The Federal Trade Commission (FTC) has found that U.S. mobile advertising platform Tapjoy misled users by cheating both developers and players out of compensation and rewards.
According to the FTC, Tapjoy has been engaging in ‘middleman misconduct’ by encouraging prospective players to engage with its dynamic advertisements in pursuit of rewards including in-game currency, but in some instances refused to pay out.
It also claims the company continued to push those deceptive advertisements despite being inundated with player complaints, resulting in developers being cheated out of their share of revenue for successful ad engagements.
“In a mobile gaming experience where developers use Tapjoy’s advertising platform, Tapjoy displays ‘offers.’ When gamers complete these ‘offers,’ such as by signing up for subscriptions or making purchases, Tapjoy credits the user’s account with coins or other currency for use in the game, and developers receive a percentage of Tapjoy’s advertising revenue,” explained the FTC.
“However, according to the FTC’s complaint, many players jumped through hoops — and even spent money and turned over sensitive data — to complete Tapjoy’s offers, only to receive nothing in return.
“It appears that Tapjoy amplified false offers by its business partners, who baited gamers with big rewards only to cheat them when it was time to pay up. Tapjoy did little to clean up the mess, even when hundreds of thousands of gamers filed complaints. This also harmed developers of mobile games, who were cheated of advertising revenue they were entitled to.”
Outlining its proposed settlement, the FTC is advising that screening and testing procedures be integrated into the Tapjoy platform to weed out malicious advertisers, and also wants Tapjoy to do a better job of policing its own platform. In short, it insists Tapjoy must “take more responsibility for fraud, rather than facilitating it.”
Looking beyond Tapjoy, the FTC also expressed concerns about the prospect of other platform holders, including major players Apple and Google, squeezing developers.
It described the iOS and Android platform holders as “gatekeeping giants,” and highlighted how both enjoy “vast power to impose taxes and regulations on the mobile gaming industry.”
“We should all be concerned that gatekeepers can harm developers and squelch innovation. The clearest example is rent extraction: Apple and Google charge mobile app developers on their platforms up to 30 percent of sales, and even bar developers from trying to avoid this tax through offering alternative payment systems,” continued the FTC.
“While larger gaming companies are pursuing legal action against these practices, developers and small businesses risk severe retaliation for speaking up, including outright suspension from app stores – an effective death sentence.
“This market structure also has cascading effects on gamers and consumers. Under heavy taxation by Apple and Google, developers have been forced to adopt alternative monetization models that rely on surveillance, manipulation, and other harmful practices.”
The commission suggested those “rent extraction” practices could be why developers have turned to loot boxes in bid to “squeeze more revenue out of gamers,” adding that such monetization tactics deploy “dark patterns and other deceptions” to bait players into spending cash.
Ultimately, the FTC said it would use the full array of tools at its disposal to address the “deeper structural issues” affecting the mobile game marketplace, and fired a clear warning shot at the likes of Apple and Google by reiterating it will continue to push back against “middlemen mischief.”
You can read the FTC’s full statement, penned by commissioners Rohit Chopra and Rebecca Kelly Slaughter, by clicking right here.