The Zynga-Offerpal fiasco seems to be coming a full circle. Zynga just pulled out ALL offers! That is incredible. In what other industry could something like this happen so quickly without government intervention?

What is really interesting is tracing through the events to see why companies would choose to auto-regulate themselves. Are they doing it out of kindness? I don't think so. I would argue they are doing it out of competition's sake. But wait, I just said Silicon Valley was special as if these companies were taking action for moral reasons? Kind of.

You see, Zynga has a bunch of competitors in Playdom, Slide etc. In other industries, once you find a way to make a tonne of money, all your competitors jump on it too. You have a silent agreement to con the crap out and not report each other. It's game theory where most of the parties that matter choose to cooperate to suck out money. In Silicon Valley, there is less of that it seems. We have companies that compete with Zynga that refused to take part in the scammy ways of generating revenue. Over time, this causes these companies to (a) be at a huge cash flow disadvantage to their competitor and (b) tell on their competitor.

This is what happened here. I think Zynga's competitor that out of moral reasons chose to stay out of the scammy stuff told their high-leverage friends like Arrington the full deal. Arrington goes live with the story. Now Playdom/Slide etc.'s once-at-advantage competitor in Zynga is forced to significantly scale back on a very profitable(but bad) source of revenue.

Had Slide/Playdom cooperated with Zynga etc. to make money via these fishy offers, I doubt there would this massive change in the industry so quickly.