The Facebook/Scamville fallout has continued with a cage-fight between two of our favorite bloggers. In the red corner we have Dennis Yu, the CEO of BlitzLocal, who two weeks ago confessed his scammy past in a controversial post on TechCrunch.
In the blue corner we present Shoemoney, the heavyweight in this contest. In two blazing posts this week Jeremy has pummeled Dennis for a variety of alleged sins. You can gauge the tone by the titles of Jeremy’s posts:
Naturally, Dennis has fought back with a post implying that he is being punished for speaking out about the bad practices of the industry.
We make no judgement or comment on an argument that so far has covered porn, fraud, lies, deception and theft. Read it all and make your own call, people. We report, you decide.
Google has announced that with immediate effect it will permanently ban any AdWords advertisers that place scam or malware ads. This news may be taken in combination with the news of the Senate report discussed above, the FTC prosecutions pending in Minnesota and the Facebook/Scamville events of the last couple of weeks to illustrate that deceptive ads have reached critical mass online, and people are actually starting to do something about it.
For Google this marks a big step away from its traditional algorithm-based fraud prevention, and it’s being done at client level rather than web site level, meaning that they will make every effort to shut down any accounts and campaigns that they believe are associated with an offender, not just the offending campaign itself.
This means that advertisers will need to take much greater care moving forward. Run one campaign that direct-links to a malware site and you could be booted off AdWords forever. This is a drastic step by Google and it’s a sign that they’re feeling heat from competitors, customers and just maybe the Feds.
Webloyalty, Vertrue and Affinion, along with over 450 of their e-commerce partners, were accused in a Senate report on Tuesday of “harming large numbers of American consumers” and of using “aggressive tactics” to bring in combined revenues of $1.4 billion.
In a name-and-shame effort, the report outlined a combination of deceptive offers, scammy continuity programs and many big-name merchants effectively selling credit card details to third-parties in return for CPA payments or other remuneration.
The U.S. Senate Committee on Commerce, Science, and Transportation has been investigating the practice of post-transaction marketing, in which additional offers are made to customers during on online checkout process. They have especially focused on what is known as “pre-acquired account marketing” in which a customer may only need to provide a click or an email address as authorization for an additional charge, with the credit card details already having been obtained by the original merchant.
Naturally continuity offers figure largely in these kinds of transactions which have proven to be very successful for the companies concerned. The report states that the $1.4 billion in revenues has resulted from over 35 million transactions and that more than 4 million people are currently enrolled in various offers.
Webloyalty settled some disputes earlier this year but complaints are still accumulating: over 2,700 comments on this thread for example.
Well known Web brands are involved in this of course, with such companies as 1800flowers, Buy.com, Classmates.com, Columbia House, Expedia, Hotels.com, Fandango, FTD, Hotwire, MovieTickets.com, Orbitz, Priceline, Shutterfly, Travelocity, US Airways and Vista Print all named in the report as having made in excess of $10 million in PTM revenues.
The Facebook Scamville controversy has roiled on this week. It made enough noise to get covered by Newsweek and Time magazine. A video tape surfaced on which the CEO of Zynga, Mark Pincus, admitting he had “done every horrible thing in the book” to get revenues. And Facebook announced that since July they had, “disabled two entire ad networks and suspended or brought into compliance over 100 applications for ad-related violations.”
On the brighter side of things though, the entire sequence of events has provoked some serious and thoughtful contributions about the role of the offer management companies and the quality of social media generated customer acquisitions.
As a result of the debate generated and the traction it has received with mainstream media, this may turn out to be an industry-changing sequence of events:
- If Facebook and other social networks were not fully aware of the nature of the offers being pushed on their platforms, they are now.
- If the advertisers were uncertain as to the nature of the leads they’re buying, they should be now.
- And if CPA networks and affiliates have any doubt that the FTC is going to be investigating the whole space, then they need doubt no longer.
Read on for an overview of the most important links that relate to the sage, and in our third section we look at some of the key take-aways for the industry.
So where does all this Sturm und Drang leave us?
There are several truths that can be discerned through the fog:
- The user experience simply sucks for many of the offers promoted on Facebook games. A player may face 10 or more screens of pop-ups, questionnaires and forms before they qualify for their incentive, and many of the continuity programs are very clever about hiding their terms in plain sight.
- Facebook is now big enough to care more about the users than about the revenue from scammy offers. They’re in the big leagues now and if networks want to keep playing in the Facebook sandpit, they’re going to have to learn to play nice.
- Advertisers are not dumb, so they’re clearly getting value from the offers they are promoting and the leads that are generated. No doubt they will be using this scandal to push prices for leads and conversions down, and the networks and game developers will be incentivized to push the envelope even harder…until something breaks. If the networks and offer management companies can’t find a way to align the interests of their advertisers with those of the users, Facebook will do it for them. It will end in tears.
More good commentary here, here and here.
And so to the fallout:
There’s a serious point to all this: lead-gen on Facebook, MySpace and other social media platforms has been a huge money-spinner for many publishers over the last year. With unsavory practices being brought to the fore by major tech news outlets, these kinds of clampdowns are going to affect many affiliates’ income streams pretty heavily. And in the future, we can no doubt expect an investigation by the FTC as well. Good times.
The TechCrunch article created something of a firestorm (sample comment: “In a nutshell, the offers that monetize the best are the ones that scam/trick users.”) which was fanned the next day by one of our favorite affiliate marketing bloggers, Dennis Yu of Blitz-Local. He guest posted a piece on TechCrunch called “How To Spam Facebook Like A Pro: An Insider’s Confession” in which he talked about publishers accessing personal user data and showing it on landing pages, cloaking pages so that Facebook employees couldn’t see them and being threatened with violence by the CEO of a top 25 ad network. Key graf:
There was no way that Facebook—and definitely not the Federal Trade Commission—could keep up with the “innovation” happening. Witness the virtual currency scam, where users complete the offers mentioned above to earn points in a game. It doesn’t take a genius to know that the quality of such leads is garbage—these users are filling out forms just to get the points.
Dennis admits he posted on TechCrunch to hustle for business, and he was inviting a negative reception from certain sections of the affiliate marketing community. Another of our blog-faves, Barman, made his feelings known with enthusiasm at ppc.bz here and here (warning: strong language).