Monetize Lab

Facebook could initiate good changes

April 23, 2008 – 11:18 pm

Mark Hendrickson wrote a interesting article on TechCrunch called “Facebook Platform Faces Rough Road Ahead, Despite Successes” that I would like to discuss some aspects of it a little further.

[…] The session started off with a disagreement over how much money developers are actually making through Facebook. Naval Ravikant from Venturehacks estimated that over $100M would be made in 2008, whereas Joyce Park of Renkoo and Matt Sanchez of VideoEgg predicted revenues as low as $10-35M this year.

All panelists agreed, however, that CPM rates on Facebook are miserably low, perhaps averaging 15 cents. Developers have begun experimenting with other sources of revenue, such as the sale of virtual goods and premium services, but advertising still generates more than 80% of the platform’s revenue.[…]

The way I see is that when things start to get uncomfortable is when new ways of thinking appear. The advertising formula of the old web doesn’t work anymore. Everyone is trying something new and is just a matter of time. Look at Beacon, it is a amazing idea if you think about it. Yeah, it has all the privacy issues and it is actually pissing users off but at least is a new way of thinking. Really soon other ideas will appear and soon enough we will be in front of a new and efficient advertising model. Who will profit with it?

[…] Despite the shift away from low engagement apps, the platform will remain the most attractive economically for independent developers. Small teams can crank out applications within days and earn decent paychecks, but large companies only have a handful of opportunities to make worthwhile returns on their investments. Ravikant made a point to discourage multi-million dollar investments in Facebook app developers, citing the difficulties associated with monetizing and maintaining a strong user-base. The sense I got, however, was that independent developers will also face hard times, since traditionally they don’t deploy high engagement apps. […]

Honestly, every time I see someone saying that there is easy money to be made I feel the urge to RUN. It always sound like paid late TV. Yes, there is money to be made and yes small teams can do it but most of them will fail.

I really like this buzz because I know it can generate new ideas. It is a lot of people in a uncomfortable position. If I was a Facebook developer I would be spending all my hours trying to monetize all my traffic. The CPM of Facebook right now is around $0.15 a small but smart change can easily double, triple that.

Change the approach people! The problem is the approach!!