Sunday, August 26, 2007

The Facebook economy

Four ways to make money

1: Sell ads

The play

about any Facebook app can get into the ad game, but only those with
the biggest audiences will earn serious money. Several easy-to-use ad
networks are already delivering the ads for a cut of overall sales.(See
"Tools," below.)

The front-runners

Graffiti (5.9 million users). This highly viral drawing tool spread quickly because of its simplicity and originality.

iLike (5.4 million users). Users can set up their music and video libraries in mere minutes.

The Simpsons Photos, Quotes, and Trivia (60,000 users). Pearls of wisdom from the first family of Springfield.

The payoff

currently generate less than $1 for every 1,000 pageviews. But that
amount will likely increase as demographic targeting becomes more
refined and the ad models move from simply racking up pageviews to
measuring users' engagement.

Tricks of the trade

Establish your base. Hold off on serving ads until you have at least
10,000 users. Bombarding users with too much advertising can scare them
away and hurt your growth in the long run.

2. Test different ad
networks. Putting up ads is a simple cut-and-paste operation, so you
can afford to be choosy and pick the network that gives you the best

3. Don't clutter up app pages. "This is definitely a
challenge for developers," says Mark Kantor, one of three developers
behind Graffiti. "The most important thing is to preserve user

4. Renegotiate as you grow. Demand a bigger cut of
the revenue share as your traffic jumps. Says Kantor, "It might be
better to go with a small ad network if you think you'll stand out."


Dozens of ad networks are cropping up to serve the Facebook developers. Here are a few.

Lookery ( This new Facebook-specific ad network aims to
offer developers demographic profiles of their user bases. More
targeted advertising could soon fetch a higher price.

Userplane ( AOL-owned Userplane pays per minute of
exposure rather than just per pageview, so it's good for applications
like games that keep users highly engaged.

3. Google AdSense. Not new, but many developers consider it the best means of supplying relevant ads.

2: Attract sponsors

The play

are already sponsoring apps. Besides being widely used, your
application needs to offer companies a natural way to interact with
their customers.

The front-runners

Likeness (2.9
million users). Offers quizzes that generate top-10 lists - an ideal
branding vehicle - and matches them with those of friends with similar

FoodFight (2 million users). Virtual lunch money
buys you food to throw at friends. Next up on its menu: chicken wings
from a major food chain.

HotLists (1.6 million users). This app
lets users define their personas by posting brands' logos, cleverly
dubbed "stylepix," on their profiles.

The payoff

direct relationships with brands takes more time and effort, but it
means higher-quality advertising and more control over how your users
interact with it. Expect to earn multiple-dollar CPMs instead of the
pocket change you'd get from the ad networks.

Tricks of the trade

Don't pitch big brands without big numbers. You'll need a large traffic
base - at least a few million users - before top brands will pay

2. Know who's looking at your pages and why. Analyze
your user demographics so you can pitch your audience effectively to
sponsors.(See "Tools," below.)

3. Let your users do the work. Incorporate brands that your users identify with, and they'll willingly spread the word.

4. Don't overdo it. Too much brand presence will scare away Facebook's sometimes advertising-averse audience.


Where to find help analyzing your traffic and users.

Google Analytics. Embedding Analytics into your apps is easy, and it
churns out useful stats about where users are coming from.

2. Gigya ( This startup tracks metrics like app stickiness and user adoption rates.

Appaholic ( This site tracks traffic growth by the hour,
day, or week - critical when launching a new ad campaign.

3: Sell services

The play

apps become more about utility and less about fun, opportunities will
arise to sell digital services of lasting value to users. Eventually,
they'll make purchases without leaving their profiles.

The front-runners

(43,000 users). Offered by, this online file-storage service
turns a Facebook profile into a repository for members' digital media.

(206,000 users). A Facebook version of Photoshop.(Hello, Adobe?) Basic
tools are free; advanced features are offered for an additional fee.

The payoff

you're selling a real service, then you can have your cake and eat it
too- try selling subscriptions and ads to double-dip on your traffic.

Tricks of the trade

Start with a free version. And make switching to a paid offering an
easy process. Don't force users to leave Facebook to sign up.

Set logical limits. Decide carefully what you'll give for free and what
you won't. And even the freebies must be valuable enough for customers
to be willing to spend their time.

3. Research your price
points. already had storage plans for businesses and
professionals. But when it moved onto Facebook, the company rethought
its pricing models and created a $25-per-year plan that's comparable to
the cost of an external flash drive - the way most college students
store important files.

4. Be tactful and timely. alerts
its users when they're nearing their file or storage size limits,
politely reminding them about its for-pay premium service.


Where to find a platform to process payments.

1. PayPal. A starter plan will cost you 2.9 percent plus 30 cents per transaction.

2. Google Checkout. The standard processing fee is 2 percent plus 20 cents per transaction.

3. Facebook. The company is rumored to be launching its own payment platform soon.

4: Sell products

The play

Facebook increasingly becomes the center of people's digital lives,
it's also becoming a venue for selling things - digital and otherwise -
to its fast-growing audience.

The front-runners

Amazing Giftbox (127,000 users). Sends virtual Amazon merchandise.

Band Tracker (29,000 users). Searches upcoming concerts and links to ticket vendors.

Visual CD Rack (20,000 users). Lets users browse and buy music from a virtual CD rack.

The payoff

developers are going the affiliate route, offering product wish lists
and then sending users to sites like or iTunes. Others,
however, are directly selling such items as ringtones and T-shirts.

Tricks of the trade

Be a middleman. iLike makes its music-sampling apps simple and hands
off sales to iTunes or Amazon via affiliate partnerships. Those
directly selling hard goods need to prepare for the complexity of
payment and delivery.

2. Keep it simple. Facebook has not yet
become a place where people are likely to buy, say, a digital camera.
But users are starting to purchase items that don't break the bank and
extend Facebook's utility. XLR8 Mobile, for instance, is looking to
sell ringtones and wallpaper on Facebook via custom storefront widgets.
"We don't want to bring people to the store," says XLR8 Mobile CEO
Perry Tell. "We prefer to bring the store to the people."

Give it away. Going viral is always the goal. One great way to get
there is by offering free samples. Whether it's a digital download of a
song or the image of an item, give your customers a taste of what
they'll get before asking them to commit.

4. Don't rule out the
odd. "Sometimes wacky, unusual, off-the-beaten-path stuff sells huge,"
Tell says. "Everyone is looking for the next Crazy Frog, so you must be
willing to try lots of things."


Clearspring Technologies. This analytics service tracks exactly who's
downloading an app and what they're buying through it. It also suggests
when to double down on an item or sales approach that is working or,
conversely, kill off those that aren't.

2. Garage Sale. Developers can use this Facebook shopping cart system run by, which takes a 5 percent cut of sales.

3. Facebook Marketplace. The largest classified-ads community on the network, it's a good place to monitor buying trends.

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