MattMaroon.com

TechCrunch wrote an article this weekend entitled Scamville: The Social Gaming Ecosystem of Hell that’s stirred up a lot of controversy, and even some changes, in the social gaming industry. This is an area I know a little something about so I thought I’d comment.

Arrington’s not entirely off-base here, but he’s not entirely on either. For one, he’s probably off by an order of magnitude as to how much of the money flowing through these platforms comes from scams. In our time running games, we’ve generally seen direct payments make up somewhere between 50-60% of total revenues. That’s counting banner ads (which are low, maybe 5%) and offers. This is pretty typical from what I’ve gathered in talking to other developers.

Of the offers, most of the money comes in from the legitimate pay ones like Netflix and Blockbuster (the two biggest), Free Credit Reports, Credit Cards, DirectTV, Gamefly, etc. Customers may be scamming those a bit, but that will just cause them to reduce payouts a proportional amount, ensuring developers get paid about the same regardless.

And then of the free offers, many are legitimate, albeit very low-paying. There definitely are some that will get you on the hook for $10 per month on your cell-phone bill if you’re not careful, but there aren’t that many of them and they haven’t paid out excessively well for months now, so as an overall percentage of platform revenues they’re not very significant. Trust me, there aren’t many offers me and my coworkers have not tried, and only once has one of us fallen for that. I’ve seen a couple pop up myself but was smart enough not to receive a code in a text message and then type it in, or to give a real phone number.

Mike also seems to be confused about who does what in the whole ecosystem. He says “Game developers, desperate to monetize, then search for ever more questionable offers to make up the difference.” Game developers don’t ever search out offers as far as I know. Rumor has it that one big developer is testing their own offer platform, but that’s the only case of it I’ve heard of.

Offer providers search for new and better offers, game developers simply display an iframe. And offer providers, like any sane business, don’t look to replace revenue, they look to maximize. They’re not like “hey Netflix dropped from $25 CPA to $20 CPA, we better find something scammy that’s $25.” They simply look for what pays the most and put that at the top at all times. It’s a state-based effect, and having Netflix’s rate change doesn’t make them any more or less hungry to find other high-performance offers.

“And recent moves by Facebook to shut down application spam only make the problem worse in some way – game developers have to spend more money on advertisers to get users now that the viral channels are shut down. That means the games have to monetize even better. Which means more scams.”

Yes and no. Yes the new changes may impact virality, which may in turn drive Facebook’s ad sales, which as I mentioned in my last post is probably not an unintended consequence. But no amount of ringtone hucksters are going to make up for that. The new platform will be all about engagement. Game developers will strive to get higher RPUs not by doubling their revenue from adding more bullshit PC Doctor DVDs, which aren’t doing that much for us anyway, but by making games that customers want to play more frequently for longer. Also new Facebook ad rules (along with Arrington’s post)have prompted many offer providers to remove hundreds of low quality ads.

On the other hand, I agree with Arrington in that the number of scammy free offers is still far too high, in that it is not zero. We personally use two offer providers. One of them (Peanut Labs) I use largely because they have the most reliable free offers, and scams are almost nonexistent. The other one allows me to block offers I don’t like, and I do this whenever we get complaints about specific ones. That’s not easy because often the customer doesn’t even remember the name of the offer that sucked them in, but I do my best to hunt them down and make sure they’re never seen on our games again.

We as game developers hate the idea of someone scamming our customers. Even discounting the ethical issues, which we do not, it’s just plain not good for us. The scammy offers are a low percentage of revenue, but a high percentage of support requests, and are probably why a lot of people quit playing our games, and therefore quit paying us money. The math just doesn’t work out. Even if we really didn’t care if our customers got ripped off (which they always blame us for, by the way, even to the point of threatening lawsuits) it still just wouldn’t make sense on our part to knowingly sponsor these.

Since my company, Blue Frog Gaming, shifted focus to developing Facebook apps nearly a year ago, we’ve seen a lot of changes to the platform. Some of them have probably been for the better, some for the worse, and one in particular has been disastrous: the rise of gifting. In the last few months it has fundamentally broken the platform.

In the early days of the Facebook platform there arose a bit of a spam problem. Developers incentivized customers to send invites to their friends, often even paying them in-app currency to do so. It quickly became obvious that apps employing such tactics could grow to millions of users almost overnight and, in the process, create tremendous volumes of invites that hampered the Facebook user’s experience.

Facebook reacted by doing a couple things. First they banned rewarding users for sending invites (or using other similar platform integration points) and they limited the amount of invites a user could send from any one app to 20 per day. The limit made it impossible to spam your entire list in just a couple clicks and the new incentive rules made users much less apt to spam over time. The idea was that if people were so constricted, and rewarded only when their friends actually signed up rather than when they sent the invite, people would be more considerate, invite only friends who might actually be interested, and the number of unwanted invites being sent out would decrease dramatically.

Those changes helped, but still they wanted to do better, so they later changed the allocations such that the “better” apps got more invites per day (up to 60) and the worst offenders were choked off entirely. Invites are the lifeblood of almost all Facebook apps, so it worked. That seemed to be an improvement until a few months ago when developers figured out how to game the system.

The problem is in how Facebook determines which apps are “better”. They do that mainly by looking at the app’s invite acceptance rate, as well as the rate at which those invites are blocked or ignored. An app’s allocations are based on how their rates compare to the median. When we first started developing about a year ago, the median hovered somewhere around 20-25%.

