The ethical quandaries of virtual goods

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gift_small.jpgADOTAS – It was just another Virtual Goods Summit in San Francisco on Friday until TechCrunch’s Michael Arrington came up to the mic during an afternoon panel and questioned the ethics of bartering lead-generation data for virtual goods.

Offerpal CEO Anu Shukla responded by calling Arrington’s insights three types of excrement to a packed crowd’s approval.

On social media and gaming sites users can either buy virtual goods — to send as presents or enhance gameplay — with money or “barter” for them by taking surveys that provide lead-gen data. Arrington’s argument surrounded what he called a “downward spiral into hell” — in a blog post, he railed:

“Users are tricked into these lead gen scams. The games get paid, and they plow that money back into Facebook and MySpace in advertising, getting more users. Who are then monetized via lead gen scams. That money is then plowed back into Facebook and MySpace in advertising to get more users….”

His ire was inflated by the notion that many of these offers are aimed at minors who likely have no clue what they’re signing up for. He singled out Zynga, a highly successful social gaming company that receives a third of its revenue from companies providing commercial offers. In addition, he accused Facebook of facilitating the scamming of its users and capturing a monetary benefit.

Shukla countered that Facebook is not making lots of money from companies such as Zygna and Offerpal and that the company has in fact come down very hard with its advertising policy in the last several months, weeding out duplicitous advertising. She called the standards more stringent than the Federal Trade Commission’s.

Expanding on Shukla’s response, an Offerpal blog claimed that terms for completing any of its offers are clearly spelled out in its l-frame and on the advertiser’s landing page. Offerpal’s policies regarding misleading copy are similar to Facebook’s, and the company said it deletes unclear offers and bans the advertisers.

Arrington’s post has received many comments including anecdotes about unethical encounters; HotOrNot founder James Hong recounted his company’s experience with such offers, concluding: “the offers that monetize the best are the ones that scam/trick users.”

Virtual goods have become a $1 billion industry in the U.S. and a $7 billion industry in Asia; Facebook’s repeated updates of its advertising and privacy policies show it is definitely concerned about spurious tactics taking advantage of users. At the same time, game developers should be able to monetize their offerings.

Surely these tense 10 minutes are just the sparks of a fiery debate set to ignite the social mediascape. The video is well worth watching, but be warned that there is some explicit language.

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