Facebook maturing as a platform

I was pleased to read on Techcrunch yesterday a report on the the Web 2.0 Expo entitled Facebook Platform Faces Rough Road Ahead, Despite Successes – it is good to see some reality kicking in.

It seems the conference is concerned about the fading performance of early star Facebook apps (e.g. Zombies) and by the way that Facebook is cutting back on application spam:

The panelists also agreed that Facebook’s recent moves to block viral distribution channels have made life harder for the developers of low engagement apps such as Slide’s FunWall. These apps suffer most because they depend on Facebook’s viral channels for their adoption, having given users little reason to invite their friends proactively.

Rather than being concerned, I see this as a positive development. As any user of FB will know invite spam was ruining the experience and low engagement apps are by definition not that interesting. In a sense all Facebook is doing is demanding higher quality apps from developers, which is obviously a plus for the overall health of the platform.

The panel also made this point, although in a slightly different way:

In the long run, more engaging apps such as Scrabulous are set to do better not only because they attract more dedicated users, but because they  rovide better opportunities for direct monetization, even if their CPMs are also quite low. Ravikant made a point to say that travel, dating, book, and game-related apps have the brightest futures whereas “everyone else is kinda screwed”.

I think what we are witnessing here is Facebook growing up. The future of Facebook apps, and probably the company itself depends on our collective ability to produce the kind of high engagement apps that will keep us all coming back for more. The bumps in the road are a by-product of FB’s recognition of this point. The flip side of encouraging high engagement apps is penalising low engagement apps.

This analysis applies equally to all other horizontally focused socnets – and, as I’ve said before, I think this is why they are all embracing open strategies.

One other piece of (potentially) interesting information in the Techcrunch post is predictions of revenues to Facebook app developers this year. They ranged from $10-100m+ – i.e. not much (particularly in light of Slide’s $500m valutioan). Further, as RealityCrunch points out “when people are trying to convince you there is money being made, run the other way”. Note though, that these predictions are focused on low engagement apps as the higher engagement apps are still new to the scene.

  • I agree with your thoughts, and I go back to what I wrote on Facebook 6 months ago here:

    http://broadstuff.com/archives/484-What-you-have-to-believe-to-value-Facebook-at-15bn.html

    And I was calculating on $1 CPM to be generous, whereas $0.15 emerged yesterday as more like the mean CPM.

  • I agree with your thoughts, and I go back to what I wrote on Facebook 6 months ago here:

    http://broadstuff.com/archives/484-What-you-have-to-believe-to-value-Facebook-at-15bn.html

    And I was calculating on $1 CPM to be generous, whereas $0.15 emerged yesterday as more like the mean CPM.

  • nic

    Tks Alan – I agree, nothing new here in terms of analysis, the noteworthy thing is that the world at large is starting to buy into it.

    And from what I’ve heard I would guess that the mean CPM is well below $0.15

  • nic

    Tks Alan – I agree, nothing new here in terms of analysis, the noteworthy thing is that the world at large is starting to buy into it.

    And from what I’ve heard I would guess that the mean CPM is well below $0.15

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  • nice post.

    indeed, after several years of building the trafic via honest-or-not mailings, maybe this movement will convince some original heavy users (that left) to come back. After all, the fashion hype will start to dissapear, so they must keep increase the added value.

  • nice post.

    indeed, after several years of building the trafic via honest-or-not mailings, maybe this movement will convince some original heavy users (that left) to come back. After all, the fashion hype will start to dissapear, so they must keep increase the added value.

  • Hi Nic,

    Good post – it’s been really good to watch Facebook tighten up its spam rules over the past couple of months, not just as a user, but also from a business perspective. As you say, making it harder for spammy, low engagement apps also makes it better for high engagement apps – with obvious benefits for companies or communities who provide this.

    I’d also point out that advert monetisation isn’t the only route – click-through rates will always be low on social network applications, and in fact the more you engage a user the less likely they are to click away. However, this engagement can be of huge value to brands in and of itself, and I expect that we’ll see many more sponsored apps and applications created exclusively for brands.

    Josh

  • Hi Nic,

    Good post – it’s been really good to watch Facebook tighten up its spam rules over the past couple of months, not just as a user, but also from a business perspective. As you say, making it harder for spammy, low engagement apps also makes it better for high engagement apps – with obvious benefits for companies or communities who provide this.

    I’d also point out that advert monetisation isn’t the only route – click-through rates will always be low on social network applications, and in fact the more you engage a user the less likely they are to click away. However, this engagement can be of huge value to brands in and of itself, and I expect that we’ll see many more sponsored apps and applications created exclusively for brands.

    Josh

  • nic

    Tks Josh. I agree with your second paragraph, although I somehow suspect that apps commissioned by brands will not turn out to be high engagement, or not that many of them anyway. I would guess the model is more likely to evolve along the lines of product placement or in-game advertising, where brands compete to become associated with high quality content.

  • nic

    Tks Josh. I agree with your second paragraph, although I somehow suspect that apps commissioned by brands will not turn out to be high engagement, or not that many of them anyway. I would guess the model is more likely to evolve along the lines of product placement or in-game advertising, where brands compete to become associated with high quality content.

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