Scamville: The Social Gaming Ecosystem of Hell

http://www.techcrunch.com/2009/10/31/scamville-the-social-gaming-ecosystem-of-hell/

by raptrex • 17 years ago

279 90 17 years ago

vaksel3• 17 years ago

I think it's telling about that conference that the scammer company was given a panel spot.

code_devil• 17 years ago

The conference was on Virtual Goods Summit, and Offerpal gives you Virtual Currency to buy those goods, so thats the reason she was on the panel.

I can see people paying 1 USD to earn 100 Virtual Coins, but they should be made aware that it's a 1 way route. I also think having offers/surveys for users is OK to earn Virtual currency, but as long as it's made clear enough to them that they are getting themselves into a recurring charge of $10.99/mo.

_cbsz• 17 years ago

Speaking of a 1-way route, I was really confused about Zynga Poker. I was wondering what the value of the currency was, since poker with nothing on the line is no fun. I was not able to determine that it actually had any, so I quit playing after a day or two.

dannyr• 17 years ago

Offerpal actually hosted the Facebook Developer Garage last year.

CapitalistCartr• 17 years ago

I play some of those games in Facebook, and while I don't fill out anything that wants me to pay a dime, they do seem to work exactly as he says. And the eagerness with which Zynga, et al copy every other game and then try to out-advertise their way to success comes across as amoral, too.

WesleyJohnson3• 17 years ago

I think calling this a "scam" is a bit strong. Exploitative of people willing to cough up real money and sign up for questionable offers in order to earn completely intangible goods? Sure, but I don't know if that qualifies as a scam.

Still, without getting hung up on the verbiage, I agree that it's unfortunate that they're trouncing all over the other developers who won't partake in these tactics.

JCThoughtscream2• 17 years ago

"Exploitative of people willing to cough up real money and sign up for questionable offers in order to earn completely intangible goods? Sure, but I don't know if that qualifies as a scam."

HUGE cognitive dissonance between sentences one and two there, man. When the only accurate way to describe something is "exploitative," step back and realize that something's rotten.

gloob• 17 years ago

For what it's worth, he didn't say nothing was wrong with it. He just said he doesn't really consider it to be a scam. Similarly, I doubt he would consider it to be murder (even though murder is presumably also wrong).

If something isn't quite a scam, it's not a scam. That said, there's definitely room to contest the notion that this isn't one.

Grinnmarr• 17 years ago

The worst of these offers, notably the SMS ones, are scams by any definition and are only defended by people making money off of them or the typical forum "devil's advocate" that in his/her ignorance find these practices to somehow be defensible. The author gives very good examples in the article e.g. the IQ test. It is an affront to all that is ethical and fair in market practices that these kinds of businesses (the scam offers themselves) are even allowed to exist at all.

WesleyJohnson3• 17 years ago

Fair points and perhaps I should have refrained from commenting until I had clearer understanding of the types of offers this article is referring to. The more I've read about some of the offers (sms in particular) in the article and in the HN comments, I realize I spoke too soon.

patio112• 17 years ago

The affiliate industry is rife with this, too. Ringtones, etc are essentially financed by reverse billing fraud (the "sign up for our free trial and you'll be billed $9.99 a month without being able to cancel"), and with the way CPC advertising works this tends to crowd out all other advertisers because if you're a fraud you have staggeringly higher LTV than legitimate businesses, meaning you can afford to outbid them.

It isn't just affiliates, either: many shareware developers have inadvertently caused their customers damage when their payment processor tacks on high-margin low-value items as a rider to transactions. I covered this on my blog here:

http://www.kalzumeus.com/2008/03/09/regsoft-scam/

In addition to the outright fraud discussed in that example, many payment processors will do things like offer customers $10 for "download recovery" service, where they promise to keep your download on file for a year so you can get it again. This obviously costs them essentially nothing. That isn't zero value (I suppose, theoretically, the shareware developer could go out of business and stop offering downloads), but it mostly takes advantage of unsophisticated customers who THINK they are buying "Get my software back if my computer melts" and are unaware that almost all shareware authors will do that for free.

