Offerpal Media, an ad provider for social apps and games, announced a new set of standards for its controversial lead generation offers, just as Facebook bans other providers like Tatto Media for their questionable ads.
The company's ads consist of special offers featured alongside free social games such as FarmVille
, inviting users to fill out online surveys and sign up for subscriptions in exchange for virtual currency (as opposed to paying for the in-game currency directly). Advertising providers and game publishers generate a significant amount of revenue from the Cost Per Action offers.
Many of the ads provide a legitimate service or product to consumers (e.g. Netflix trial subscriptions), while other misleading offers brought on unauthorized credit, debit, and mobile charges to unsuspecting social games players, some of whom were unable to cancel the charges or services/goods that they were tricked into paying for.
The issue came to a head several weeks ago when TechCrunch's Michael Arrington confronted Offerpal
and wrote a series of scathing articles about the social gaming industry's "lead gen scams". Offerpal co-founder and former CEO Anu Shukla responded by claiming
that less than one percent of users complain about the offers.
The debate surrounding CPA offers spurred developers like Zynga and RockYou to revise their ad policies, and Facebook set an example shortly afterwards by suspending Zynga's FishVille
when the dubious promotions appeared with the game. Both the social network and developer were named in a class action lawsuit
filed this week alleging the companies knowingly allowed the offers to swindle users.
Since the scandal, Shukla resigned from her CEO position (she intends to stay at the company as a board member and advisor), replaced by George Garrick, previously president and CEO of Jingle Networks. Offerpal's new standards for the offers will mark the chief executive's first significant action at the company.
"This is something the industry needs to do," said Garrick in an interview
with VC news site Venturebeat. "Individual companies need to draw a line in the sand in what they will do. It sends a message to partners that you want valid and credible and ethical business."
He added that the new regulations, posted in full on the company's site
, were developed in close contact with publishers and platform owners like Facebook and MySpace. To help its clients meet the new standards, the ad provider introduced a multi-step review process required for each offer before going live.
Garrick said costs for offers are now more clearly spelled out and presented with bigger font sized in order to prevent any confusion. Offerpal also updated its tools to automatically detect non-compliant ads and delete them from its network. The company has already removed hundreds of CPA offers in the past few weeks, putting them back into its system only after advertisers make them compliant.
To emphasize the legitimacy of its lead generation advertisements, Offerpal added several "high-value offers" from recognizable brands like Real Networks, New York Times, Disney, Yahoo, Netflix, Blockbuster, DirecTV, Priceline, Discover Card, and others.
As Offerpal revises its ad policies, though, Facebook has reportedly banned similar offer providers like Gambit and Tatto Media from its apps and games. This isn't the first time Tatto Media has come under fire for its promotions, as the Washington State Attorney Generals Office investigated the firm
for false and deceptive advertising in 2008. The company eventually agreed to settle for $500,000.
Gambit denies that Facebook or other social networks have removed its ads
: "Gambit is, and has always been, up and running on our clients' applications on Facebook, MySpace, and many other venues online. We're not happy that there has been news otherwise, and we are working to address the issue. We will be announcing the real story in days to come."