Facebook cracks down on offer providers

It looks like the ban hammer has hit its mark on two of the biggest in-game offer providers on Facebook: Gambit and Tatto Media. Earlier in the month Facebook announced that it had shut down in-game offer providers for some shady and misleading offers, but didn’t name names. This week the social network did. Both Gambit and Tatto Media have been accused of serving up offers in games that have hidden obligations or fees. The reason for the bans, according to an excellent report on VentureBeat, was ” repeat violations of Facebook’s guidelines for offers.”

If you take into account that 30 percent of revenues in the $1 billion virtual goods business are derived from such offers, then this is a very serious matter that needs to be addressed now, because it shows a weakness in that business model. Game providers like Zynga, Playfish and others have started cracking down on these kinds of dubious offers as well - though Facebook has certainly done its fair share of forcing these companies to do the right thing.

Ultimately in-game offers need to be re-thought and refreshed so that users aren’t roped into products and services without knowing what all of the details are. Some examples of this might include a service that doesn’t tell you until it is too late that you have signed up for a lengthy and expensive subscription, or a product that is mailed to you unsolicited with a questionable amount of time to return. At the end of the day players have to ask themselves if the virtual currency they might earn by participating in an offer is really worth the risk and ultimate costs (goods and services they didn’t know they purchased).

You can learn more by checking out this excellent VentureBeat article on the topic.

Video Professor responds to Scamville article

Recently TechCrunch wrote an interesting investigative report called “Scamville: The Social Gaming Ecosystem of Hell,” which pointed out the questionable practice of allowing users to opt-in to special offers in order to earn in-game currency from titles made by social game developers like Zynga and Playfish. In that article, the author categorized the Video Professor products as particularly scam-my. The special offers would often have “fine print” or would have charges that consumers might not know about until after the transaction was complete.

Other web sites, like Business Insider, referenced that article, and cited other sources for facts, saying that Video Professor in particular was an out and out scam. Video Professor, in case you don’t know, is a series of educational CD-ROMs that claims to teach its users techniques to master certain programs like Excel, operating systems like Windows XP or online services like eBay. Certainly the offers as detailed in all of these reports are questionable, but Video Professor is feeling a bit battered and bruised.

A recent exchange of emails with its Vice President of Public Affairs, Brian Olson, pointed out one truth: the company was never given the opportunity to defend itself or to explain its products, services and business practices. In fact, the company was met with either silence or out and out hostility from most journalists. According to Olson, one nameless editor offered the following response to an inquiry on presenting the company’s side of the story:

“It’s a huge fucking scam. And you know it.”

Ouch. Considering that the use of its name (and other offers) could have ruined Playfish’s chances to be acquired by EA - a deal which was finalized earlier this week - and the fact that Zynga’s CEO indirectly mentioned these deals in a recent blog post (and a video making the rounds on YouTube), we thought it would be fair to give the company a chance to defend itself. The company at least deserves some credit for trying to address all the talk about its products being a rip-off to consumers. First a response to the allegation that its dealings with Zynga and Playfish were shady:

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EA posts Q2 loss, plans massive layoffs

Imagine how it must feel to hear that EA has acquired Playfish, a social game development company, for a possible total of $400 million USD and then in the same breath that you are losing job. That’s what some EA employees might be hearing (or have heard) today as EA reveals its abysmal second quarter results and a series of planned layoffs.

Electronic Arts said Monday that its loss widened in the second quarter and that it plans to lay off around 1500 employees, or about 17 percent of its global workforce. This would happen before April 2010, the velocity of those layoffs is an unknown at this time; for all we know they have already begun..

In the second quarter EA posted a net loss of $391 million, or $1.21 a share - a 26 percent increase over the same period a year ago. Net sales saw a 12 percent decline to $788 million in the second quarter as well. Sales, including deferred revenue from online games, did grow 2 percent to $1.15 billion during the quarter, but obviously it was not enough to pull Q2 into the black.

It must hurt those employees to hear that This morning EA announced that it had committed to purchase the outstanding assets of Playfish, one of the largest social game development studios on Facebook (and other platforms), for a total of $400 million USD (see this news story for a break-down). EA said that these layoffs, 1300 of which are part of a restructuring plan that was already in place, will be completed by March 31, 2010. According to the company, this plan will result in annual cost savings of at least $100 million and restructuring charges of $130 to $150 million.

