News & CommentaryArchive
Nov 05, 2009
Scams, FarmVille and Embedded Giving
Updated November 13
It’s “giving season” again and so we’re about to see a huge ramp-up in embedded giving—the practice of embedding a donation into the purchase price of something you buy (e.g. “a portion of the proceeds will go to cancer research/plant a tree/build a space hotel”). Joining Lucy Bernholz, we’ve been critical of embedded giving schemes for a variety of reasons including their ability to obscure what is really going on.
A case-in-point is a series of recent stories about Zynga, a company that makes online social games including FarmVille that have become wildly popular on sites like Facebook and MySpace. A few weeks ago Zynga announced that it had raised nearly $500,000 for children’s programs in Haiti via an embedded giving scheme in FarmVille. Essentially users had the option of purchasing (with real money) virtual seeds for their farms, and a portion of the money paid was directed to the Haiti program. Zynga was praised and a number of commentators pointed to virtual goods as a big part of the future of giving.
Then a few weeks later, Michael Arrington, an enterprising reporter from the blog TechCrunch, did some digging on how social gaming companies like Zynga were making their money. It turns out that in addition to selling game players virtual goods, a big chunk of their revenue came from being a conduit for consumer scams. In Zynga’s case about 30 percent. The scams involve offering players “free” virtual goods in return for filling out surveys or the like. What the game player doesn’t know is that filling out the survey ends up subscribing them to a monthly subscription of some sort without their knowledge. The scams are run by separate companies but they pay Zynga for access to their game players. The revelations have led MySpace and Zynga to change policies in relation to the games, and to one of the leading conduits for the scams, OfferPal, to replace their CEO.
So this story has a generally happy ending, but the point remains that embedded giving programs like Zynga’s often cover up the reality of what’s happening in the background and the general practices of the company. In this case, while feeling good about giving to children in Haiti, players were also supporting a company that earned a substantial portion of revenue by turning a blind eye to scams.
But this is just one of the more egregious examples of the problems with embedded giving. The real problem is a near complete lack of transparency (who gets the funds? when? how much?) in the industry.
Lucy Bernholz has kicked off a project to start gathering data on the embedded giving industry. When you come across examples of embedded giving that seem particularly dubious or opaque, please let her know.
Update: A video has surfaced of Zynga’s founder telling a gathering that he purposely built the company with revenue from scams.