Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Analysis: The Business Opportunities From The Scam And Spam Epidemic

Posted by Tom Foremski - November 3, 2009

There is an excellent article by Mike Arrington from Techcrunch on the subject of the duplicity of social gaming networks and social networks as fronts for advertisers that trick people into signing up for monthly "services." [Scamville: The Social Gaming Ecosystem Of Hell]

This is an issue that has been going on for some time. And it's not limited to the social gaming companies or the social networks.

I raised the problem earlier this year when I interviewed Brett Brewer, president of Adknowledge, the largest virtual goods/cash company. [Will Virtual Cash Reinvent Online Ads?]

Mr Brewer said that Adknowledge was aware of the problem and was taking steps to weed out the problem advertisers.

Mike Arrington describes how some of these scams operate:

...users are offered in game currency in exchange for filling out an IQ survey. Four simple questions are asked. The answers are irrelevant. When the user gets to the last question they are told their results will be text messaged to them. They are asked to enter in their mobile phone number, and are texted a pin code to enter on the quiz. Once they've done that, they've just subscribed to a $9.99/month subscription.

There are plenty more variations.

Here is a description of the money that can be made from a self-confessed Facebook spammer: [How To Spam Facebook Like A Pro: An Insider's Confession]

When the Facebook platform first launched, developers used Google AdSense, which was paying 10-15 cent eCPMs, meaning that developers were earning 10 to 15 cents for every 1,000 ads they shown. But soon, ad networks, such as the one I operated, stepped in to show that by using social data and some clever ad copy, we could raise this to well over $6--that's 60 times better than AdSense.

It's not just gaming and social networks where you can find these types of scams. They are everywhere on the Internet. They are distributed by large ad networks.

And there are plenty of grey areas. For example, Experian, the credit reporting firm that owns freecreditreport.com. The New York Times reports:

[The Federal Trade Commission] has long believed that the company that owns freecreditreport.com is deliberately diverting people from a government-mandated site where consumers can get free credit reports by law, and using the reports as a lure for a $14.95 monthly service that alerts subscribers to important changes in their credit status.


Foremski's Take: This deluge of scam and spam is a serious issue because it threatens the future of Internet commerce. The more people ensnared by these types of scams, the less likely they are to buy much of anything over the Internet.

Media companies, for example, are already struggling to make money from online advertising. This will make matters much worse.

The gaming companies, the social networks, the ad networks all seem to turn a blind eye to what is going on because they reap large rewards from these scams. But it is a short sighted strategy because they are selling out their users, their members.

They should be looking out for them not selling them out.

By turning a blind eye these companies are missing a unique business opportunity to offer a safe place for Internet users, to guarantee that there is no scam advertiser on their network, and to insist that their advertisers clearly spell out billing terms.

But this will take courage and it means saying no to large amounts of money. And it will also raise their costs of business because it will require monitoring of ads, and this can't easily done by machines, it requires people.

Silicon Valley media companies such as Google, Facebook, etc, like to do everything by server and software. This is potentially an Achilles' heel that other media companies could exploit.



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