Facebook Becomes a Competitor and Complement to iTunes as MP3s are Sold for Credits via Pages

iTunes and Amazon take note: musicians are now selling MP3s directly from their Facebook Pages. Electronic music producer and DJ David Guetta this week added a tab application to his Facebook Page that allows him to sell MP3s for Facebook Credits. The Nothing But The Beat app, developed by French marketing agency KRDS, allows users who’ve Liked Guetta’s Page to listen to previews of tracks, publish audio clips of songs to the news feed and the walls of friends, make payments, and initiate downloads.

The enhanced and retention viral features, ability for artists set their own download prices, and the fact that Facebook and iTunes take an equal 30% cut of sales could make Facebook Page tab apps an increasingly popular digital distribution channel for musicians.

Facebook has emerged as a digital media store this year, allowing third-party developers to use its Credits payment system to offer an alternative purchase point to iTunes and Amazon for film rentals, pay-per-view video streams, and now music. Facebook isn’t officially pushing this use of Credits, but may offer a first-party MP3 store or payment portal to streaming services such as Spotify, Mog, and Rdio as part of its anticipated Music Dashboard that’s expected to launch later this month at the f8 developer conference.

David Guetta now has the 39th most popular Facebook Page according to PageData, collecting 23.6 million Facebook fans despite not being a household name. He’s accomplished this by being a savvy early adopter of music technologies, using creative tab apps and partnerships with developers such as MXP4 to frequently reach our fastest growing Pages charts.

Guetta’s app prices MP3s at 19 Credits, or $1.90 apiece, making them 1.47 times more expensive than on iTunes. The app may therefore be designed to attract impulse buys and those looking for convenience rather than savvy music shoppers. However, any artist could develop a similar app and sell tracks for equal or cheaper than other popular music services in order to draw customers to where they have a higher lifetime value.

Facebook Offers Musicians Better Retention and Virality

With artists increasingly driving their fans to their Facebook Pages that offer strong retention and marketing capabilities, offering MP3 sales from the same presence could be lucrative. Otherwise, musicians must force users to open the iTunes desktop software or direct them offsite to Amazon or other webstores before they can execute purchases. The friction of these extra clicks and load times cause some users to drop off, diminishing sales that might have been completed if users didn’t have to leave Facebook.

Virality and retention is also much better on Facebook than on other music stores. By hosting MP3 sales apps on their Pages, musicians can gain the opportunity to market to users in the future, especially if they require users to Like their Page to access the app. iTunes only allows users to subscribe to updates about an artist through its failed Ping social network, and Amazon doesn’t offer any long-term retention mechanic.

By using Facebook’s social plugins and stream publishing capabilities, developers can let listeners share albums, tracks, and artists to the news feed with a single click, while iTunes and Amazon require multiple clicks, sometimes through hidden drop-down menus. When users click the Like or Send button on a song through a Facebook app such as Guetta’s, friends can play an audio preview of the track straight from the news feed. iTunes and Amazon’s song shares don’t offer in-line play so users must click through to the desktop app or site to hear a song recommended by a friend.

Since iTunes and Amazon downloads are served from the servers of those services, artists can’t offer free or deeply discounted downloads without approval. On Facebook, though, artists serve downloads from their own servers and don’t need Facebook’s approval for anything. The social network simply gets its 30% cut of any Facebook Credits purchases, so artists can offer free or cheap downloads as loss leaders to win over new fans.

The enormous number of credit cards numbers iTunes and Amazon have collected and their roles as go-to digital media buying destinations means artists aren’t likely to sell exclusively on Facebook. Instead, they’ll add the site as another distribution channel alongside other digital stores, their own websites, and physical retail stores.

Sales on Facebook could cut into those on iTunes and Amazon, though, while creating a new revenue stream for the social network. Established online music stores will need to consider improving their retention and virality mechanics to give artists better access to their customers and improved lead generation through rich media sharing. Otherwise, they could see digital music sale market share slowly slip to Facebook.

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