Zango Co-Founders Receive Over $5 Million For New Start-up
Two of the original founders of 1800Solutions (later called MetricsDirect and then more infamously Zango) are in business together once again with a new start-up company, BigDoorMedia. Keith Smith and Jeff Malek recently received $5 million in investments from Foundry Group according to information on their site and TechCrunch. This brings the total investments for BigDoorMedia to almost $6 million.
BigDoorMedia is currently in public beta and describes their business as:
Our platform helps companies build game-like mechanics and loyalty programs into their site or app through points, badges, levels, leaderboards, virtual currency and virtual goods.
Ultimately, the BigDoorMedia platform allows publishers to monetize their community through virtual currency and goods using an offers platform.
An interesting side note is that Foundry Group is also an investor in Zynga, the social gaming company behind Farmville, Yoville, MafiaWars and many other games. These are the types of social games the BigDoorMedia platform is meant to monetize. Ultimately some would consider this a risky investment for the Foundry Group considering the background of the two founders.
Smith and Malek have achieved the milestone of launching a new start-up company and acquiring significant financial investment in the short time frame of about a year following the bankruptcy filing and asset sale of Zango which led to the personal bankruptcy filing by Smith.
Reformation or Public Relations?
The business model and practices of Zango received a steady onslaught of criticism over the years from many groups including security companies, online advocates and consumers. Through it all, Zango consistently maintained their innocence against the allegations related to malicious installs of the various Zango products and launched savvy public relations campaigns to counter the negative PR and stigma that became associated with the various company names. The public relations campaigns were successful, at least for the many advertisers who continued to run campaigns on the Zango platform.
Smith appears to be addressing the past problems of Zango head on, which is probably a good public relations move for his new company. I doubt there are many players in the online marketing space who don’t know about the past history of Zango. In a BigDoorMedia blog post, a detailed account of the philosophy behind BigDoorMedia is laid out, as well as lessons learned from Zango and how these lessons are shaping BigDoorMedia. While some of the “lessons learned†appear self evident for any business, such as being good to consumers and only do business with the good guys, there are a few points worthy of further exploration:
Don’t be adware. It doesn’t matter that our move into adware was based on logic that was sound and motives that were pure. Adware became known as a public scourge and trying to fight a broadly based perception is like spitting in the wind. We don’t ever want to write broadly distributed client-side software again.
I’ll pass on the debate of whether or not the move into adware was sound logic and the motivations were pure, but what is not mentioned is the degree to which the $3 million dollar FTC settlement (pdf) undoubtedly played in the decision to not be adware. At least I hope that Smith took something away from the FTC investigation into his business. Although I notice that BigDoorMedia appears to have left themselves a bit of an opening with “broadly distributed†client-side software and don’t go as far as to state definitively not entering the arena of adware.
Regardless of whether or not BigDoorMedia has any intentions of using adware in their new business venture, Smith does have to inform the FTC of his new business venture as required in the FTC settlement agreement. This is irrespective of whether or not adware is involved, and is a pretty standard clause in FTC settlements. The FTC wants to be informed of this so they can keep an eye on business practices to ensure consumer protection. Smith addresses this point when stating:
Be good to consumers. Monetization of users and content by its very nature is not going to be directly welcomed by consumers, but it absolutely has to be consumer friendly.
I certainly agree that monetization absolutely has to be consumer friendly, although the scope of being good to consumers certainly goes far beyond the example presented by Smith for balancing the amount of time exposed to ads with the time the consumer engages in the desired content consumption.
Smith expounds on another lesson he has learned:
Be long-term greedy. Real value needs to be delivered to get people to part with their money, so revenue is a great way to measure the value you are adding to the world. Short-term greed and measurement will almost always lead to ruin, but if a business thinks long-term and makes intelligent decisions about what will generate the most amount of revenue over a three to five year period of time (an eternity online) – in most cases that will be a fantastic guide to doing good and adding tremendous value.
When taken together, I have to wonder if Smith has truly learned what being good to the consumer actually entails. Revenue earned isn’t necessarily a valid or a reliable statistic for measuring “good and adding tremendous value.†We only have to look at recent events in the way some platforms have monetized social gaming to understand that a lot of money is being made at the expense of the consumer. Shady advertising offers to social gaming users have provided quite a bit of revenue to companies like Zynga (remember they have been funded by Foundry Group also). It is hard to argue the point that taking advantage of consumers is treating the consumer well. These types of advertising offers that mislead consumers are the exact kind of marketing the FTC doesn’t like to see.
But maybe Smith isn’t completely blind to these types of activities in the social gaming monetization marketplace, as BigDoorMedia blogged about the whole TechCrunch/Zynga “Scamville” incident, sharing more of the lessons learned from running an adware company. The crux of the problem becomes whether or not a company can recoup the millions invested in a short-term (the 3-5 years pointed out by Smith) without being lured to the big dollars behind the questionable lead gen offers out there.
What Is Missing From The Picture?
The rhetoric is well and good. But if one looks a bit closer, there are some glaring points which should be considered if lessons have been learned and indeed reformation may happen with the management of BigDoorMedia. I appreciate the fact that the BigDoorMedia venture is still in public beta. Beta clearly indicates the company may well be working the technical kinks out of their system. But since the company is currently accepting publishers and vendors, there are some fundamental aspects missing from their site that I would expect to see from a legitimate business.
Terms Of Service I could find no TOS on the BigDoorMedia web site, even a footer link on the publisher sign-up page. This is so basic, I don’t think any further elaboration is required. A TOS would certainly provide some insight into how a business is being operated.
Privacy Policy I was unable to find any Privacy Policy on the BigDoorMedia web site. This is as basic as having a TOS. This is also not only critical for the publishers and vendors working with BigDoorMedia, it is essential for the consumers who will be interacting with the BigDoorMedia platform. It’s an aspect required and expected by the FTC as well.
Advertisers While Smith may say he thinks that certain types of advertising offers need to be cleaned up from the online ecosystem, there is little to no information on the BigDoorMedia site about the advertising companies and offers being used for monetization. What types of offers can publishers expect their communities to be exposed to? Indeed, BigDoorMedia talks very little about the actual monetization on their site. At the end of the day, the platform is about monetization not providing cool badges, trophies and loyalty points only.
Be Good To Advertisers While consumers should be treated honestly, so should advertisers. Ultimately there is not monetization without the advertising dollars. In all the posted lessons learned, I saw nothing talking about how advertisers should be treated just as fairly as the consumers. Certainly, there are advertisers who are more than happy to scam consumers, but if you are “only working with the good guysâ€, those types of advertisers should be removed from the picture by default.
We saw historically the Zango platform being used to defraud advertisers and this was with the full knowledge of Zango. Back when it was 1800Solutions, they engaged in some of the exact same practices themselves acting as affiliates. While measures could have been taken directly by Zango to not allow their platform to be used in such ways, Zango never implemented any protective measures.
In the world of incentivized advertising, potential fraud is present (e.g. consumers submitting lead gens with false information or intent to cancel offer only to get the incentive). With an exchange economy based on offers, the majority of revenue generation will come from the coffers of advertisers. Will BigDoorMedia care as much about the advertisers as the consumer?
At the end of the day, it is not what BigDoorMedia puts down in web ink as their mission and theology of the business. It is the choices the owners make in the actual implementation of their business model. As they are persistently pointing out, they feel they had a good business model with 1800Solutions/Zango, but made many mistakes in the implementation which ultimately led to its failure. Only time will tell if BigDoorMedia is able to fulfill the promises currently being made and plays as a good netizen in the online advertising space.
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Pat Grady
