Zynga CEO Speaks On Offers, We Provide Some Context

zyngapincusAdvertising offers have been a key way for some social games to make money. And, there have been recurring questions about them (most recently on TechCrunch), as some offers are scams. Today, Zynga chief executive Mark Pincus has published a blog post explaining his company’s position in more detail.

What he says matters because Zynga is the single largest social gaming company on Facebook, and it has also been using offers for many months. In the post, Pincus defends the concept of the offer, points out that it does not make up a majority portion of Zynga’s social gaming revenue, admits to not guarding well enough against scammy offers, and says the company is working to fix the problems. For more on the issues, see our post from earlier today.

Key quotes, below, along with our context.

Pincus: “Most of these offers are good for the advertiser and user. There are many users who don’t have access to online payment methods who are still interested in making in game purchases. There is also great potential for large web players like amzn, ebay and netflix to leverage social media channels like facebook and zynga to acquire new user relationships. Sponsoring a white tiger or pink tractor may accelerate these customer acquisition campaigns.”

Context: Netflix and a couple of other fully legitimate companies have been using offers for a long time, and they still are. This is because offers, at their core, allow users to earn points in a game in exchange for something else they might want, like a Netflix subscription. The concept of an offer is perfectly legal and ethical, although particular offers are neither.

Pincus: “The offer industry is still just getting started and this category of advertising makes up a small minority of our revenue, the bulk of which comes from users directly purchasing virtual goods.”

Context: In April, another big gaming company, Playdom, told us that half its revenue came from offers and half from direct payments — multiple industry sources since have told us that the offer share of revenue has gone down versus direct payments via PayPal, mobile payment providers, etc. So based on what Pincus is saying, either the number has gone down for Zynga, as well, or the company never made most of its money from offers in the first place.

Pincus: “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.”

Context: It is not clear when Zynga made this change, although we’ve asked the company for comment [Update, see quote, below]. Mobile ad scams have been a problem on Facebook for many months, as we’ve previously covered. We have also heard that these scams can be much more profitable than more legitimate forms of offers — meaning that social gaming and offer companies may only be getting rid of them now that social gaming itself is becoming more mainstream, and as people start looking more closely at potentially questionable practices.

From Zynga:

This has been a continual process over the last few weeks. We have revised SLAs in place with our partners well in advance of last week; and, beginning last week and over this past weekend we aggressively worked with our partners to remove all mobile ads and other ads that didn’t offer clear user value.

At this point, though, the question for any company that has run scammy offers is if or how much they have been complicit in the problem. We have heard whispers about scams within the industry, and we have also heard that offer rates are dropping because users and advertisers are not finding value in them. But we have not gained a significant amount of evidence in proving how widespread the problems have been. Neither has any other publication, from what we have seen. We are continuing to look into the issue. Email us, here, if you have more information to share: mail AT insidefacebook DOT com.