(Wow, I'm finding myself agreeing with Arrington.)

hop3• 17 years ago

Fiscal darwinism.

caffeine• 17 years ago

Not sure why you were downvoted so much - fiscal darwinism is exactly what it is. We appear to have poorly calibrated selection pressures in these industries: bad regulation and stupid users. Therefore "fitness" in such an area involves fraud, vast numbers of young / unsuspecting users, and opaque advertising/pricing.

bemmu• 17 years ago

I love it that to the right of this post was TechCrunch advertising for "make $1000/day from home!".

nikcub2• 17 years ago

we do what we can to filter those ads out on the page by maintaining a blacklist in adsense. it isn't easy to manage, which is a whole other story

devicenull• 17 years ago

It's essentially trivial in adblock plus. I regularly install it on people computers that I set up, and I've never heard of any complaints, nor seen it not working.

jlees2• 17 years ago

We had the same problem on a WoW site that would frequently end up with gold-selling ads popping up no matter how hard we tried to firefight with blacklisting. We got readers to submit every bad ad they could see, and even pulled the ads at least once, because of the impact on our 'honesty' as readers perceived us.

patio112• 17 years ago

Incidentally, the comments at Techcrunch include an important post from James of HotOrNot. Search for "We ran offers like this".

skmurphy• 17 years ago

First two paragraphs from referenced comment:

We ran offers like this back in 2005 for a very short period of time at HOTorNOT, that is until we realized what was going on. 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. When I hear people defending their directory of deals by saying Netflix is in there, i am reminded of how hotel pay-per-view has non-pornographic movies. Sure it gives them good cover, but we all know where the money is made.

In the end, we decided to turn the offers off. Quite frankly, the offers made us feel dirty, and pretty much on the same level as spammers. For us, the money just wasn’t worth it. On top of that, we relied on our goodwill with users and focused on growing by having a product and company that our users liked. Our sense was that using scammy offers would make good money in the short run, but would destroy our userbase in the end. Perhaps apps on facebook don’t feel this pressure because facebook is so huge, and there are always new people to burn.

fnid• 17 years ago

The difference is that Facebook has to please the investors, rather than the users. The investors want revenue and they want a good exit. They will be increasingly upset if that exit never comes or it is at a lower valuation than they want.

ramchip• 17 years ago

Who the heck says someone's point is "shit, doubleshit, and bullshit" when sitting on a panel at a conference?

Thinking about it, this might explain their attitude towards users...

vaksel3• 17 years ago

especially if that someone is Arrington, who you know is going to make it a personal quest to destroy you.

tomjen2• 17 years ago

They properly didn't know whom Arrington is. Most people don't care.

hop3• 17 years ago

But I doubt the vast majority of Farmville and Mafia Wars read/care about TechCrunch.

FreeRadical• 17 years ago

I think she lost a lot of credibility with that statement.

greyman• 17 years ago

But at least we have found someone more arrogant than Mike! ;-) That will be for an interesting fight. ;)

uuilly• 17 years ago

While I don't like her tone, I listened to her entire response and she seemed to address Arrington's issues pretty effectively.

She should heed the advice: "Never pick a fight with people who buy ink by the barrel."

thedon• 17 years ago

Ditto! Didn't like her tone either but she addressed the issues.

antonovka2• 17 years ago

While I don't like her tone, I listened to her entire response and she seemed to address Arrington's issues pretty effectively.

Only if you've never worked at a game company selling virtual currency. The idea that only 5 incidents of children stealing their parents credit card or cell phone number occurred across 105 million transactions over two years is laughably ridiculous in the extreme.

Those numbers were clearly pulled out of the "shit, doubleshit, and bullshit" hat. We ran a similarly sized game and were inundated daily with complaints from parents whose children had stolen their credit cards and cell phones to buy coins in our games.

