate, and far reaching.

1. Offerpal canned Shukla several days later – although it’s impossible to know if this was the reason

2. Facebook brought the hammer down on several ad networks and even took down the newest Zynga game, FishVille, because of the offers it was showing.

3. Zynga first announced that only approved offers would remain within games, and then simply removed all offers - a decision that could cost them tens of millions of dollars in lost revenue.

Personally, I think this shake-out was a long time coming. The sketchiness of some in-game offers has always rubbed me the wrong way, and I think the social gaming industry will be better off as a result. You don’t endear yourself to your users by ripping them off on a regular basis. In fact, the poor user experience of some offer providers is a big reason that we went with Trial Pay for Watercooler games earlier this year.

When deciding on a payment vendor for our Fantasy Football 2009 game, I met with all of the usual suspects in the industry: OfferPal, Gambit, SuperRewards, TrialPay, PeanutLabs, and a few others. We went with Trial Pay because they just had a superior product. Of all the options, they felt more product-driven while the others felt more sales-driven. The difference is that the user experience is a key component of TrialPay’s strategy, while the others seemed to take more of a “revenue at all costs” strategy. I will say that Peanut Labs also has the opportunity to differentiate themselves from the pack. They offer a quality survey product that gives user’s in-game currency in exchange for taking a survey. Unfortunately, that product tends to be overshadowed by their offer wall which at the time contained many of the same scammy offers as the other vendors.

It will be interesting to see how all of this really shakes out. Is this a flash fire that will quickly burn out, returning things to the pre-Arrington way? Or was this the catalyst the industry needed to button things up a little more to protect users. I’m hoping it’s the latter, but we’ll see.