A big part of the debate about the lead gen scams plaguing Facebook and MySpace via social games is over how much money is being made on these “offers.” Zynga, by far the most successful at building and monetizing these games, is now telling us exactly how much – 1/3 of total revenues, according to Andrew Trader, a co-founder of Zynga:
Andrew Trader, co-founder of Zynga, said the company makes about a third of its revenue from advertising and another third from virtual goods transactions. The last third comes from companies that provide commercial offers, trading Netflix memberships and marketing surveys for in-game cash.
Zynga revenue guesses range all over the place, but are likely $250 million a year or more. That means $80+ million/year is being brought in from legitimate offers like Netflix subscriptions, as well as the really smelly stuff like recurring mobile phone and learning CD subscriptions that trick users into paying big dollars for little or no return value.
What percentage of offer revenue is scammy? We believe it varies over time, and is heading in the wrong direction. Legitimate advertisers like Netflix and Blockbuster, hit with countless laundered subscriptions from repeat subscripers, are said to be dramatically lowering bounty fees paid on signup. Far less scrupulous advertisers like Video Professor and Tatto take their place.
HotOrNot cofounder James Hong said it best in a comment to our post yesterday outlining the scams: “In a nutshell, the offers that monetize the best are the ones that scam/trick users. Sure we had netflix ads show up, and clearly those do convert to some degree, but i’m pretty sure most of the money ended up getting our users hooked into auto-recurring SMS subscriptions for horoscopes and stuff.”
Offerpal and others, who provide these offers to game developers, try to downplay the percentage of revenue that comes from scams. Clearly they are obfuscating the truth, to put it kindly.
Facebook and MySpace must takes steps to address this.