Where’s the easy money on the internet today? Facebook applications, if you are to believe Chamath Palihapitiya, the company’s vice president of marketing and operations.
As reported by News.com, Palihapitiya told attendees of the TiEcon conference in Santa Clara that Facebook’s platform is turning the company into a sort of “cable company” which carries “social information and engagement information about people.“
Using terminology that even Ted Stevens could understand, he stated:
“That plumbing should exist around the Internet, and then what happens is that people can create truly social experiences on the Web. As long as we can build the plumbing for this, we view that as a success.”
According to Palihapitiya, this metaphorical plumbing is creating huge opportunities for entrepreneurial plumbers who are willing to work with the pipes of Facebook’s application platform.
Palihapitiya proudly disclosed that a self-reported survey of Facebook application developers revealed that 33% of Facebook application developers reported “profits of up to [emphasis mine] $500,000 a month.“
Getting the opportunity to earn up to $500,000 a month only requires 2 to 15 weeks (the average time it takes to develop an application) and then…
…”all you need is one person to like it, one person to be an advocate of it, and then their friends find out and engage in that.”
Of course, anybody who would be so naive as to compare his company to a “cable company” (most of which have less-than-stellar reputations with consumers) should probably be given a strange look.
The common sense response to Palihapitiya’s rosy sales pitch is ‘if it sounds too good to be true, it probably is’.
While there is no doubt that there is some opportunity for Facebook application developers, for the average developer, it’s far from a “get rich quick” proposition.
Beyond the fact that long-term viability of applications as advertising platforms is questionable, there are a number of significant reasons to doubt the long-term potential of the Facebook platform itself.
The low barriers to entry in developing Facebook applications means that there are a flood of applications and few specific applications have any “defensibility.”
Most are designed and used for entertainment and while there’s nothing surprising or inherently bad about this, it’s hard to argue that most of these “novelty” applications imbue significant loyalty.
In the eyes of many, Facebook’s platform has become a platform for “spam,” causing some to beg Facebook to stem the tide. The measures Facebook has taken to do so, of course, make it more difficult for applications to achieve viral growth.
Of course, the truth is that the average Facebook application doesn’t gain massive adoption and it only takes a quick survey of active user numbers at Adonomics to see that the vast majority of applications are quite unsuccessful. Recent trends indicate that, on a macro level, “application fatigue” has definitely set in.
But perhaps the biggest blow to Palihapitiya’s “get rich quick” marketing spin is the fact that it appears the hype has worn off for would-be application developers, according to an interesting analysis by Adonomics creator Jesse Farmer.
After “noticing that the level of activity in the Facebook developers forum was dropping sharply,” he investigated further and found that “the activity level of the Facebook forums is a fraction of what it was at the beginning of 2008.“
In April, there were 51% fewer daily posts, 29% fewer daily signups, 44% fewer daily threads, 27% fewer active users and 47% fewer highly active users than there were in January.
He concludes that “the vitality of both the Facebook developer community and the Facebook platform is not what it was even four months ago, and that these two phenomena are closely related.“
And in a statement that would probably make Chamath Palihapitiya cringe, he advises:
“It boils down to this: investing most of your man-hours into Facebook at this point in time is a mistake. The potential return on that investment, a year after launch, is a fraction of what it once was. And the fact that Facebook continues to change the rules and selectively break them for their own benefit means the risk is comparatively higher.
“It is better to branch out into other social networks or to piggy-back on Facebook as a means to establish your own, more independent social network. This is what the top companies like Slide, RockYou, Zynga, and SGN are doing, and what many of the independent Facebook developers I’ve talked with want to do.”
Clearly, this doesn’t bode well for a company that is pitching entrepreneurial software developers on the potential to earn “up to” $500,000 per month and that dreams of being the cable network of the internet.
Those budding application millionaires itching to set up their UBS accounts should probably keep their day jobs and Mark Zuckerberg might want to ask what the return policy is on the $100m worth of servers he plans to purchase.