Offer-based ads are beginning to drive substantial revenues on social networking sites, giving game developers a long-needed way to monetize their wares. But they’re also infuriating some consumers who claim they’re being scammed. And the dust-up is about to come to mobile.
Social gaming has exploded in the last couple of years, with the three biggest players — Zynga, Playfish and Playdom — generating an estimated $300 million a year or more. Naturally, that success has caught the attention of venture capitalists who are pouring millions more into the space.
Much of those revenues are driven by offer-based ads that allow users to enhance the gaming experience by biting on offers. A casual gamer who accepts a trial offer from Netflix, for instance, could be rewarded with extra levels, while a fan of a mafia-based game could get a weapons upgrade by taking a survey.
But offer-based ads are increasingly coming under fire, as evidenced by this scathing piece from TechCrunch’s Michael Arrington. Facebook and Zynga are facing a class action lawsuit from users who claim they were scammed into paying for things they didn’t want, or into giving up personal information. The fallout continued last month when Facebook banned the Zynga title FishVille, leading the social gaming company to pull the plug on all cost-per-action offers until further notice.
But the growing controversy has done little to slow investment in the space — Zynga last week got a massive $180 million injection — and offer-based ads are positioned to move into mobile in a big way.
The boutique game maker Digital Chocolate — which has expanded beyond mobile into the broader world of social gaming — has last week began toying with the concept on a new Facebook game. The company has tapped Offerpal Media (which is embroiled in its own spam accusations) to deliver ads on MMA Pro Fighter, enabling players to advance through the game as they accept the offers. The title is currently available only through Facebook but could easily transition to mobile phones.
Other mobile players are dipping their toes in the water, too. Offerpal has also teamed with Tapjoy to give developers new ways to monetize their mobile apps. AdWhirl, which gained substantial traction with an iPhone ad platform before being snapped up by AdMob (and hence will be a Google operation) said earlier this year that it plans to support offer-based ads. And BigDoor Media has released an SDK centered on offer-based ads and is soliciting participation from developers.
While little hard data exists in the nascent space of in-app mobile purchases, it appears mobile users are already paing a few extra dollars to gain energy or upgrade their weapons. Offer-based ads are the next logical step for developers looking to monetize their offerings, and it’s easy to see the appeal of enhancing a gaming experience by simply clicking on an ad. So app-store operators and mobile social networks will need to keep a close eye on offer-based ads to protect their customers from scammers. Which means the App Store police may have one more job on their hands.