Today at OpenSocial’s first birthday event, a group of press, developers, and members of the OpenSocial team convened to discuss the future of the platform. Of the many topics discussed during the roundtable, perhaps the most pressing was the issue of monetization – many developers are simply unable to convert their users to a steady stream of revenue. And while OpenSocial’s Director of Engineering David Glazer admitted that he didn’t know the answer, he predicted that within the next year we’ll see a standardized payment platform integrated into OpenSocial. And with that, we may start to see more of these applications transition into viable businesses.
Since the launch of Facebook Platform (and the subsequent launch of OpenSocial on MySpace, Hi5, and many other social networks), application developers have struggled to convert their userbases into steady revenue streams. Advertising has seen some success (spawning companies like SocialMedia), but very few apps have been able to successfully implement any kind of transaction or micropayment system.
Much of the problem can be attributed to the fact that there is no consistency between payment platforms – users typically have to reenter their credit card information for every app, which is both a hassle and also increases potential security risks. What we need is a unified system, where users enter their information once and use it across any application. Facebook (which is not on the OpenSocial platform) annouced plans to roll out a micro-payment platform back in March, but it still hasn’t materialized.
Now it sounds like OpenSocial will have its own system – one that could potentially work across every social network that supports that platform, including MySpace, Hi5, and Orkut. Glazer explained that he suspected someone would figure out how to effectively implement a monetization system into the standard, allowing developers to call on standardized hooks to securely deal with financial information. Having a ubiquitous microtransaction system would significantly lower the barrier associated with spending money on these apps, which would likely be a boon for developers. Many developers will still struggle with establishing user bases in the first place, but those that can will no longer have to rely exclusively on banner ads to pay the bills.
Of course, this assumes that every participating social network would fully implement the monetization standard, which is by no means guaranteed. But if it did happen, the scenario would leave Facebook as the odd man out – one of the only major social networks to use its own proprietary payment system (if it ever releases one at all). Don’t be surprised if Facebook rushes to be first out the gate, which would make it look like an innovator rather than the holdout.
“… To Finally Monetize Within The Year”
Keep on dreaming Jason. Unfortunately, we’re entering tough economic times and it will be 100 times harder to monetize in 2009 than it is now. So if they haven’t monetized by now, the chance that they’ll monetize later is approaching zero.
I think that people will still be willing to drop a dollar or two at a time for virtual goods or whatever else these apps come up with. Especially the teen/tween crowd.
i’m bearish on finding a solution next year. It’s one thing to buy useful mobile apps on my iPhone, especially when I know the payment is going straight through my iTunes, but purchasing web apps is not going to be an easy adoption for the masses. I hope it happens though.
I think the value of what you get for that $1 is going to have to improve vastly beyond some Christmas tree icon you gift to someone. I think the time is ripe for alternate virtual currencies to take root.
If opensocial creates a micropayment api system that all myspace + users are automatically subscribed to, paypal will be in a world of hurt.
opensocial micropayments has the *potential* to be the 2009 service of the year.
Does anyone want to buy my OpenSocialSystem.com domain name?
How about $20 and I’ll cover the domain ownership transfer fee?
I an app developer and have been using Rawclix to monetize my FB apps since their launch in June ‘08. I have been receiving a solid $2 eCPM for for the last 5 months or so. I receive weekly payments every Monday, and they have never been late. The support is outstanding, and they really seem to care about each of their customers. If you haven’t already, you should give them a shot and see for yourself.
So they waited to take off the free mask?
NOt bad, as long as they dont charge me too much, i am ok.
“David Glazer admitted that he didn’t know the answer, he predicted that within the next year we’ll see a standardized payment platform integrated into OpenSocial. And with that, we may start to see more of these applications transition into viable businesses.”
1. Set up Web 2.0 site
2. Enact standardized payment platform
3. ???
4. PROFIT!
Listen: if people want to buy stuff, they will buy it. A little bit of “hassle” is NOT going to get in their way.
That may be the case with larger purchases. But with impulsive buys, the easier the better.
This system will turn OpenSocial Platform in an more attractive opportunity for developers.
how about opensocialstore.com?
the point is:
make it simple.
make it cheap.
it’s like with iPhone apps. iTunes has my data, all i do is enter my password. and i don’t download many apps north of $10, but the stupid crap for 99 cents… why not? it’s less than a Snickers. the money to be made is in small purchases.
If they can get this multi-service payment system working, I think there might be more money coming there way. As is, there is no reason (and often no way) to spend any money on these apps.
We are also focusing on offering app developers the ability to use one advertising platform across all their opensocial portfolio and then give the ability to control and track across all apps and platforms. We currently run on facebook, bebo, myspace and hi5. Friendster, orkut and others are coming soon.
We have also just launched a new web based graphical stats interface for both advertisers and publishers.
http://adchap.com
as I see it, its going to be tough for the 7500 large developer community to maintain the high traffic they are attracting every day. And I don’t see any viable break through to monetize the social apps like opensocial and fb apps yet.
Monetization is definitely becoming more and more difficult for app developers. At AdParlor, in addition to banner ads, we are also trying to push virtual goods, and an incentivization platform. (and of course we support all 6 soc net sites)
For me it should be rather embarrassing to the Big Co’s that they cannot in a short time period build a payment system to allow for the sell and subscription of Social Network Apps.
It would also be a good idea if all the smart guys in the room at the Big Co’s would think of a revenue model before they pushed out their monopolizing standards.
Very interesting… new online business models are on the way…
Wait, what? I get the concept of a better system for making payments, but WHAT are people actually going to be purchasing? You’ve explained the system but not the product. What is there to buy on Facebook?
OpenSocial’s director of engineering didn’t have an answer? What the hell does he get paid for? An engineer without answers is a car without wheels.
Jason — I agree that a standardized payment system would certainly help developers monetize their apps, but to imply that so few developers are making money is a bit misleading. Remember, TC is the same blog that wrote about one app making $1 million a month: http://www.tech...-a-month-i-can/.
Also, you say that “those developers that can (establish user bases) will no longer have to rely exclusively on banner ads to pay the bills.” But, banner ads aren’t their only option. Virtual currency monetization, which TC mentioned in the million dollar app article, is a much better option, and our company (Offerpal Media) has been paying out significant revenues to hundreds of app developers for over a year now. So I see your point about how monetization could be made better, but I also think it’s not as lacking as you might think.
I was hoping this article found the silver bullet on monetizing social network traffic above and beyond low CPM advertising and freemium. Instead I read this as a more convenient way to pay for apps perhaps on a per use or subscription basis. Open Social seems like a convenient way to store “all things you” but does it open up new monetization strategies?
Jason — here’s a more basic question: Do social networks really need to be ‘monetized’? Is it really a terrible problem if they never do much more than cover the cost of their operations?
If you are interested, I just wrote about this at http://simonfir...-to-make-money/
If it means i have to pay for those stupid icon gifts, im out. cant waste a dime on an application that says “Race Your Car” and the next second it says “You Have Lost”. No, not those.