This method is, it turns out, easily gamed. The original solution, used by Mob Wars and the like, was to create in-game “buddies” that come from an invite and give you in-game benefits. Want to run a job in Mob Wars? You’re only allowed to if you have enough friends in your mob. Want to attack people? Your success in battle will be almost entirely dependent on your mob size. You may need 20 buddies to do a mid-level job and 500 to attack another player with any shot of success. At some point the buddy requirements get so high that the only realistic way to get them is to send buddy invites (via Facebook invites) to large numbers of people who already have the app, which you found on some large “Add Me” lists.

This of course boosted Mob Wars’s invite acceptance rate. When you install the app, you might invite your real friends for a week until you run out. Let’s say you send 100 invites to actual friends, and 10% sign up. Not bad, but you need 20 to do that next job. So you join an add-me list.

Next thing you know you’ve got 400 new friends, all of whom were on the list, and almost all of whom are sure to accept your invite request. So you invite them over the next couple weeks and they almost all accept. Despite the fact that only 10 out of the 100 new people you sent an invite accepted (not a particularly high rate) your total invites were accepted by 400 out of 500, making for an average of 80%. The acceptance rate didn’t go up because the developers made the game better, they just hacked the platform to make sure the people who already used it sent and accepted more invites.

This still wasn’t that big of a problem because most people never got that far, the needed number of friends wasn’t too high, and the active players really didn’t need to send out the full 20 invites per day for very long. It pushed the median invite acceptance rate up as RPGs grew, but not ridiculously so. Then came gifts and the rise of Farm Town.

As far as I can tell, in-game gifting as a platform hack was first figured out by MyFarm, and then later put to spectacular use by Farm Town. The idea is to have one app send many invites to people who play the game every day for as long as they play the game. Combine this with an engaging game and you’ve got an invite acceptance machine.

When you first log into Farm Town, you are taken to the gifting screen, where you can easily choose an item (such as a pig or an orange tree) and then send it to all of your friends. Each gift is a Facebook Invite that has to be accepted in Facebook (not in the Farm Town app) from your requests page. So you click the accept button, go to the app, are given the gift, then have to hit the back button and do it again for every gift you have.

Now just about everyone who plays the game is sending out the full amount of gifts per day. And what happens is that their friends who play accept nearly 100% of them. The ones who don’t click ignore once, and the ones who do click accept 100 times. As a result, the median invite rate for the entire platform has since shot to near 60%, and it isn’t because spam has been reduced, it’s because it’s been increased but the non-spam invites have been increased many times more.

Imagine if your email provider, instead of blocking spam, somehow made you receive twice as much of it but then somehow made half of their customers (of which you may or may not be one) receive 100 times as much non-spam email. Your overall user experience suffers, and in fact even the people who are getting more non-spam are suffering, but the overall % of emails that are spam just decreased by a wide margin.

That’s exactly what has happened on Facebook. Even the people who play the farm games don’t want that many invites. They want the gifts, and that’s fine, but surely nobody wants to log into Facebook, see 20 Farm Town gift invites, and have to accept them one at a time by clicking accept, loading the app, then clicking back to the requests page. It’s slow and painful. From a usability standpoint gifts should be given in-game and not even require acceptance (who would ever not want a free chicken?) but the developers get a tremendous advantage from the acceptance rate so the user has to suffer in order to help them game the platform.

Another problem this creates is that you simply cannot have a top app without gifting, no matter how nonsensical its existence in your game is, or how much it detracts from the user experience or game mechanics. Your game could be the most engaging on the platform, but without a solid gifting system your invites are going to get choked off. Take a look at Restaurant City, which is maybe the most engaging game ever launched on the platform. It’s also a great platform citizen, attempting to get new users largely by making a game so engaging people want to tell their friends about it, rather than by giving them large rewards for spamming friends.

Restaurant City’s invites per day are down to 12 and it’s a Verified App. Being Verified means it gets boosted 2 buckets in the allocations. To put that another way, if it were not Verified it would be getting 6 per day.

Scroll down through the top games on the Facebook platform and install them all, as I have, and you’ll see a trend appear very quickly. Almost all of them dump you immediately onto a gifts page every time you log in. This is no coincidence. It’s because it’s the only way to keep reasonable allocations.

The solution is simple: only count requests sent to someone for the first time when determining the median. Or better yet, switch to a better metric entirely like engagement. Facebook knows how much time my users spend on my apps (or at least they could if they so desired). Why not base my allocations on that rather than forcing me to beg my customers to send a dozen gifts with every login?

I wrote 90% of this post over a month ago, and was prompted to write it today by the fact that the platform is probably changing in about an hour and a half. I’ll admit, I’m somewhat dreading it. It’s been a long time since Facebook made a change that made me think more highly about developing on their platform, and with each knock to developers’ allocations they’re going to push more and more people off. I worry that if trends continue, at some point we’ll be left with just Playfish making new games and Zynga cloning them and then marketing them to the top. Our new game on Facebook is doing very well, and we’re already thinking about how to parlay that into a standalone web success. I know we’re not the only app developers thinking along those lines these days, and Facebook should take that seriously, if for no other reason than to give Zynga someone’s games to copy.