As promising as virtual goods utilized by Facebook games have looked to be this past year, there has been a wave of controversy rising over its potential expense. As relationships with virtual goods companies and social games are reportedly yielding boatloads of revenue, consumers, privacy advocates and pundits are taking notice. This past week has proven particularly damaging for several companies participating in virtual goods, as scams are revealed and less than stellar business practices are uncovered or alleged with many of the popular social games on Facebook (i.e. FarmVille, Restaurant City, Mafia Wars, etc.).
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The Core of the Problem
Many of the more popular virtual goods companies generate revenue through offers. These offers are essentially deals with third party companies seeking payments from end users. In exchange for participating in the offers, the end users receive virtual goods in the form of virtual currency or items. Enticing the end users is the promise of virtual currency and items to be used directly within a social, casual game, or a similar application, often run through platforms such as Facebook’s. The problem is that some of these offers are of questionable integrity or downright “scams”.
As this business practice becomes more prevalent, the way in which they take advantage of consumers becomes more noticeable. Admittedly, some of these business practices have similar traits to tactics we’ve seen in previous marketing schemes across the Internet. The fact of the matter remains: a good portion of ads ran through the Internet rely on deception to lure in customers. Some would argue that this is a primary trait of marketing to some extent. So why is it such a big issue this time around?
The potential behind virtual goods is that they have the ability to create a more direct relationship with consumers. It’s this direct relationship that can essentially eliminate a heavy reliance on advertisers. Yet the over-abundance of “indirect” advertising through virtual goods is making a lot of users upset and uncomfortable. Instead of generating revenue in a more direct manner through improved relationships with consumers, many games and applications have become the new Trojan Horses for unwanted marketing ploys.
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What’s the Solution?
For starters, app developers and publishers can look towards the creation of an improved relationship with marketers as well as consumers. This way, consumers wouldn’t have to be taken to separate websites, provide payment information or feel taken advantage of. A more integrated approach to virtual goods offers would be beneficial to all parties involved, as long as they still provide value to the end users.
On the advertisers end, such an integrated approach would encourage quality relationships with end users as well. One option for further improving such a relationship would be to utilize more seamless payment options, minimizing a consumer’s need to enter in their personal information. Most of the services that provide these tools utilize mobile payment options, indicating a turn towards mobile service providers as new age financial institutions.
There is also the perspective of the platform providers themselves. Facebook, Apple and many others are providing the platforms through which virtual goods games and applications are being distributed. That’s not to say that the platform providers should be held fully responsible for the questionable business practices of participating publishers, but they do have the ability to regulate the apps to some degree.
In all fairness, most social networks like Facebook have adopted pretty stringent stances on abuse of applications/advertising within their platforms and Facebook just announced further actions against deceptive ads. Thankfully companies like Zynga, MySpace, and RockYou have all joined in to help curb the problem. However, there’s always going to be a temptation for virtual goods application developers, as well as other Facebook application developers, to find out how to take advantage of users (see the Facebook guide on how to minimize this via privacy/app settings). Internal reporting on the app publisher and platform sides have curbed some of the negativity arising from recent scams and bleak business practices, but it’s clearly not enough. Every aspect of virtual goods will need to be held accountable in order for this sub-market to halfway reach its potential.
Update (Nov. 8, 2009): Zynga’s latest Facebook game FishVille was taken down due to Facebook advertising violations. When you attempt to load the application from your Facebook account it’s unavailable and it gives you this message:
The application “FishVille” is temporarily unavailable due to an issue with its third-party developer. We are investigating the situation and apologize for any inconvenience.
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Below is a video from Michael Arrington clearly displaying another Facebook games scam perpetrated by advertisers associated with Zynga’s FishVille game that just launched two days ago. According to Arrington, Zynga may be deliberately blocking the ads from reporters and bloggers on Facebook who have been critical of the free offers that are nothing but more Facebook game scams. In order to obtain the free coins or virtual goods for the game you must enter your phone number. While some advertisers disclose the “free” offers charge your mobile phone a fee they are deceptive and the disclosure statements are practically hidden from clear view. Hence, the next time your cell phone bill arrives you’ll have a nice surprise subscription to some crappy ring tone service charging you $9.99 per month or more.
Update (Nov. 9, 2009): Zynga’s CEO Mark Pincus removed all free offers from its Facebook games. Mr. Pincus also disclosed the fact that Zynga is an investor of DoubleDing, the offer provider for their Facebook games:
we had helped fund doubleding earlier this year in the hopes of cleaning up the space and raising the bar on user experience. we intend to influence them and others to improve their ad content and be long-term focused for the success of the social gaming and social networking industries.
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