• by David Berkowitz , February 16, 2010

One emerging business model that has caught on in social media is not particularly social at all. The model, especially prominent in supporting the booming social gaming business, allows marketers to target consumers with cost-per-acquisition deals that earn consumers points or virtual currency in the games.

Among the best known players in this field is Offerpal, which says it reaches more than 150 million consumers. After missing the company's CEO George Garrick last month both when he was in New York and I was in San Francisco, we finally caught up on the phone for an exclusive interview. While Offerpal has typically targeted direct response marketers for lead generation programs, new and upcoming programs will cater to brand marketers too.

Note that his answers below are paraphrased, except where in direct quotes, and some of the questions were added later for clarity.

Offerpal Overview

Offerpal reaches consumers who don't want to spend money for points or virtual currency. Offerpal's consumers are typically teenagers - younger people who may not have credit cards.

The first rewards were offers, but there are other ways Offerpal is providing value for consumers subsidized by marketers. Shopping Offers was introduced a few months ago. A video product is coming out where consumers will get rewarded for watching ads.

How do the leads from these offers compare with customers acquired through other channels?

We'll see if the quality of the response from these offers will turn out to be lower than purely voluntary responses (consumers who are not incentivized to respond). If someone sees an ad for Netflix and signs up for a new account, they're probably more interested than someone who suddenly needs some game points. The lifetime value is probably not going to be as great. The economics are probably going to settle out over the remainder of the year, and that's  OK. "If you look at customers acquired through different channels, they're always going to have different values."

The quality of leads may not be lower at all though. "I don't know that it's going to turn out that way. There's an argument that can be made in the other direction." You can say the type of person playing a social game is a heavier user of DVDs and watches more movies, which offsets the fact that you're incentivizing them to sign up.

It takes a long time to calculate lifetime value. "Ideally you need a lifetime... I don't think there's enough data yet." Offerpal has been around a couple years but social games only really took off at the beginning of last year. Part of the challenge is that "up until recently, a lot of the offers were coming through exchanges and networks... If you're coming through a network like Commission Junction or ValueClick, the marketer can't really tell where the lead is coming from." Better data is just starting to become available.

How will the new data affect pricing?

"Most marketers expect to be paying the same regardless of the channel... I think over time, the advertisers look at additional visibility into the source of the leads and their acquisitions and they will adjust the pricing by source... At the end of the day it probably doesn't make that much difference because unless a new channel comes along that suddenly is a significant source of customers and is significantly different in terms of lifetime value, it really wouldn't make that much of a difference."

What else is Offerpal doing to attract brand marketers?

"We have a number of things coming along that are targeted to brand marketers and more of the Ad Age type reader than the Direct Marketing News reader." [Editor's Note: MediaPost welcomes all such readers.] "The brand marketing world is spending a lot of money, and we think that social environments in games are a great way to reach people, especially certain demographics that are harder to reach through traditional media." Consumers playing these social games are arguably more engaged than TV watchers because they want to get the reward.

You're discussing the offers' role in social gaming. Do you see the offers themselves becoming more social?

"I don't know. It depends on what the marketers and what the agencies come up with." As more research and understanding come out of this, that's a reasonable thing to expect to happen, but that's really up to the marketers and agencies. "We don't design the offers... Typically, marketers do want to take advantage of the environment and the state of mind the audience is in."

Consider  Groupon - they come up with an offer that's only available if a certain number of people sign up for it. TownHog does that too. "We will always be looking for things like that to embed in our offering. I wouldn't rule out actually developing some of our own offers at some point."

What impact did the 'scamville' brouhaha have? [For background on this, read Garrick's comments in TechCrunch.]

"I think there's a lot of opportunity that's still being left on the table because of the controversy that happened a couple of months ago. There's still an excessive amount of hesitancy to engage in non-cash alternatives. While I can understand that, there are a lot of users who would engage at a deeper level in these games and applications if there were non-cash alternatives available."