ScamVille

Estimates of just how much money Zynga was making from these offers vary. The company's own executives dismissed it as a "mere" 20 per cent of their revenues, then revising the figure downward again to 10 per cent in a move which feels suspiciously like an attempt to downplay the importance of the whole scandal. Other sources peg the income from partner offers as being as high as a third of revenue, with some even suggesting that it could be as high as 70 per cent. For a company which has been (perhaps optimistically) valued at around a billion dollars, and which expects to post revenues of over $200 million this year, that's big money - even at the lower end of the estimates.

It doesn't take a great business mind, of course, to understand that scamming your consumers is not a fantastic long-term model. It essentially prevents you from building a loyal following, instead burning through consumers (which are not, contrary to what some business leaders seem to believe, a limitless resource) who, once mistreated, become disillusioned not only with your specific business but with the entire sector in which you operate. It's a quick way to make money, certainly, but also a certain way to limit your sector's growth.

The whole situation has been further compounded by Zynga's CEO, Mark Pincus, who appears to be a walking disaster in corporate communications terms. Not only did he address a meeting of entrepreneurs in which he proudly announced that he had done "every horrible thing in the book" in order to get revenues - and admitted that he "couldn't get rid" of a piece of malware which the company foisted on its consumers in return for some poker chips for one of its games - he allowed this to be videoed and posted on the internet. PR people reading may wish to pause at this juncture to slap themselves melodramatically in the forehead.

Needless to say, the whole situation has now developed into a series of pledges from Zynga not to do anything naughty ever again - none of which ring particularly true, especially in the light of earlier protestations that the scammy nature of the partner offers was none of its business - and a class action lawsuit being filed against both the company itself and against Facebook.

The fallout is likely to be limited, assuming Zynga can actually clean its act up. Even if the class action succeeds (which it probably won't), it is unlikely that it will seriously damage Zynga's revenues. But some damage has been done; consumers have become more wary, and some have left the industry entirely, while advertisers, too, have been disillusioned by the whole affair. If you're a big, reputable company like Netflix, why would you want to hitch your cart to the social gaming space when they have a track record of associating your good name with scammers and con artists?

The whole affair is an object lesson in how not to do new business models. The key watchword here is ethics - because while many of Zynga's ideas are fine, and its games are perfectly decent (albeit not terribly original, which has led to accusations that it ripped off other developers), its owners decided to leave any sense of business ethics or of responsibility to their consumers at the door when they started up the company.

That kind of behaviour is not uncommon, of course - but in the long term, it has the potential to be extremely damaging. Zynga got lucky; its scandal has not broken into the view of the public, at least not yet. The next company to try to fund its operations through underhanded dealing and sharp practice, however, may not find itself quite so lucky - and if that happens, the impact could be immense, not just for one company but for the entire casual games sector.