ON REAPING THE VALUE OF A FACEBOOK USER

DEJA VU

Michael Arrington has a post with a provocative headline "How much is a Facebook user worth?  At least $0.30".  He goes onto cite 3 nascent, and different ad monetization and network experiments by various application developers on Facebook, and then focuses on the third one:

"RockYou has been quietly testing their own idea of an advertising network - selling “users” to other applications. They’ve had a tremendous amount of success building viral applications on Facebook so far. Their Super Wall app, for example, has nearly 3 million users and is adding hundreds of thousands of new users each day. It’s basically what it says - a better “wall” where friends can leave messages. With Super Wall, people can add pictures, video and other rich media.

They’re offering to promote third party applications on Super Wall, and charging on a per-user-acquired (CPA) basis. When a user is signing up for Super Wall they are asked if they’d like to also add a additional application (the advertiser). See the screen shot to the right (click for large view).

The test so far are going very well. CEO Lance Tokuda told me today that they moved $30k in inventory in just four hours. They are testing various price points, but the low end seems to be around $0.30 for each user they sell to another application, and they believe they can get as much as $1 over time. The effective CPM (or revenue per 1,000 pages) is a “multiple of $20″ he says. This make them possibly the first Facebook application to have found a real way to monetize users and pageviews."

Very intriguing stuff, recognizing of course that these are relatively small experiments, and not necessarily representative of an ad network effort at scale.

The big question here of course is why can't Facebook do this themselves? 

Why allow hundreds, if not thousands of developers build and propagate ad networks that can rake in millions?

A quarter of a century ago, a little company like Microsoft had a similar dilemma.  What to do when third party developers have application hits on their operating system platform, MS-DOS? 

Well we know what happened when Wordperfect and Lotus 1-2-3 became hits.  We got Word and Excel that became the market leaders over time.

This time around, it's not just third-party applications on one's platform that can get quasi-cloned by the platform owner.

It's potentially the advertising/monetization businesses as well.

Comments

[Jean-Marie Le Ray]

Hi Michael,

Nice point of view, anyway where/how do you get "that a search on Google is worth roughly $0.12 and a search on competing search engines is typically worth less than $0.08"? It's the first time I read these figures so I'd like to understand it better :)
Thanks,
Jean-Marie