From my VERY BRIEF look at the system, and if what they say is true about how easy it is to integrate, I think small-time game developers or even medium-sized flash game developers would be willing to take this hit.

I say this because I honestly haven't ever played a flash game yet that had this sort of system (most likely due to the complexity of it, both in the backend and frontend), and if a small-time game developer can spend 10 minutes setting this up with Heyzap, then its money well spent (the 50% loss in revenue) since they'd probably not take the time to implement the feature themselves.

Of course big-time flash game developers probably won't be willing to use this system if their games are that popular or if they have the resources to dedicate to creating their own system.

yeah I think developers would prefer Kongregate's model better since they give 100% of revenue to the game developer.

Kongregate only offer up to 50% rev share on the advertising and if they offer 100% on the virtual goods part then its not a business model for them.

that's for ads, the tips go 100% to the developer

edit: it may not be a business model for them, but that's kinda the point. It makes Kongregate look more developer friendly.

HeyZap has a lot of risk and little competition. If the model becomes proven, other companies will jump in and drive down the margins.

Little competition? There are a TON of companies in this market space, many of them well established. Just off the top of my head: Super Rewards, Offerpal, Gambit, Peanut Labs, etc...

And those companies are already driving down the margins. Most of the players in the market offer a 75% cut at minimum.

EDIT: Looking at their CPA page now I see that they're implementing Gambit. Guess they're in the same boat.