Facebook may have 75.5 million monthly visitors, but the world's most popular social network is not getting by on advertising alone. This month, estimates for total revenue from applications will be roughly equal to Facebook's profit through advertising. And it seems like Facebook is looking for cash in on that lucrative market.
According to AdAge:
Facebook is testing a payments system with some of its developers that would enable one-click buying of virtual goods and services on the Facebook platform, with Facebook taking either a percentage of the transaction or a flat fee. In addition, Facebook is testing a service to allow users or advertisers to buy and trade "credits" or a virtual currency to facilitate commerce. Spokesman Brandon McCormick said three tests of the system will commence in the coming weeks.
Facebook expects $500 million in ad revenue for 2009, and AdAge estimates that the collective revenue for Facebook develeoprs to be between $300 million and $500 million.
Lisa Marino, who runs West Coast business development for RockYou, told the publication that developers will earn money from Facebook this year primarily from three areas: virtual currency, branded sponsorships and ad-network inventory. "These are three strong revenue models that Facebook isn't participating in but that might overall be bigger than what Facebook brings in revenue."
It makes a lot of sense for Facebook to hedge in on the money others are reaping from its profitability. Social mediea advertising remains a rather unreliable revenue stream. Twitter's Biz Stone today even stated today that his company is not going to bother pursuing an advertising model, which points to a softness in the social media ad space.
Facebook suffers from this problem. It may be the most popular social network, but Facebook users are notoriously stingy with their clicks. Display ads on Facebook are cheap, and while Facebook's engagement ad model encourages more interaction from users, the click through rates remain low. Most of Facebook's current advertising revenue comes from a pre-existing deal with Microsoft.
While some of the applications on Facebook use advertising, many earn money from micropayments from users who want to get ahead in their games or purchase goods to play more. While the general advertising market remains soft, it makes a lot of sense for Facebook to branch out into other streams of income, especially if social media advertising never makes it to the pay day that many in the space would like to see.