Payment Industry Perspectives: Q&A with AdParlor CEO Hussein Fazal

As we continue our look at the Facebook Platform payments ecosystem, today we turn our attention to AdParlor, a full service social network ad agency that operates its own virtual currency monetization platform and social ad network. We recently spoke with AdParlor CEO Hussein Fazal about his view of the payments landscape on the Facebook Platform and AdParlor's approach to the market. Inside Facebook: Why did AdParlor make the transition from traditional online advertising to offers and direct payments for virtual currency? Hussein Fazal: Feedback from application developers told us that banner advertising was making up only 5 to 20 percent of overall revenue, whereas the rest was coming from offer walls and direct payments. Virtual currency is doing so well, but keep in mind that not all applications are suited for it. There are applications out there that do in fact make a majority of their revenues from banner advertising. We started in the ad network space and are still focused on growth within this space; however, we have also brought on dedicated individuals to grow our virtual currency and wall offer piece. When it comes to revenue potential, the offer wall outperforms the ad network. Right now the ad network piece is a larger portion of the business because we've been doing it for over a year, but virtual currency will take over at some point. Given the fact that we started in the ad network space, we had relationships with all the major app developers. How would you compare your business across different platforms and countries? AdParlor primarily focuses on Facebook and MySpace - that’s where most of the transactions are. In terms of banner advertising, we're on most of the social networks, but the focus is on Facebook and MySpace for virtual currency monetization. There's not much disposable income in some countries where social networks are strong. In Malaysia and the Philippines, it's difficult to monetize because there's not much willingness to spend. The Chinese market and some of the other Asian markets are a bit different because they have massive populations that have enough disposable income, and are comfortable playing games with built-in virtual currency such as RPG's. It's difficult for us to get into the Asian market because of the language barrier and the difficulty of building relationships with strategic players in those local markets. Who are the key players in your value chain and what value does AdParlor deliver to each? On the application developer side, the value for app developers is that they don’t need to worry about going to hundreds of different offer providers, managing payouts, seeing what works and what doesn’t, and handling user complaints. By going through AdParlor, given our volume, we can negotiate better rates when it comes to completing offers. Developers can focus on building applications. We help monetize. In the same way, the offer provider has no interest in going to each app developer and would rather go to aggregators like us that can draw users from different types of applications. We work with around 30 offer providers, 10 of which we work closely with. They provide us with best offers at highest payouts. In addition, we partner with payment platforms, including Zong and Social Gold. We're also looking at something pretty interesting right now, which is bringing landline companies into the value chain. Users can buy virtual currency by billing to their landline bills. Can you walk us through the transaction process, from the end user to the advertiser? Users see an offer in an application asking them to complete a survey in return for, say 10 credits. They click on the survey and complete it through AdParlor. The survey provider then pays AdParlor a certain amount, say $5 dollars per survey. We pass on a portion of that to the application developer, ranging from 70 to 90 percent, sometimes higher if the developer is pushing a high amount of volume. Based on the amount we pass on, that’s how many credits get passed on to the user. From the user's perspective, what's the psychology of purchasing virtual currency? You would be surprised how many people are willing to fill out surveys in exchange for virtual currency. Let’s say a user is playing Bingo on Facebook on a Monday afternoon. See it as entertainment. Just as people pay money to play video games, when they run out of credits, they'll pay for more to continue playing. It’s like a cost of entertainment. Are offers really aligned with users' interests? All the offers aren’t useless - they add value. For example, an offer may require you to signup for a DVD club for $1 dollar. In return, you get seven DVDs. For someone who is interested in movie services anyway and is looking to get credits to play Bingo, it's a win-win situation. Every offer is different. I imagine payment fraud is a problem you have to deal with? It does happen that users put in stolen credit cards and fake addresses and phone numbers. In this case, a chargeback occurs. When offer providers finds out, they're not going to pay. We go back to the application developer and reverse the transaction. If developers are thorough enough, they'll make additional callbacks and take the credits back from users; however, if they've already sent it, there's not much more you can do. That said, the level of scamming isn't high. Fraud gets caught at the top of chain: the offer provider may see that 10,000 surveys were completed in one second. We also have checks in place along the way: if the IP address points to a location that doesn't match the postal code, that also raises a red flag. So, it's confirmed that Facebook is launching its own virtual currency test for applications. Thoughts? Obviously Facebook is in an advantageous position. But at the end of the day, Facebook is another competitor – a big competitor, but that doesn’t mean other virtual currency or offer payment platforms won’t exist. We’re not anxious or excited, but it’s something to keep eye on. It’s going to be interesting to see how Facebook’s virtual currency test rolls out, and if the company decides to go with a full-fledged offer wall, what kind of offers it would have. With all the volume of user information it has, Facebook could do some really interesting stuff. For example, if someone wrote a Wall post about a Britney Spears concert they want to attend, Facebook might be able to use that info within an application to offer you a 10 percent discount to the upcoming Britney Spears concert. In this economy, how are advertisers changing how they do online advertising? That's interesting. Before the recession, large brands were okay spending money on branded banner advertisements. Now they're hesitant and looking for guaranteed results. From the ad network side, brands are shifting from CPM to CPA models: they don't care how many times an ad is seen; they want to pay only if users sign up, so a lot of money is shifting from branding to actual action. How's your company doing from a financial perspective? We're profitable and doing quite well. Where will the payment space go from here? The key is to make all payment options available to users, whether it's via credit card, mobile phone, or landlines. I don’t know if there will be much innovation in terms of payment, but Spare Change has an interesting model: users buy Spare Change credit and exchange this credit with whatever virtual currency there is within an application. The benefit of this is that if users play with five to 10 gaming applications, they can buy 1000 Spare Change credits and use them across apps. Thanks for your time, Hussein. Any final comments you'd like to make to our readers? The fact that we come from both the ad network and virtual currency sides means that we have a lot of relationships in place with advertisers and offer providers. AdParlor brings interesting and exclusive offers to the table. If an application developer wants to integrate with an offer wall, our self service system will get them set up in half an hour.

Social Pro Daily

Payment Industry Perspectives: Q&A with AdParlor CEO Hussein Fazal

Jessica Lee

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!

Jessica Lee