In the platform wars between Facebook on the one side and MySpace, Google, and the whole OpenSocial crew on the other, the side that makes it easier for application developers to make the most money will win. Advertising in social networks has always been problematic, and with an advertising recession upon us those already-low ad rates are going to get lower, not higher. The other way to make money on these platforms is to try to charge for apps themselves or sell things through the apps. But to do that developers first need a payment and billing system to tap into.
Less than an hour ago, MySpace COO Amit Kapur revealed at the Web 2.0 Summit that MySpace is working on its own payments and virtual gift products that MySpace developers will be able to add to their own apps.
Facebook has its own virtual gifts, but has not yet opened that to developers. (Although there is a gift economy inside Facebook powered by other companies). And Facebook has been rumored to be working on a payments system since forever.
iPhone’s App Store has proven that, at least on mobile phones, people are willing to pay for apps. Bringing that model to social networks could work if the quality of the apps goes up and the number goes down. One problem with Facebook and MySpace apps is that there are too many of them. there are no barriers to entry. Charging for apps, or trying to sell add-on services through them, would force the startups and developers creating them to build something that people are actually willing to pay for.
And it is not just the developers who are in a sudden rush to figure out how they are going to make money. Facebook and MySpace are also under more pressure to ramp up revenues these days.
The challenge to switching over to such a model from the current free-for-all is that the value of many of these apps is directly correlated with how many people use them. (More specifically, with how many of your friends use them). The minute someone charges for an app, the adoption rate goes way down. So some aspect of most of these apps will likely always be free. But the ability to charge for extras or for a more fully-featured experience might actually result in better apps being produced.
In any case, the race is on to provide alternative revenue streams besides ads to app developers. Will MySpace beat Facebook to the payments party?
(Photo by Paul Falardeau).
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Totally biting FaceBook…
It’s about time. Monetizing via micropayments of virtual goods is going to be a much better option than serving ads or getting users to complete offers.
Hmm … I must have heard Amit incorrectly because I recall that he said virtual gifts and advertising were two of the primary sources of monetization.
I spoke to Amit after the talk to confirm, and he did.
Smart move by MySpace. The developer activity on their platform has ballooned over the last several months, and from what we’ve experienced, virtual goods and virtual currency has proven to be very lucrative: to the tune of $75/day/1,000 DAUs.
http://www.insidefacebook.com/.....pace-apps/
this is great!
Mike,
You have got to be kidding me ! NO way Chris gonna let folk get that gUaP on MySpace. Why you running game for? (smile) Wait till you peep game on the punchline title on my blog post talkin’ bout Ol’ Techy TechCrunch…(smile)
lol
Puters Put’n….
I put the wrong link to the post talking about you on the last comment. Here’s the correct one. Hope you get a great laugh. Perhaps next time you’ll reply to me on MySpace Mike….(smile)
Shawn
“MG”
Will MySpace beat Facebook to the payments party?
they gonna keep sharing the cake since they don’t satisfy the same needs
I feel like Bill Murray in Groundhogs Day at this point. Here’s how every day goes:
–Some ‘web 2.0′ company announces they’re getting into payments
–Some blowhards (techcrunch, d mcclure) talk about how it’s the biggest thing ever (in caps and colored fonts of course)
–Said payment system never materializes (see Facebook) or comes out and can’t be given away (see Google)
I think PayPal’s overall incompetence lulls these other companies into thinking they can do it too. But they can’t. Which is a shame, because some real competition and innovation would be good. But alas, I’ll guess I’ll have to be content to wait for the next big (and doomed for failure) announcement about the next payments system.
Create a payment system is may be not so easy. Why don’t they make a deal with an existing payment system like Obopay, Amazon Payments, etc ?
Facebook kicks ass.
http://vidsonly.blogspot.com
I believe the Asian social networks and gaming companies use this to great profitability. Its about time facebook got into the action.
Will Myspace kill the Adsense Earnings?
never happen
Agree with some of the comments here. Banks to banking, online payment companies do payment. Social networks do people and relationships. With xxxmillion users, FB, MySpace could cut a fantastic deal with someone like Moneybookers.com. The first social network to do this gets the jump on the others, whilst the payment provider leaps into the limelight right up against PayPal. Surely a good thing.
In terms of users willingness to pay…my feeling is that FB has enough engaged users messing regularly with already installed apps, Wall, Zombie… It shouldn’t be to hard to convert 0.3% - 0.5% of these app users to ‘add-on’ a must have feature for $1-$2. From there it should seed as members friends will want the cool features too. This surely has to be led by Slide or one of the big boys.
Social network subscribers are increasingly becoming more important than ever before especially in monetary value.
http://www.nichea.info
I agree with you.
http://www.memoments.info
And I also agree with you.
http://www.iamacommentspammertoo.com
I think it will take a long time to happen.
http://tech-blog-4u.blogspot.com
If MySpace engage their users to buy digital goods like Cyworld did, they will have very good sales because their huge user base.
It will be exciting to watch how MySpace will try this. Cyworld had success but relatively only in South Korea. MySpace is bigger and much more internacionalized.
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You can already send virtual gifts @ http://www.giftd.com. This stuff is already happening.
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