Maybe since the children are being scammed via third party, the parents don't know who to complain to?

zaidf• 17 years ago

Totally with Arrington on this one. OfferPal CEO came across as a complete jerk. Arrington's response was surprisingly chill and levelheaded.

teamonkey• 17 years ago

We never heard what Arrington said to them. :)

numair• 17 years ago

I love how Arrington refers to Slide as the "good guys." You know an ecosystem is unbearably slimy when you have the spammers fighting the scammers for the title of "good guy."

Facebook Platform is such a joke. Sad, too, when you know what the original vision looked like.

jimmybot• 17 years ago

What was the original vision?

dschobel2• 17 years ago

Why do you say it's a joke of a platform?

freddier• 17 years ago

Why is it sad?

Tichy• 17 years ago

"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"

How does that even work? I think in Germany to start such a subscription, one would have to send a SMS to a specific number. Sounds as if in the US there are other ways?

Or is it simply that a phone number equals a bank account? A company could do the same if it could just get a person's bank account number, and just start deducting money?

ahlatimer• 17 years ago

I believe that by entering the PIN, you're agreeing to the contract. It seems like total "shit, double shit, and bullshit" to me, but it doesn't seem totally outside the boundaries of the law. Might be wrong, though, as IANAL.

NikkiA• 17 years ago

Nope, the pin is purely a verification step for the points you're getting in return for the scam-signup.

The legal 'opt-in' step that the scammer claims gives them the right to bill you, is the 'enter your phone number for an SMS' step.

The opt-in probably won't be enough to satisfy the watchdog organisations that overlook this kind of stuff (ofcom in the UK for example) but it will be enough to broadside a legal complaint of simple fraud (ie, police involvement), and thus send the complaint to the watchdog authority...

The reason they do this is, if they can avoid the police shutting them down with a 'simple' investigation, then they get months upon months as someone like ofcom investigate, and during that time they can rack up the profit, then 'run' (declare bankrupcy and hide the profit) when the watchdog authority appears to be about ready to issue a fine.

(IANAL either, but have worked in the premium SMS industry, and seen this kind of 'ofcom-stalling' trick)

dan_the_welder• 17 years ago

As a business owner I can attest that a phone number equals a bank account. Daily we receive phone calls that are designed to trick the unwary into agreeing to being billed for worthless services. After the third or so time an employee had been conned into a free website deal or a listing in a worthless business directory. I called my phone provider in a rage and demanded a third party billing block.

To which they replied, "No problem sir, most people don't even know we offer that service."

Obviously the phone company gets a cut and for that reason are happy to act at middlemen.

One would think that an honest broker would require you to opt in to the system, rather than merely providing a virtually unknown opt out option.

Facebook is doing the same thing as the telcos, for their cut.

Batsu• 17 years ago

Basically, there's a method for companies to charge your phone bill their unrelated services. When you initially use a service (on a whim, perhaps) you are often subscribed to the service. In some cases, this is probably OK, maybe some people really want to be attached to a nonsense service, but the much more likely case is that someone used it without realizing there would be recurring fees.

This is a PC World article on the subject from 2007. http://www.pcworld.com/article/129285/mystery_cell_phone_cha...

omarchowdhury• 17 years ago

The way it works is through premium SMS billing. The $9.99 monthly subscription is just ONE text that is delivered to your phone every month that costs you $9.99. The provider can send you other texts during the month as a part of your subscription, these are billed at standard prices. When this industry began, the texts you received during the subscription were ALSO charged at $1 or so, so you can imagine what kind of revenues those companies were making in the beginning. But Mobile Marketing Association and the carriers seem to have gained some conscience, albeit very late.

donw2• 17 years ago

Phone-based payment is popular in many countries where credit cards aren't as common, or are more tightly regulated. Usually it works by submitting your phone number, being texted an authorization code, and then submitting that code back to the merchant.

The situation in the U.S. is a holdover from the heyday of 1-900 phone numbers and phone-based home shopping, where customers genuinely wanted to be able to purchase things from a vendor over the phone.

