SWOT Analysis Essay
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SWOT Analysis Essay
The Scamville Controversy on Virtual Goods: SWOT Analysis of the Businesses Involved, the Ethical Side, and Future Implications
In his theory “Scamville: The Social Gaming Ecosystem of Hell”, Arrington fully
outlines a horrific scheme for scamming, or essentially draining customer cash against both in writing, on the TechCrunch.com website, and live, in his open provocation for Ms. Shukla (then Offerpal’s CEO, released from office thereafter). In short, Arrington takes the purely ethical stand of insisting on better definition of the borderline between legitimate monetizing of otherwise free-application customers and the pure scam. Of course, he also fights for better enforcements of the current and, hopefully, future regulations on the matter (Arrington, 2009).
The current paper takes into account the ethical stand of Arrington assuming he duly and rightfully represents the valid, albeit not yet fully realized claims of the customers and society as a whole, and presents it in contraposition to the pure business analysis of the phenomenon.
2. SWOT Analysis
The brand new app economy as a whole has a few remarkable strengths. They are mostly associated to its platform of operations – the World Wide Web. This platform means instant access to hundreds of millions of potential customers at a very low cost, remarkable strength of the viral marketing (or word-of-mouth), and great efficiency: the targeted user is reached in the privacy of their own personal electronic device (computer, mobile phone, etc.). The strength of doing business on the online platform has shown its might repeatedly during the past years, specifically providing for unheard of growth-speed, breaking even remarkably soon, and making unpredictable profits. Google, Facebook, and others have already proven this strength, but it seems that social games developers are surpassing even those two giants’ history of growth and quick profitability. Considerable strengths, making this new economy a true boom.
The first weakness of the social gaming development business is, once again the platform.
This type of online operations has no means, or at least for now appears to have no means, to be transferred onto other platforms (TV, paper, etc.). This means a predictable limitation for growth foreseeable already at the birth of the industry. Second weakness is that social gaming raises ethical criticisms from many different directions, but those are the issue of the second part of this work. Furthermore, this industry is limited to the “high-tech” people. It is a prerequisite to possess some sort of device capable of accessing the internet. From then on, it can be argued that at least average (if not much higher) pc- and internet-literacy of the user is mandatory, no matter how much simpler and simpler games for the masses the developers are striving to offer. If nothing more, at least sufficient literacy to be a Facebook/MySpace/etc. member is required to get to the level of participating in incorporated social-game type applications. Both the owners of internet-access devices and the higher-literacy users are still growing as a number.
Nevertheless, they are growing slower and slower and the target group “internet user” is getting more and more finalized and consolidated. Of those, social network users are also growing, but also at a slower and slower pace, and this growth will also stop much before all people with internet access are members of at least one social network (MacMillan, Burrows, & Spencer, 2009). Finally, a very current weakness is the increasing spotlight-scrutiny focus on the marketing tools utilized to generate sales and users. For example, currently the lead-gen type of raising customers (hence revenues) was forbidden by Facebook, so developers were forced to develop much more complicated schemes for routing of the generated leads, so as to avoid using Facebook itself for the purpose (MacMillan, Burrows, & Spencer, 2009).
The largest opportunity for this business is obvious: it is an infant industry, just beginning to unfold. Now is the time of first come-first serve type of market-sharing and market-making. Profits are still unpredictable and Facebook-like explosive growth is still not only possible but very probable for new entrants in the still under-populated industry.
Another opportunity to add to all this is the position of pioneers that current developers can take. It is rare (in fact, only at industry birth and few exceptions) when a few companies can dictate the shape, form, course of development, near future, and even codes and etiquettes of the entire business they’re in. The leading social-games developers are currently in such position. Last but not least, this opportunity has an implication with borderline legality and very borderline ethics: running faster than the regulator. The example brought forth by Arrington (2009) shows that, just like every new business, until society/the government realize what the new is industry all about, what dangers and risks it holds, and how to address, contain, and regulate them, the few pioneer-players in that given industry are basically in the unique position to do legal business in ways that will obviously be outlawed, once detected and brought to the attention of the regulator. Albeit almost always unethical, this is still a valid, legal, and very rare and beneficial business opportunity.
The first threat comes from the pioneering opportunity outlined above. Although the basic principle of legislation is that no suits can be filed for actions committed before the actual legislation forbidding them was passed, there is a well-known tendency for businesses seizing a short-term window of, say, “grey” opportunity to push it and go overboard, finding themselves in the position to clean a severely damaged or even ruined reputation. Another threat is the private sector. Social gaming has been proven to work on the basis of addiction, the so-called “hooking up”. The very mechanism is such: first you convince the customers to play for free, then they get so excited that they are willing to pay cash to advance further and further in the game. This addictive nature already shows clear results in lowered productivity by a big proportion of desk-stationed employees. True, it is the employer’s problem – not the social games’ developer, but lobbies are lobbies, and they are very creative in using true ethics to put false blame. Last but not least, the short-term window of opportunity posed by the new-industry growth is a threat to the strategy of any player in this industry. New entrants will quickly flood the market seeing this exact unique window, saturating it so quickly, that first they pose the threat of over-saturation (unlikely), and second – they call for drastic strategic measures by the founding players. History has shown that by far not all super-growth boom-companies are that good in strategy, crisis management, and market share retention once there is the first obstacle to growth (MacMillan, Burrows, & Spencer, 2009).
3. The Ethical Side
The point Arrington makes and his struggle against the new-born corporate-giant babies (game-developers and lead-gen flow companies alike) are an example of the ethical side of this new controversial phenomenon called social gaming. As always, it is not the central, branded, publicly advertised concept that deserves ethical reconsideration. There is nothing unethical about Farmville or even Mafia Wars (leave aside the violence). It takes technologically qualified, especially informed and knowledgeable users like Arrington (surely the exception, not the rule) to detect such an issue as the subtle scams for game cash in social games. Once again, the chain of events attached to the birth of every new industry is dogmatically followed: there is a boom, the growth is unheard of, the great sensation and “mania” lets the players in the industry develop various scams and unethical profit-generating models calmly, away from public attention. Then, very few voices start raising, but usually they are bluntly crushed precisely like former Offerpal Media CEO Anu Shukla treated Michael Arrington on the 2009 Virtual Goods Summit in San Francisco (video is available in YouTube: http://www.youtube.com/watch?v=2PhKRCkbX9A). Then, more and more people start paying attention to the issues created by the unregulated side activities as more and more people suffer damages from them; this leads to social outcry loud enough to finally stir the regulator, who then finally acts, typically with huge delay and damages already suffered by many individuals. This is a summary of the typical cycle of business ethics failure anytime a new industry is born (Koehler, 2010).
4. Future Implications
The question is, then, what can be done to break the vicious circle of regulators lagging behind cunning industry pioneers and trying to pick up the pieces and put the train back on the tracks too late? In other words, how to prevent this from spiraling into a micro (or not even) crisis eventually (Arrington, 2009)? Although there is no such thing as a SWOT analysis of the customer or stakeholder in general, in this case society is in possession of a unique strength, available to the suffering consumer side for the first time in the history of new industries taking advantage of under-regulation. All these scams and scam-like side activities are happening nowhere else but within the framework of social networks. For example, Facebook tools like groups, causes, and events are very powerful and can take advantage of the very same viral marketing to protect users from the viral-marketing scammers. For the first time, the side with no bargaining power, the side always suffering from the lack of ethics in new industries – the regular consumer – has just as much potential power as the business abusing him/her. The question is will the consumers get organized against this, and if yes – how timely and how effectively.
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