Wednesday, February 01, 2012

The Zynga Consumer Protection Agency

Lately on Facebook, I've been noticing a massive upswing in the Zynga hate. I'm not sure what's triggering this all at once, though it seems to be centered on Mafia Wars (which I don't play). That there are Zynga hate groups doesn't really surprise me; any company with over 200 million customers is bound to piss off a bunch of them at some point.

One of the biggest complaints leveled at the company are "lost" or "missing" in-game purchases. This got me thinking about the whole concept of app purchases, especially the way social games implement them, and how there is a huge problem here waiting just under the surface.

If you've never played a "social" game before, this might require some explanation. Most social games are free-to-play. You game is delivered to the user by some pre-existing platform (in this case, almost always Facebook), and linked to the user's account there. The way Zynga makes their money is two-folder: ads and purchases.

The ad revenue works like you'd expect: they show ads above and below the game itself in your browser, you click through, they get money. (There's also in-game sponsored content: Cityville, Zynga's biggest property to date, has seen McDonald's, Best Buy, and Capital One buildings, among others.)

The in-game purchases, however, is where most of the money comes from. Though the games are free to play, and much of the in-game content is purchased with in-game virtual currency, Zynga offers murchandise that you can only acquire with real cash. Some of this content is "premium", like fancier clothes, unique buildings, etc. Other content is "convenience": pay a tiny bit of money and all your dead crops come back to life.

The in-game purchase model Zynga uses is pretty standard across the gaming industry. If you looked at the actual prices of much of their content, it would be small transaction amounts: way to small to be worth the processing fees, since we haven't figure out micro-payments yet. So, Zynga doesn't have you buy each item individually. Instead, you purchase in-game "premium" currency, which is sometimes themed to match the game. (Pioneer Trail has "horseshoes", Castleville has "royal crowns", while Cityville just has "city cash").

You buy this premium currency in bulk, say, $50 for 500 game-cash. You then buy premium content with your premium currency. Since the conversion rate for real to in-game currency goes up as you buy in bulk, you are incented to buy a lot at once, before you actually have anything to spend it on. This, of course, disconnects you from the real cost of what you're buying: a robotic space stallion cost 99 Horseshoes, but you have to stop and do some math to realize that can be over $10 in real currency.

But, that's the the problem I was worrying about: if consumers aren't willing to be responsible with their money, more power to Zynga to make a profit from it. It's not like they are scamming anyone or hiding the costs of their product. (There are even ways to make premium currency from referral programs, buying things you'd buy anyway.)

The problem is, what happens if I buy something in-game and don't get it? Or if its not what I thought it was, or doesn't do what I wanted? What if its defective (buggy), or I get the wrong thing?

In the "real" world, I have a ton of options. If I bought it from a reasonably reliable store, I can probably return it for a refund, exchange, or credit. This is really the only option I have from Zynga: if I can find it, I can submit a complaint to their tech support, and usually get credited back my in-game currency. I've never had a problem with Zynga support in this area: despite the mass of complaints, (or possibly because of them), Zynga's support staff is very good at reimbursing players via in-game currency.

But if a real-world vendor doesn't come through, I have other options. If I paid by credit card, I can contact that bank and have the charges reversed. Or, I could order a stop-check order on the check. Worst case, I could, if the amount was big enough, possibly sue the vendor in small claims court for breach of sales contract.

In a Zynga game, though, the "product" that you purchased for real cash is premium currency, which you already got when the transaction posted. If Zynga failed to give you your Farm Cash, you could appeal to any of those outside agencies for help. But if Zynga failed to trade in your Farm Cash for a Satuday Night Fever Disco Cow, what real-world transaction are they failing to complete? That's an in-game bug, and this is a free, no-warranty-included game.

This is the problem I forsee with this in-game purchase model. Consumers are adding an extra level of indirection between their actual funds and the product they wany to buy, and it opens up a huge loophole in the consumer protection laws. And let me be clear: Zynga is absolutely not the only company at risk here. This cash-for-points-for-stuff model is ubiquitous in the gaming industry: Runescape and Puzzle Pirates, for example, have been doing it for years, and it's the core of the Microsoft XBox Live Marketplace. For consumers, you get the convenience of not having to whip out a credit card just to download a new wallpaper for your XBox, and the benefit of buying currency in bulk at a discounted rate.

But what are you giving up in exchange? And now that Zynga is out in the "public", with more players than any "traditional" gaming company could dream of having, how long will the status quo last?

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