Credit cards weren't quite en vogue, and provided a stopping point where the customer could have a chance to bail. The phone company was more than happy to get some revenue off of a service that both the vendors and consumers genuinely wanted, but they didn't really think the details through.

Nor did they expect that cheap internet and mobile phones would magnify a non-optimal payment system into a massive factory for scams.

ivenkys• 17 years ago

Who are the people who sign up for this scams ? Doesn't everyone know enough about these apps to know that ?

ErrantX• 17 years ago

I signed up for a love film (uk version of netflix) subscription to for a similar "scam" (not facebook or game related). In that case I was toying with getting the subscription anyway (and I still have it 8 months later and am very happy I took the plunge).

However I do think that was a lucky experience; I saw something I wanted to try out, got it and got a freebie in the process. Win win.

I liked the follow up Techcrunch post where the Hot or Not guy is quoted as saying that the idea isnt in itself a bad one (affiliate sign ups) - just that the industry has slid the wrong way. Im sure he's correct; It worked for me and it can work for others too. But Im guessing that the number of times it is easier to just scam people is higher.

Good on Arrington for having a good public bitch about this.

dgabriel3• 17 years ago

Everyone who has previously fallen for these scams, or has enough experience to understand that most of the offers are scammy. That leaves a lot of suckers to be mined.

My nanny (a very nice, intelligent woman, but naive about such things) wound up with a $500 cell phone bill last month after falling for a bunch of scams in a single week.

ryanwaggoner6• 17 years ago

You have a nanny and you're posting on HN? How old are you?

hop3• 17 years ago

Then the VCs that fund Zynga are equally culpable for these scams - http://www.zynga.com/about

Kleiner Perkins, Foundry Group, Union Square Ventures, Peter Thiel's Clarium Capital, more...

motoko2• 17 years ago

I don't include Peter Thiel as equally culpable. As far as I know, Thiel failed to invent a state-free currency with Max Levchin, and over decades, he witnessed the defeat of uncompromising humanity over unconditional growth, and now Peter Thiel probably understands himself as like the Adrian Veidt character from the Watchmen.

That is my best hypothesis. Who has obsessed more about the cancers of human behaviors than Thiel and his circle? He seems like a person who would feed cancer now if he projected his culpability as minimizing E(cancer).

ryanwaggoner6• 17 years ago

...what?

Eliezer• 17 years ago

When were the investments made? Which of these VCs (if any) has a controlling position on the Board? It's not like a VC can say "Oops" and demand the money back after a company turns unethical.

That said, writing to the VCs might indeed be an interesting strategy for handling ethically iffy startups. In fact, probably the most effective I can think of offhand. I'd just strongly recommend a polite "Please look at what this company in your portfolio is doing... I respect your group and I know you'll want to talk to them about this", not a "You! You're to blame! Damn profiteering bastards!"

sscheper• 17 years ago

I think the next step will center on Facebook outlining rules against those ads that are deceptive. I highly doubt Facebook doesn't want to put a stop to it because "it makes Facebook a quick buck." The numbers they yield are a fraction of a fraction of Facebook's revenue.

Those ads aren't the cash cows--they're small, extreme and unethical elements that have slipped through the cracks of the application ecosystem. If you're going after them, you might as well go after Google for allowing Acai Berry ads to be shown on Google Adsense.

axod• 17 years ago

Obviously this is nothing new. Reward schemes and sites have been around for 10+ years, and are really profitable for those who run them. But the value they give is debatable.

jfarmer• 17 years ago

I agree with Arrington, but his article is long on rhetoric and short on facts. He also totally mischaracterizes Anu's response to his claims, saying she didn't address "any of his points," when in fact she addressed all three of them directly.

chris1238• 17 years ago

Speaking of scams and scam companies, I’m dealing with a company named MindJet, which makes a mind mapping program called MindManager, which I wanted to test against the open-source programs. BTW, the open-source programs are better, as one might expect.

Before purchasing the software (to test) I contacted the company to ask about the software itself, as well as their refund policy. I was emailed back by Christian Walter, who said they offered a 30-day money back guarantee.

