Monetization Options For Facebook Application Developers

5/03/2008

In a couple of hours time I’ll be on the panel at the second Singapore Facebook Developers Garage, which features the topic: “Marketing and Monetization of FB Applications: Hype or Goldmine?”

The session moderator Bernard Leong has posted a kickoff post: Marketing and Monetization of Facebook: Prologue

If you’ve spoken to me or exchanged emails, you’ll know that I’m a pragmatist at heart. Having see the rise of the dotcoms and dot-crashes soon after, I’m certainly not in this application if the end result of facebook monetization is mere “hype”.

Talking to Jason Bailey, whom I’m helping to launch his $uperRewards FB monetization system, I’ve seen the applications and case studies of successful FB applications which are making $100,000 – $200,000 a month.

These applications are probably in the top 5% of Facebook applications that turn a profit and a huge profit at that…and the reality of any capitalist society is that you must benchmark yourself against benchmark yourself against the leaders, rather than the other 90% of Facebook developers who are merely scrambling to find two nickels to rub together…

A business must be able to generate positive cashflow and must be able to sustain a comfortable lifestyle for the application creators. Anything less and you’re running a charity.

Let’s break this down for a moment…

An “average” application might generate $10,000 to $15,000 a month, which could be fairly reasonable…until you break that $15,000 by 30 days, or $500 a day.

$15,000 a month or $500 a day, with an assumption of 50,000 daily active users means you are generating 1 cent per daily user…that’s pretty pathetic…

–

Instead, if you want to go big with Facebook Applications, you need to define your goal and reverse engineer the process.

I think $100,000 per month is a decent benchmark. (as a starting point…)

With an average of 100,000 daily active users that’s an average revenue per user (ARPU) of $1 per user per month.

Which is going to be hard to achieve if you’re using “traditional monetization” routes like CPM (pay per 1,000 impressions) or CPC/CTR (pay per click) methods like most applications are doing.

Some of Jason’s findings:

facebook monetization

Based on the BEST case scenario for a CPM payout of $2 per 1,000 eyeballs, that’s going to take a lot of churning to reach that level.

Adsense and other CPC measures could perform even worse with a $0.05 pay per click payout (with a clickthrough rate of sub-1%).

Here’re 4 other “traditional” monetization systems:

facebook monetization

You can pretty much expect all these to underperform because using these website monetization media to try to monetize off a dynamic application is like putting a motorcycle engine into a Ferrari…the $*#&@ thing just won’t fly.

Among the reasons why it doesn’t work…

Banner Blindness
Irrelevant ads being served up
Horrible CTRs
Zero marketing support
Low trust

The key factor is that these systems are prime examples of interruptive marketing.

Most application developers will shove these ads and banners at the top or bottom of their app as an afterthought…

So if your clickthrough rate is 0.05%, you’ll know why…

Instead to construct a commercially viable Facebook Application, the monetization systems need to be integrated into the application design. Do the equivalent of product placement where you see the BMW automobile or Omega watch in a James Bond movie. You can’t really do a Tivo timeshift out of that, can you?

Better yet, integrate your monetization system into the heart of your game logic and development process…

If completing an offer is part of the application, you’d be able to see the 75% CTRs that have formed the foundations of $uperRewards payouts…

superrewards

The above stats for $uperRewards applications $10-50 earnings per 1,000 daily active users. CPM of $50-300. CPC revenue of $0.15 – $0.20 with CTR of 75%.

For more information, visit: $uperRewards

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