The Great Debate Over The Exchange Economy

The BigDoor team has been watching with great interest the massive debate that Michael Arrington kicked off last week when he publicly blasted some of the practices of the large offer platforms.  He then followed that ambush up with a scathing report in TechCrunch.

All we can say is, well done Michael!

Well, maybe that’s not all we can say.  A few more thoughts on the subject.

Our founders have more battle scars than we ever cared to earn from public debates of this nature, and as a result we’d like to think that we’ve learned a few lessons along the way.  Here’s a few pointers we’d like to offer for no charge at all (virtual or otherwise) to the players in this debate:

  • It’s never easy when an executive gets caught off guard with a question like this in public, but going on the defensive in favor of scamming customers is not good.  I’m sure that Anu at Offerpal cares about the experience her consumers have, so she should make that clear and have the actions of her company follow suit.  There is just simply no good defense for scammy offers that fool consumers, so don’t try to mount one.
  • I’m sure that Anu was highly annoyed at Michael, and yes – he can be a total jerk – but he’s one of the smartest and most insightful jerks in the tech blogosphere.  It was amazing to see that within the past month multiple major publications ran articles about Zynga and their meteoric rise, with barely a nod to the underlying offer engines that are driving much of that revenue.   Business Week, Forbes, and Fortune all did stories without any real understanding of the mechanics behind their growth.   So we were happy to see that Arrington was the first guy with a loud voice to get to the bottom of things and understand that offers are being used by consumers to earn virtual currency.  It’s never smart to get into a big, public fight with a really smart guy that carries this kind of influence (especially when he makes money from the eyeballs watching the fight).  Rather than digging trenches and preparing for a war that only benefits Michael and only hurts Offerpal (no matter the outcome), Anu should shift direction and get behind the “no more scammy offers” movement.
  • I’m giving Arrington all kinds of props here, but he’s dead wrong about a couple points.  The problem that he points out is that some offers provided by the big offer platforms (which in many cases are simply brokered by the big affiliate companies) are misleading or don’t give consumers any value in exchange for recurring subscriptions.  It’s important to understand that this isn’t something exclusive to social media marketing, and it certainly doesn’t mean that this exchange isn’t good for consumers the vast majority of the time.  The bad marketing that he points out is the same kind of garbage has been running across the Internet for years and it is going to take more than just Offerpal and Zynga to get rid of them.  Google, Microsoft, Facebook, Myspace (and soon Twitter) will all need to take a stand against this kind of marketing and hopefully eradicate it.  Where Michael goes wrong is that he is trying to throw out the proverbial baby with the dirty bathwater – and there truly is a baby in there.  The value exchange that takes place when a consumer provides something they have in exchange for something they want is a beautiful thing.  The budding “offer industry” has tapped into an important trend that we believe is just getting started.  Consumers want to be entertained, they want games, videos, connections and personal expression and they don’t always want to (nor are they always able to) pay for it.  Allowing a consumer additional options for how to monetize this kind of content creates a virtuous cycle that pleases the consumer, monetizes the content and thus allows more high-quality content and platforms to be created.  Done right (and we think it will be done right) this is powerful, important and good.
  • Virtual Currency is going to change the online monetization landscape.  Similar to other movements, virtual currency became huge in Asia but was considered childs play until recently here in the US.  It is now booming and will continue to do so.  Consumers need and want ways to acquire virtual points beyond simply paying for them.  The Exchange Economy is here to stay, but we believe that marketing offers are just part of that equation.  Consumers are going to continue to look for companies to innovate to create good and transparent means to earn virtual currency with their favorite game, app or site.
  • We beamed with pride when we saw how Mark Pincus responded to this brouhaha in his personal blog.  Well done Mark, we need more of this kind of honesty and transparency in this space.  There is no doubt at all that as we build out BigDoor we’ll make some mistakes and do some stupid stuff along the way.  When we do, we’ll try to be forthright and transparent.  Every new company and industry goes through these growing pains, it makes no sense to deny they exist.
  • Two guys that are proving themselves to be thought leaders in this area are Jay Weintraub and Andrew Chen.  Both have a deep understanding of the lead gen space as well as social media and online marketing in general.  Everyone in our industry should be reading what they are saying.  A couple highlights:
  • Political ideology aside, as leaders in the online monetization world we need to police ourselves because we don’t want the politicians to do it for us.  Elected officials are always looking for an easy way to become a hero and left unmonitored and with no self-control, the offer platforms and some of the social networks would soon be in the cross-hairs of regulators and other bureaucrats.  This will be painful and expensive and it will mean that we failed in our attempt to give the consumer something really great.  We all need to keep the consumer and their choices at the front of our minds, our products and our platforms.   The consumer is the very centerpiece if this amazing new ecosystem being created, so let’s not run our businesses to be focused only on the revenue trends the spreadsheet is spitting out – we need to keep asking ourselves how we can better serve our consumers.

New industries and the change that they bring are rarely created in a vacuum or without a hot shower and a good scrubbing or two along the way.  This water may feel a bit scalding to a few players right now, but this process of cleansing is good for the entire ecosystem and certainly good for the future of the Exchange Economy.

  • Ben Waugh

    I must say this is a great article i enjoyed reading it keep the good work 🙂

  • Tom Foremski

    You take a strange position in this story. You don’t seem to have noticed that the scams are harming the value of your “exchange economy.” Better to get the scams out now I would advise. It will be good for your business long term yet you seem to be on the other side of this issue…

    • admin

      Thanks for taking the time to post a comment Tom. I must apologize, if after reading this post I somehow left you with the impression that I don’t like the scrubbing that is taking place and am in any way on the “scammy” side of this issue – then I completely failed in my communication. I thought that everything I said in this post was in support of the cleansing and the getting out of these bad offers. My last sentence summed up the sentiment of the entire post, “This water may feel a bit scalding to a few players right now, but this process of cleansing is good for the entire ecosystem and certainly good for the future of the Exchange Economy.”

      Please tell me where I went wrong – I’m afraid I somehow left you with the exact opposite impression of what I was actually going for.


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