I purchased the software, tried it, determined that it did not meet my needs, to put it nicely, and certainly was not something that was worth any money. Therefore, I emailed the company to request my refund. This is where the fun starts.

When I requested my refund, Christian at MindJet effectively denied the request (in my opinion) and told me I would have to download a form, swear on it, sign it, and fax it to an international number.

On the form it said all fields must be completed or else no refund. One of the fields was “Customer Number,” which it says is listed on your invoice. That is not true (at least not on the invoice I have, nor anywhere on "my" account on their website).

The other part of their scam (that's what I call this kind of business practice) is that when you buy the product they throw in a “free” year of support. What they don’t tell you is that this is really a subscription for paid support, with the first year free, and that they will bill you annually starting next year unless you: (1) figure this out, (2) figure out how to opt out, and (3) do it in time.

I’m still dealing with this MindJet issue, gathering info for a detailed blog post with screenshots. Tune in later to see how the story ends, if they refund me on their own or I have to dispute the charge with Mastercard (I’ve already met the requirements to dispute the charge and am just waiting to see what they will do).

In meantime, I can tell you that, based on this experience (on its own and in comparison with every other company I have ever done business with), I consider MindJet a scam company. If their business practices are legal, they seem at least highly deceptive, tricky, and unethical (to me). Again, this is only my experience and opinion, so take it for what it's worth.

donw2• 17 years ago

This is why when a customer asks for a refund, it's a lot easier to just give them one. Especially if you're a software company. You might lose a sale, and a few bucks, but that's nothing compared to the bad press and expense of chargebacks against your merchant account.

If MindJet had just refunded Chris's money, no matter whether or not he is actually 'right', then this post, and the blog post that's likely to follow it, wouldn't even exist. The worst that Chris could say is, "I bought their software, it sucks, they... uh... gave me my money back. Those bastards."

Being scammy just doesn't pay off, at least to my way of thinking.

robotrout• 17 years ago

I use Mindjet and have for years. They're not a "scam company". If anybody was scamming, it seems like it was you. Your obvious plan was to get the software, write a bad review of it, and then ask for your money back. You get an article for your blog with no financial impact to your wallet. Now, when that backfired, you're indignant. I have to say, I'm not feeling that sympathetic to your predicament.

chris1238• 17 years ago

Wow robotrout, your thought process says a lot about your outlook on life and people, which says a lot about you.

Could it be that I wanted to evaluate all of the mind mapping products on the market before deciding which one to go with? Is that not a what many people do before they make any major decision, which to me is what picking a new piece of business software is? Could it be that I did some initial research and came up with a short list of candidates (Freemind, XMind, Mindjet MindManager, Dropmind, and NovaMind)? Could it be that I have now concluded my evaluation and MindJet was not the product for me and I simply tried to exercise my money-back option?

I am not "indignant," I am reporting facts, facts which, IMHO, mean "scam." If other customers who are eligible for refunds and want refunds are ok with having to fill out, swear to, sign, and fax a form to an international number to get that refund, then that's ok (for them). If they are ok with the refund request form saying they must supply a customer number from their invoice and there is no customer number on their invoice, fine. I'm just reporting those facts. Doesn't seem like a good policy to me, but if it's fine with you, fine. But don't get pissy and accusatory with me.

Lastly, nothing has backfired. I will get my refund from them or through MasterCard chargeback. The reason I'm spending my time telling people about this situation is in case anyone finds it relevent in their dealings with MindJet or in how they handle refund policies and procedures, as a previous commenter stated.

MY INITIAL QUESTION TO MINDJET:

I am interested in your mind-mapping software, but it is expensive. Does it come with a money back guarantee?

THEIR REPLY:

When you purchase MindManager in the Mindjet online shop you can cancel your order within 30 days after the purchase.

