Social gaming is exploding, in a slightly different way that everyone thinks... Yes, there have been some major successes in the space, most notably EA's recent acquisition of Playfish. But over the past week, there has been tremendous press about scams among the social game sites.
It started with Michael Arrington's post, "Scamville: The Social Gaming Ecosystem of Hell" -- which essentially laid bare accusations that behind the Mafia wars, the farms, and the Texas-styled poker lie affiliate marketing scams that sign users up for expensive things they don't need (which appear free at first glance) in exchange for in-game currency. The piece has since drawn a number of press releases, confessions of past misdeeds, and claims of having turned over new leaves. Execs were replaced. It's also created a bad taste in the mouth for larger advertisers considering the social games space.
There's an underlying issue of scale. Currently, ad inventory exceeds demand by credible advertisers in most of these markets. Excess inventory drives down CPMs, and publishers are stuck between a rock and a hard place. If they don't allow the more unsavory advertisers, it'll be much harder to turn a profit and remain competitive, and they'll just burn through their VC money. If they do allow the unsavory scams, it's going to turn off legitimate advertisers who might be interested in reaching the game's audience. It's the AdSense problem. No self-respecting brand wants to appear in the same spot as a "punch the monkey" ad.
