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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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.

Zynga dominating the social gaming space

Zynga is the biggest dog on the front porch in the social gaming scene, and this morning news that it now has 129 million monthly users playing games like Mafia Wars, FarmVille, YoVille and even the highly generic Zynga Poker puts an exclamation point on that fact. Zynga says that it has more than “quadrupled its monthly users over the last six months.”

According to data from Developer Analytics approximately 34 million users worldwide play Zynga games every day. The company also has the four top Facebook games that we have already mentioned above. On a negative note, Zynga is probably responsible for half the spam you and I get from games like Mafia Wars and YoVille. So in that respect, F*ck you, Zynga. Just kidding.

Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Tagged, Yahoo! and the iPhone, and include FarmVille, Zynga Poker, Mafia Wars, YoVille, Vampires, Street Racing, and Scramble. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel. Zynga is headquartered in San Francisco.

Brian Reynolds gets social, joins Zynga

Social games company Zynga today appointed Brian Reynolds to the newly created position of chief designer. Reynolds will lead the product development team and will be responsible for developing new social strategy games.

Reynolds is best known for his leading roles in Firaxis Games and Big Huge Games and design work on several smash hits including Civilization II, Alpha Centauri, and Rise of Nations, as well as Catan for Xbox360 Live Arcade. Reynolds’ videogames have sold over six million copies worldwide.

Reynolds will head up operations at Zynga East, expanding the company’s presence on the East Coast. In 2009 this office will begin with 12-15 employees, including game designers, web developers (PHP, MySQL, Flash), artists, and producers. Based in Baltimore, Md., production efforts will be focused on creating new social network games on Facebook and other platforms–particularly games with a strategic emphasis.

Big huge Games was purchased earlier this year by Curt Schilling’s 38 Studios from THQ. During that time 38 Studios said that Reynolds would serve as a consultant to the company. We assume that will still be the case despite this new gig.