FOR THE RECORD robotrout's ORIGINAL COMMENT TO WHICH MY ABOVE REPLY IS DIRECTED:

ryanwaggoner6• 17 years ago

Why bother with going back and forth? Just dispute it with Mastercard and move on.

chris1238• 17 years ago

You raise a good point: Why not just take care of myself and move on and not care about anyone else, or if I care why raise a finger or expend an ounce of energy when it can't benefit me and could actually hurt me? If other people get ripped off, who cares, right? Heck, maybe even in some twisted way I benefit when other people get screwed. Relatively speaking, if they get screwed and I don't, I'm better off (some kind of reverse competition or whatever name has been given to it).

For me, however, this "me, me, me" mentality is the core of what's wrong with America right now. There are too many people who only care about themselves, who won't spend a dime of their money or a second of their time to stand up for someone who can't do anything for them. Not so much here and in our community, which mostly has an abundance mentality and knows that it's not about what you can get, but what you can give, and do give.

That is why I'm spending my time, opening myself up criticism, etc. I will get my money back regardless. It's $129, who cares, really. I've been through an IPO, made multiple successful real estate and stock investments, and done over a billion dollars in deals since 1999. Who the fuck cares? I quite that and moved to Europe in 2006 and haven't "worked" since. Again, who cares? Nobody. It doesn't matter. The point is not about money, it's about standing up for other people, people, who might not have the ability, time, energy, or whatever to stand up for themselves or anyone else. Heck, it's even about standing up for those "gotta look out for #1" types, I hope to help save them some money, too. More importantly and critically, I hope to help a few realize that the only way we can really change the world and make it a better place is by standing up for each other, helping each other, not ourselves. I also hope to give a company or manager or two a second thought about their business any shady business practices they are considering, help them realize that they will "get" more by acting ethically.

You may call me a dreamer and an idealist, that I am, but I'm not the only one. And I hope to "always" believe that we can make positives differences in each others' lives. That's what it's about. Really.

Yes, I hate getting ripped off (or feeling like I am getting ripped of, if it's more accurate). And I will not take it. I will suffer costs in excess of the rip off in order to benefit the community. I think the community benefits from better, more ethical and clear, business practices. I think by standing up here, I encourage that.

Since I'm in full rant mode now, I'll close out with a few quotes that come to mind:

Obama:

"Change will not come if we wait for some other person or some other time. We are the ones we've been waiting for. We are the change that we seek."

Yes, that's an updated version of Mohandas Gandhi's "Be the change (that you want to see in the world)."

---------

NOFX: (this is a punk version of "First They Came"):

First they put away the dealers, keep our kids safe and off the street. Then they put away the prostitutes, keep married men cloistered at home. Then they shooed away the bums, then they beat and bashed the queers, turned away asylum-seekers, fed us suspicions and fears. We didn’t raise our voice, we didn’t make a fuss. It’s funny there was no one left to notice when they came for us.

---------

chrisco (me):

Stand up for each other people, even if it's at cost to you, maybe even especially if it is a cost to you. This I do know the name of: "altruistic punishment." Lots of info on the web about that. One blog that comes to mind is Christopher Allen's "Life With Alacrity" -- see http://www.lifewithalacrity.com/2005/03/dunbar_altruist.html.

jlees2• 17 years ago

What's interesting is how quickly you run up against scam-walls (as someone who doesn't like paying for virtual currency outright, anyway). I can easily see how users fall for it, even the smart ones who try to pick scams that don't require credit card or mobile numbers.

As a user, though, it's really annoying to keep running up against the same things in every single game out there. Want more acres of land? A bigger cafe? Better weapons in Spymaster? The very omnipresence of 'give us your mobile number/credit card and we'll abuse terribly small print to charge you money for things you don't want' is making them almost acceptable, because people are used to seeing them.

praptak• 17 years ago

What really sucks is that a company can just pull money out of your account without your actual consent. As long as this is possible, the scammers will thrive.

Credit card companies and telcos should get their act together and stop this. No more handling your wallet to the vendors.

Devilboy• 17 years ago

At least credit card companies will refund you when you dispute a charge. The whole 'pay to receive' SMS system is just horrible.

Scamville: The Social Gaming Ecosystem of Hell

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