Practical Entrepreneur

Yes, I said it. Everybody involved knows it. It’s the dirty little secret of social media ecosystem. Log onto Facebook, MySpace, or any social application on these platforms or anywhere else. The majority of the ad units you see are for scam related offers. The infamous “crush ads” are everywhere. The whole purpose of these ad units is to get the consumer to enter their cell phone number and usually without realizing it subscribe to a monthly subscription on their mobile phone.

These ads are so profitable that they usually outbid any other advertisers on any network. If Google was not fiercely combating them, the would take over the overall online advertising universe. The actually come in a very few formats that I am sure you have noticed them

• Crush Ads: Someone has a crush on you!
• IQ ads: What is your IQ?
• Age Ads: How old are you really?
• and a few more “creative” ones

What percentage of ads on social media are composed of these scams you might wonder. According to insiders in multiple ad networks, it is as high as 70% of their revenue! Basically if you are monetizing your product through social ad networks, your business is probably being financed by scam ads.

We learned this very quickly when we were running social ads on Zoosk last year. First sign was when we started getting complaints from users that we should stop charging their cellphones. But Zoosk didn’t have any mobile features at the time. Once the volume of these complaints got to a level above noise, we did a few follow ups and quickly learned that these users were tricked by the scam ads to give out their cellphone numbers and not knowingly they were being charge on a monthly or sometimes biweekly basis for something around $10!

We tried to block these advertisers manually from our apps, but it turns out that if your ad network doesn’t fight them it is very hard for the publisher to effectively block them. We knew that we would be getting lower eCPMs by doing so, but we decided to switch from all the known social ad networks for basically this reason.

At the same time I understand why these up and coming ad networks can’t afford to remove these advertisers from their networks. Publishers flock to highest paying network on a whim and if a network drops 70% of their revenue, it will certainly die. Only Googles of this market can afford to fight these guys hard. I must give Facebook credit. They at least try to block these advertisers through their “ad policies” and even though I don’t agree with their method of combating these guys, at least they try.

What about publishers? Properties such as Zoosk that manage to directly monetize consumers have an easier way of turning down higher eCPM payouts by cutting scam ads (which I am super happy about . However, if advertising is your main revenue stream, it is very hard to turn down the higher eCPMs.

That being said, I want to argue that publishers should fight the urge to stay dependent on such ads for their own long-term livelihood. These ads and companies behind them won’t last long term. In many countries around the world consumer have finally been able to fight these scams. Over the past two years consumer rights groups have been able to pressure phone carriers to not allow these offers to operate on their network. As you can imagine carries play a very tricky role in this whole game. They don’t mind the revenue generated by these offers (sometimes they get half of the payout on these offers) but also don’t want to be known for supporting scams. And they have started to give in to the pressure from consumer rights groups. Even china recently passed laws that make the life for the companies behind these offers so hard that most of them have completely disappeared. I am sure US carriers will do so in the next 12-18 months as well.

Once 70% of revenue of ad networks disappears due to legislation or carrier policy change social media publishers relying on these advertisers will see a significant drop in their eCPMs (remember when Facebook forced Social Media and Cubics to clean their act to some extent last year? first effect was slashing eCPM rates). If your company is addicted to such incomes and hasn’t worked “harder” to figure out better ways to monetize you will be in a very grim situation once the plug is pulled. Not to mention that you would be doing your customers a big favor by saving them from these notorious scam techniques on the web today.

So what do you say Social Media publishers? Let’s fight these scams to both protect our users and also build companies that can outlast scammers.