Facebook Gold Rush? Why Developers and Brands Aren’t Connecting

In most stories about Facebook Platform development, there’s a depressing footnote – sure, applications are popular, but very few of them make significant profits. The New York Times famously compared Facebook’s economy to the San Francisco Gold Rush, describing a long line of developers searching for a short supply of gold. Apps on the Facebook Platform may get traffic, but the perception is that developers don’t make money.

That perception may be incorrect.

“Developers want to monetize their applications,” says Chris Cunningham, founder of Appssavvy, a new ad firm representing Facebook application developers to major brands. “Brands do as well.”

If the desire is there, why haven’t big companies jumped on the opportunity while prices are at a premium? Fortunately, the traffic gold rush analogy is flawed. Developers have already figured out how to get huge volumes of traffic, and are just looking for a way to ship it to Madison Avenue.

To some degree, they’ve already succeeded in getting paid without Madison Avenue’s help – vibrant app exchange networks are flourishing on Facebook, and many developers have deployed affiliate and cost-per-action offers with great success. It takes a lot of clicks, but with hundreds of millions of pages served every month, those clicks can amount to real cash.

Most observers, however, are more interested in the investments big brands make. But big brands need a railroad to get to all that gold. That process is just beginning on the Facebook Platform. Countless app developers have traffic, but they don’t have the connections or talent to sell that traffic to advertisers.

According to former ad salesperson Ashkan Karbasfrooshan, ignorance about the ad sales world is a problem on the web at large. There are also issues specific to Facebook – while a search engine thrives on monetizing a user’s intent, it’s been widely circulated that Facebook continues to struggle to monetize its own traffic. “It tries to bypass content creation,” Karbasfrooshan says, “and instead passes off UGC as premium content advertisers want, which is even more foolish.”

Ironically, applications may have a better path to monetization than Facebook itself. Facebook can sell against all the app traffic too, but apps give the social graph more meaning and value to users. That’s when brands get interested.

Already, some companies and applications have taken the leap into partnerships. Many brands have launched their own applications, and others have worked closely with existing ones. Free Gifts, Zombies, and other top apps have all launched campaigns with major brands.

The space is monetizing rapidly – traffic gains experienced by many Facebook app developers have merely outpaced construction of the railroad to Madison Avenue. Ad sales companies will continue to dive into the space and aggregate traffic, focus content, and help brands access traffic gold. John Battelle’s Federated Media has already partnered with Graffiti and Watercooler. Even companies like Videoegg, which sell ads across a vast network, have focused on better serving Facebook application developers specifically.

The future for developers, however, is in young companies like Appssavvy. Founder Chris Cunningham has a background in ad sales as well as widgets, and his relationships with a number of major brands and developers help him sell for individual Facebook apps. “We are selling the applications through a direct sales team. Sharp developers have no way of connecting with big brands at a high level – we want to change that.”

The larger ramifications of brands embracing Facebook? Less “useless” and more meaningful apps. A relatively useless but pageview-maximizing application makes sense when developers are selling on a CPM or CPC basis, but as Cunningham notes, “Brands get excited if they feel like they’re reaching the right audience – they are interested in a relationship.” That relationship means richer applications and, eventually, richer developers.

The Facebook application gold rush is already a success: developers have found traffic in massive amounts, while other websites spend years panning for as many visitors. Now, the railroads are being built to get the traffic to the brands that can use it.

Admittedly, that process moves more slowly than fast-forward Platform watchers are accustomed to. However, these new relationships will endure for a long time – as the arduous process of ad sales begins, the Facebook Platform seems less like a rush and more like an economy.

Phil Edwards is Director of Business Development at Lonely CEO Media

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11 Responses to “Facebook Gold Rush? Why Developers and Brands Aren’t Connecting”

  1. Inside Facebook: Why Brands and Developers Aren’t Connecting (Yet). says:

    [...] There are of course, as many theories for this as there are terrible applications, but I feel Phil’s analysis is optimistic while simultaneously realistic. [...]

  2. Neil @ FacebookInsight.com says:

    I thought this was insightful, and agree completely with the idea of “meaningful” applications. The current userbase would of course, beg to differ.

    Facebook is working hard on this Profile clean up to remove the taboo associated with terrible one-time-usage applications, and focus on tools that truly create user benefit.

    There is definitely room for applications to help people with their everyday, and I think when that happens, we’ll see new models evolve.

  3. Daehee says:

    Unless you can fill a void missed by Facebook, give users what they want, not what developers think might be a “useful application.”

  4. Chas Edwards says:

    Phil–I work with Battelle over at FM. While I do worry about developers building their businesses soley upon revenues from the app exchange networks, I’m a big believer that major brands will support top Facebook apps with advertising dollars. Dell’s ReGeneration “Draw What Green Means to You” campaign (http://chasnote.com/2008/02/01/dell-goes-green-1000000-votes-for-dell/) and HP’s “What Do You Have to Say” sponsorship (http://chasnote.com/2007/12/14/hp-sponsors-comments-on-facebooks-graffiti-2/) and Wacom’s “Draw a Monster” contest (http://chasnote.com/2007/11/29/wacom-invites-facebook-artists-to-draw-to-win-promotion/) are three early examples. I expect many, many more!

  5. Google Too Will Pass; Will Facebook Do The Passing? says:

    [...] goes hand-in-hand with the thoughts that Jim Harper expressed today over at Inside Facebook. There, Phil Edwards in talking about the mythical Facebook gold rush explicitly acknowleges the fact that Facebook is not only having a hard time monetizing their [...]

  6. Jacob Madison - » Google Too Will Pass; Will Facebook Do The Passing? says:

    [...] goes hand-in-hand with the thoughts that Jim Harper expressed today over at Inside Facebook. There, Phil Edwards in talking about the ‘mythical’ Facebook gold rush explicitly acknowledges the fact that Facebook is not only having a hard time monetizing their [...]

  7. Google Too Will Pass; Will Facebook Do The Passing? | Social Media News Desk says:

    [...] goes hand-in-hand with the thoughts that Jim Harper expressed today over at Inside Facebook. There, Phil Edwards in talking about the ‘mythical’ Facebook gold rush explicitly acknowledges the fact that Facebook is not only having a hard time monetizing their [...]

  8. Watch Television says:

    Well I don’t think it’s all about profit, personally I prefer to offer a service that’s actually of use. As a developer I prefer that my work gets used then in making money off of it, maybe I’m the minority there – but I think most coders/developers care more to solve simple problems then in actually creating a brand out of their work.

  9. AOL-Bebo deal is good for the industry « Lightspeed Venture Partners Blog says:

    [...] Inside Facebook and Techcrunch have noted, the use of social media has far outpaced the monetization of social [...]

  10. AOL花8.5亿美元买下Bebo是否值得? | Startup says:

    [...] Inside Facebook and Techcrunch have noted, the use of social media has far outpaced the monetization of social [...]

  11. Larry says:

    It’s just good to know that companies like AppsSavvy are out there representing the top applications – and brands finally have a central place to go to get the right app for their needs.

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