Can the Advertising Offers Business Find Redemption In Social Networks?

Offers-1The entire social gaming industry has been criticized in recent weeks for running deceptive advertising offers. But how bad has the problem been, really? After all, low-quality ads for weight loss, teeth whitening, and a range of other dubious promises run in major ad networks and appear on prominent web sites all over the web. So here is the result of our investigation into the past and present problems with offers as they have affected social games and other applications on social networks.

Based on our research, we believe that offer companies have run many deceptive offers. Yet the majority of offers have not been deceptive, but rather legal and also low-quality. These offers have been some of the most lucrative for offer networks and developers. However, a meaningful minority of offers have been high-quality, and point the way forward for the concept of incentivized advertising in social networks.

To really understand the scope of the problem, one has to first understand how it fits into the larger, yet still-young social gaming industry. Here, we’ll lay out the history of offers on social networks, include what most offer companies who are active on Facebook and MySpace told us about the issues, discuss ongoing enforcement measures, and look at what’s needed to improve the ecosystem.

A Brief History of Offers

How long have offers been running within social networks? Since the rise of social gaming. Games began getting traction on social networks starting when Facebook launched its developer platform in May of 2007, but developers needed revenue to support themselves. Many users had never paid for virtual goods before, and they didn’t necessarily want to start paying out of pocket — and anyway, most developers had little or no experience building virtual economies. So offer companies sprang up, or in many cases migrated over from the advertising industry.

In social networks, these companies let users earn points to buy things like virtual currency by signing up for a Netflix subscription… or a mobile quiz subscription. To make this possible, offer companies, at their simplest took (and still take) advertising inventory from dozens if not hundreds of ad networks, then display that inventory within “offer walls” that appear in the payment page on social games. At its most basic, an offer wall is simply targeted ad inventory displayed within a window on a game. Like “scotch tape between two pieces of string,” as one industry source described them; it’s not as if many offer walls are fine-tuned technological marvels, although some companies are more sophisticated than others.

But how bad were offers in the beginning? As another person in the industry told us, it was not as if offer companies and developers said “how can we scam users.” Instead, many of the more legitimate advertisers who found their ads running within social applications also found themselves being burned by some users. A game player who wanted to get points didn’t necessarily care about the offer, so they’d sign up for the offer, get the points, then cancel — or some variation of that scheme. A few big advertisers, like Netflix, have internal methods that allow them to survive in this harsh environment, but others cut off social offers due to these issues.

So what sort of advertisers were left entering this environment? Mostly the ones that have been dealing with hard-to-monetize users for many years on the web: performance advertisers. Over a decade in to this industry, you can still spot their handiwork in such places as in the remnant ads of well-respected tech companies like Google and Yahoo, and on major news sites. Many of the ads that you’ll see in these locations are exactly the ones being criticized for appearing in offers: mobile ringtone subscriptions, IQ quiz ads, etc. They are not all illegal, or even necessarily deceptive, but when you see them, you wonder who would want them.