Zynga faces lawsuit over ad scam

Zynga faces lawsuit over ad scam

By Rob Crossley

November 23rd 2009 at 1:52PM

Zynga and Facebook â??generated enormous profits through misleading advertsâ??

Social gaming outfit Zynga is at the centre of a class action lawsuit following complaints that the developer had used dishonest advertising to generate huge revenues.

More than $5 million is being sought from both the developer and Facebook, the latter being the platform Zynga’s adverts went through.

Zynga, the firm behind the extraordinarily popular Facebook games Mafia Wars and FarmVille, previously faced criticism for running controversial commercial offers.

The developer’s cost-per-action ads give users virtual currency for participating in various surveys, quizzes, or signing up for trial offers.

It is alleged that some companies used Zynga’s cost-per-action ads illicitly, making unauthorized credit charges.

Such allegations have now developed into a full lawsuit. Neither Facebook or Zynga have made a statement regarding the suit filing (in civil law their current position is innocent of such charges).

However, Zynga CEO Mark Pincus has already implied that such alleged scams were beyond the firm’s control, because they were managed by external companies.

And yet it is alleged that video footage of Pincus saying, “I did every horrible thing in the book just to get revenues,” can be connected to the case.

The lawsuit filing, re-published by Valleywag, claimed that “over the last four years, Zynga and Facebook have generated enormous profits through these misleading special offers.”

It is though that Zynga made around one third of its revenues from its cost-per-action advertising. That controversial advertising method saw Zynga's most recent Facebook title, FishVille, momentarily removed from Facebook.

“Industry sources estimate [Zynga’s] annual revenue from $100 million to $250 million per year, this means that Zangya has potentially obtained $33 to $84 million per year from consumers responding to the special offers it promotes and promulgates through its online games,” read the suit.

Facebook was also accused of taking huge profits from cost-per-action advertising.

“Facebook shares a substantial portion of the revenue generated from the false and misleading advertising promulgated through Zynga games,” read the filing.

“In fact, it is estimated that from 10 to 20 per cent of Facebook’s $500 million in annual revenues is generated through games published by Zynga.

“Facebook is fully aware of the false and misleading nature of the advertising promulgated through Zynga's applications and that despite this, it actively engages in promoting Zynga's game to the public."