Inside Facebook

Facebook shook up the Internet world 3 weeks ago when it announced the availability of Platform, enabling developers to build applications deeply integrated within Facebook, distribute applications through feeds and requests, and keep 100% of the advertising and transaction revenues generated. Lots of smart people have since been drinking the kool-aid.

As an entrepreneur, the main concern I have about building my business on the back of Facebook is the amount of control I’m giving up to play. As an application developer, I get no Service Level Agreements, and when I look at the Developer TOS, I see:

“We reserve the right to charge a fee for using the Facebook Platform and/or any individual features thereof at any time in our sole discretion.”

I need Facebook to acknowledge the risk I’m taking by building on their platform and give me some reassurance that they want to help me win.

One important way I think they could do that would be to provide monetization tools for my Facebook application. Namely, an ad network and payment processing service. Why?

• An in-house ad network could leverage the deep behavioral and demographic data that lives in Facebook and agency relationships already established by the sales team to deliver higher CPMs to application developers than can be obtained from third party ad networks.
• An in-house payment processing service could significantly simplify payment gateway integration for application developers and (potentially) unify the transaction experience for customers under the trusted Facebook brand (a la Google Checkout or eBay/Paypal).

By providing these tools, Facebook could align its interests with those of application developers, cultivate the application economy, and build new recurring revenue streams. Why wouldn’t they want to do that?

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