Looking to the next quarter, EA predicts GAAP net revenue to be between $3.6 and $3.9 billion; Non-GAAP net revenue is expected to be $4.2 to $4.4 billion; GAAP diluted loss per share is expected to be between $1.20 and $2.05; Non-GAAP diluted earnings per share is expected to be between $0.70 and $1.00; and return to profitability in Q3 and Q4.

EA acquires Playfish for $275 million

Electronic Arts has acquired Playfish, the makers of the Facebook games Crazy Planets, Pet Society and many other social gaming properties. EA says that this acquisition accelerates the company’s position in social entertainment and strengthens its focus on the transition to digital and social gaming. Playfish will operate under EA Interactive, a division of EA focused on the web and on wireless.

EA has acquired Playfish for approximately US $275 million in cash and approximately $US 25 million in equity retention arrangements. In addition, the sellers are entitled to additional variable cash consideration, up to a maximum of US $100 million, contingent upon the achievement of certain performance milestones through December 31, 2011. This puts the total price tage to right around $ US 400 million.

Playfish claims an installed base (collective number of games) of more than 150 million, played worldwide on platforms such as Facebook, MySpace, Google, Bebo, iPhone and Android. Playfish currently has over 60 million monthly active players across its ten titles – including Facebook hits Pet Society, Restaurant City, and Country Story – driving more than 1 billion game play sessions every month.

On a related note, leading global venture capital firms Accel Partners and Index Ventures announced that they have sold their holdings in Playfish to EA.�

How Zynga may have ruined possible Playfish buyout

An interesting report on Silicon Alley explains how some refreshing honesty from social gaming company Zynga may have inadvertently killed a rumored buyout deal between EA and Zynga competitor Playfish. That deal was described as in being worth somewhere around $400 million USD.

But the honesty only came after technology site TechCrunch dug into both Zynga’s and Playfish’s use of “free offers” as a way to earn in-game currency. These offers were sometimes shady, often not very useful to the user, and mixed in with legitimate offers from advertisers like NetFlix. They included lead-gen offers from less scrupulous advertisers like Video Professor and Tatto. After being called out about it, Zynga CEO to speak up about the whole mess on his blog:

“We have worked hard to police and remove bad offers. In fact, the worst offender, Tatto Media, referenced in the TechCrunch article, had already been taken down and permanently banned prior to the post. Nevertheless, 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. We have also removed all mobile ads until we see any that offer clear user value.”

But here’s the real kicker for Playfish; Some portion of the revenue it has reported may be based on such offers, which won’t exactly help seal a real or imagined deal with EA. In other words, Zynga may have inadvertently (or purposely) just screwed one of its biggest competitors out of a $400 million deal.

Playfish expands in San Francisco

Social gaming company Playfish has opened a new game development studio in San Francisco. The studio, which complements Playfish’s acclaimed development studios in London, Beijing and Norway, will target the Bay Area’s talent resources to create original social games for friends to play together on platforms such as Facebook, MySpace, Bebo, iPhone and Android.

Playfish’s latest studio joins the company’s existing business development focused office in San Francisco, which was established in 2008. Further details and information about available positions in San Francisco and other Playfish offices can be found at www.playfish.com.

Playfish founder to keynote GDC Austin

Sebastien de Halleux, chief operating officer and co-founder, of social games developer and publisher Playfish will deliver the keynote address at the 2009 Game Developers Conference Austin (GDC Austin). The keynote will take place the morning of September 18, 2009, at the Austin Convention Center.

Sebastien de Halleux’s keynote will focus on how these social platforms can be used to create engaging games and why developers should be looking at social networks as a burgeoning area of videogame design and business development. Playfish has succeeded by expanded its reach beyond traditional gamers and putting an emphasis on interaction between friends.

More than 100 million copies of its games across nine titles have been installed, after only 18 months since its launch in late 2007. Playfish’s games include the popular hits Pet Society, Restaurant City, Who Has The Biggest Brain? and Crazy Planets. Players access these games via web browsers through social networking sites including Facebook, Bebo and MySpace.

To register for GDC Austin, visit www.GDCAustin.com.