As of writing this entry there are nearly 3000 polished Facebook applications developed for the F8 Facebook developer’s platform, but only a very small number of those applications were developed with the intent of earning revenue.

The Challenges of Facebook Application Monetization

• Contextual Advertising Does Not Work
  Steve O’Hear, a social networks and Facebook blogger for ZDNet, brings to light that Facebook suffers incredibly low click-through rates for advertising campaigns (0.04% per 1.4 million impressions) thus ruling out the lazy-man’s monetizing option, contextual advertising campaigns like Google AdSense.As though abysmally low click-through rates weren’t enough to deter one from employing AdSense Jawad Shuaib the author of the most prominent monetized F8 application, “My Favorite Books,” writes:

  Part of the reason is that Facebook does not allow developers to embed JavaScript within their code; hence making it difficult to enable Google Adsense for the content. Moreover, as is the case with MySpace, contextual advertising is not targeted enough to earn sizable revenues.

  I’ll be the first one to thank Facebook for sparing us from a barrage AdSense bulk on all of my friends’ pages.

• Facebook Users are Suffering from “Facebook Application Fatigue”
  When I began telling some of my fraternity brothers and friends that I was developing a Facebook application, the first thing I got was a long groan and something along the lines of “not another %^#@ing Facebook application!” Apparently, this is not just a phenomenon localized to Vanderbilt students; a handful of bloggers are reporting the very same frustrated sentiment.Facebook users want a limited number of apps visible on their profile page. This means that your application will not only be competing with applications within similar domains, but your application will also be competing for precious real-estate space on every individual user’s Facebook profile page.I will be doing a post dedicated to the causes of “Facebook Application Fatigue” in the very near future.
• Large Number of EntrantsThere are nearly 3000 published applications available for Facebook users so it has become very difficult for great Facebook applications to get noticed. It is no longer just enough to simply “add” a Facebook application to the directory and wait for the users to come rolling in; you have to actively reach out to Facebook users and get them to adopt your application willingly.This is especially true given how long the wait delay is on the Facebook Application directory.In order to get users, you are going to have to make your application stand out above the competition. No one will adopt it simply by virtue of its existence.
• Most Facebook Applications Fail to Create Additional Value Facebook is not a “content” service so much as it is a “communication” service. People do not log-on onto Facebook to read RSS feeds, get the latest weather, look-up movie times, and such, as those services are not inherently conducive to Facebook’s function as a communication medium.Applications such as iLike (favorite songs, music videos), Graffiti (MS Paint tool for wall posts), and Video (upload home videos and tag your friends in them) are all popular examples of applications that are conform to Facebook’s original intent.The problem with most application designers is they view user-service interaction as “content” production. The fact of the matter is, Facebook is not user-service interaction, like how Google is, but it’s all user-user interaction with the service acting as a communication link. When a user lists his or her music or film preferences on Facebook, it is for the express purpose of communication those interests to his or her peers, not so random people on the Internet can look them up and say “Oh hey, I like Boondock Saints too!”

Designing a Facebook Application with Monetization in Mind

• Remember Facebook’s Ultimate Purpose - Communicate!
  Avoid the traditional downward spiral that most Facebook application developers fall for - FACEBOOK IS NOT ABOUT CONTENT. It’s about communication. Here are some ways that you can design your application to perform a “communication” versus a “content” service:
  1. Design your application to publish interests that currently are not served adequately by Facebook or other existing applications. My Favorite Books is a great example of such a service; it is essentially an upgrade to the existing “books” section on Facebook. iLike on the other hand publishes song and music video preferences, which weren’t available on Facebook at all prior to the F8 release.
  2. Design your application to create innovative forms of peer interaction that are not currently available to Facebook. Graffiti and Honesty Box are both new ways of communicating to your friends on Facebook. Honesty Box allows you send receive and send anonymous messages and Graffiti allows you to send and receive graphical messages; neither of these services were available before.
  3. Design your application to establish unique relationships with other Facebook users. Top Friends and Greek Family Tree are examples of popular applications used for establishing relationships between groups of users; while Top Friends publishes generic relationships, Greek Family Tree focuses on specific Greek organization hierarchies between older/young siblings.
• Release a High Quality Application Tomorrow Versus a Medicore One Today
  Facebook users are fickle. It comes with the territory of catering to college and high school students. Users pick up and dump Facebook applications all the time; just because iLike is the number one song and music video application today does not guarantee that it will be that way in three months. An application that is
  1. Easiest to use
  2. Occupies the smallest amount of profile space
  3. Provides distinctive communicative value
  4. Is easiest to install and set up
  5. Provides the highest quality of service

  will prevail over the competition so long as those points remain intact. So don’t rush your application for the sake of “being first.” Instead, take as much time as you need to “be the best.”

• For Interest Publication Services: Find Referral Services to Sell Related Products
  The key to My Favorite Books‘ profitability is its incorporation of an Amazon.com referral system. If you’re browsing a friend’s Facebook profile with the application installed, you can follow a link to purchase any of the “favorited” books from Amazon.com, and in the process, earn the My Favorite Books developers a 4% commission on the sale.This is a very simple and easy model to follow. Just find a good referring service for your domain and use affiliate links on all of the interests.
• For Communication Innovations: Charge a Small Usage Fee or Subscription
  This is the model that Facebook employs to for its Gift service; charge a $1 fee for a small graphic of a “gift” to appear on someone else’s page? Well if you have a million users give each someone one gift each, you have yourself a pile of cash.Facebook application developers should not shy away from charging people to use the service; if you charge a reasonably low rate (like $1 per gift), that will not deter people away from using it. If I were the developer of Honesty Box, I would have employed this from its inception. The notion that the entire Internet economy should be supported by AdSense and Amazon.com referral links is wrong. In addition by making your service exclusive to paying users, you will help keep your costs down.Make sure you incorporate a free demo to a number of users during your initial opening, or keep a free, limited version of your service around for the sake of enticing users to users to your subscription or free based service.
• Get Relevant Sponsors
  If you run an application dedicated to sharing your favorite Entourage quotes or Lost theories, getting a sponsorship advertisements for either of those shows is a no brainer. Users who have that app would probably be interesting in clicking on an advertisement for either of those shows; the hard part is getting the ads in the first place!

If you have any suggestions, please leave them here. I have more ideas on monetization ideas but they’re just so good that I need to keep them for myself :p. Stay tuned for when I release my own application in the upcoming months

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