Now that Facebook finally unveiled carrier-powered payments for the mobile web yesterday, it’s time to look at what the potential costs might be. Last month, U.K.-based mobile billing and analytics provider Bango announced to shareholders that it had a new partnership with Facebook, but that it couldn’t disclose the terms. Bango powers billing for app stores and also has a deal with Amazon.

Here are Bango’s standard payout rates for the carrier partners Facebook mentioned yesterday. (Important note: These are not Facebook’s actual rates. These are Bango’s standard rates. It is possible that because of the social network’s clout and scale, the company might have been able to wrest slightly more favorable terms. But this should give you an idea of how expensive the carrier’s cut is for Facebook.)

Bango’s standard carrier payout rates:

AT&T – 60%
Deutsche Telekom – Unknown, because Deutsche is not a Bango partner.
Orange – 83%
Telefónica – 55%
T-Mobile USA – 57.5%
Verizon – Unknown, because Verizon is not a Bango partner.
Vodafone – 79.2%
KDDI – Unknown, because KDDI is not a Bango partner.
SOFTBANK MOBILE Corp. – Unknown, because Softbank is not a Bango partner.

Since Facebook pays out a 70 percent revenue share to developers, any time a carrier remits less than 70 percent, Facebook is taking a loss on facilitating these transactions. When you factor in the research and development costs of building the mobile platform, it’s almost certain the company will be losing money on this area of the platform for some time.

Now to anyone in the mobile industry, this really shouldn’t be a surprise. Terms for carrier billing have always been onerous. Facebook has dealt with this in the past as it’s been possible to pay through carriers for Credits on canvas games through the Zong partnership. Google is also in a similar position when it comes to in-app payments on Android via carrier billing.

Continue reading on our sister site, Inside Mobile Apps.

Facebook partnered with some of the world’s largest carriers to make the experience of paying with Credits more seamless on the mobile web, the company announced today.

The company has done a deal with AT&T, Deutsche Telekom, Orange, Telefónica, T-Mobile USA, Verizon, Vodafone, KDDI and Japan’s Softbank Mobile Corp to let Facebook users pay more seamlessly with Credits through carrier billing. The deal comes at a critical time for Facebook as Apple’s iOS and Google’s Android platforms threaten to cut the social network out of influencing and earning revenue from the mobile app ecosystem.

Facebook’s chief technology officer Bret Taylor said that the current system for making web-based payments has too many friction points to make it useful to consumers or developers.

“Right now, the payments experience on the web is just broken for end users,” he said in a keynote at Mobile World Congress in Barcelona. “Even with operator billing support, most require a step called SMS device verification. That means if I’m in the middle of the game and I want to pay 99 cents, I have to wait for an SMS to arrive.”

After that, the user has to verify that the device is connected to their Facebook account.

“Then I have to awkwardly memorize the code and resubmit the transactions,” he said. “If I manage to make it this far, then I can finally go back to playing the game.”

With the new solution, third-party developers will be able to integrate a single SDK that lets their players charge their monthly phone bills in a single step through Facebook.

Continue reading on our sister site, Inside Mobile Apps. Lead Writer Kim-Mai Cutler is live at Mobile World Congress in Barcelona where Facebook made the announcement.

Facebook holds money transmitter licenses in at least 15 states, according to an analysis by American Banker.

In it’s filing for an initial public offering, Facebook said it applied for certain money transmitter licenses and planned to apply for more in the U.S. It did not state that it had already acquired any licenses, though some of its licenses had been issued as early as August 2011. This means the company is further along in its payments business than most people knew.

States require companies that accept and transmit currency to have money transmitter licenses, though laws vary across the nation. Generally, businesses that handle money orders, currency exchanges and stored value — funds that are kept, retrieved and transferred electronically — are regulated in this way. Companies like Amazon, Google and PayPal, for example, are licensed money transmitters.

According to online listings discovered by American Banker, Facebook has licenses in Arkansas, Delaware, Georgia, Idaho, Iowa, Kansas, Kentucky, Missouri, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Texas and Washington. The company could have additional licenses that are not available online.

Facebook generated $557 million, or 15 percent of its revenue, last year from payments. Users can buy Facebook Credits to spend on virtual goods and digital media within apps. Game developers are required to use Credits for transactions, of which Facebook takes a 30 percent cut. Many expect the social network to push the use of Credits elsewhere on the platform, including third-party sites. As such, the company needs to ensure compliance with money services laws.

The company wrote in its S-1 filing:

Depending on how our Payments product evolves, we may be subject to a variety of laws and regulations in the United States, Europe, and elsewhere, including those governing money transmission, gift cards and other prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions. In some jurisdictions, the application or interpretation of these laws and regulations is not clear.

Whether Facebook has plans to turn Credits into a wider payment system or is simply being cautious is unknown, but the fact that the company already has licenses in at least 15 states means that it has made progress toward this effort.

Facebook is running a promotion designed to entice game players to purchase Facebook Credits with a buy $1, get $4 free offer.

The promotion is aimed primarily at players that have never made in-game purchases with Credits. By offering 50 Credits for the price of 10, Facebook can lure users into inputting their credit card information and getting accustomed to using the social network’s virtual currency. Once users add billing information to their accounts and experience the in-game advantages that come from spending Credits, they are more likely to buy virtual and digital goods within applications. This helps developers monetize and increases revenue for Facebook.

Users who have not bought Credits before will be notified of the promotion through in-app offers and modules around the site, both of which are pictured here. If an app has implemented TrialPay’s Offerwall or DealSpot products, the $4 free value will be redeemed as the app’s native currency — for example, City Cash in CityVille. If a developer has not implemented in-app currency offers, the user will redeem the offer as Facebook Credits. If a user accesses the offer through a promotional unit elsewhere on the site, the purchase will again be in Credits. The company will pay developers their full revenue share, despite the 80 percent discount for users.

The social network earned $557 million from payments last year — 15 percent of its total revenue in 2011. About 50 percent of Facebook’s 845 million monthly active users play games, and between 2 and 6 percent of those players end up paying for virtual currency, according to sister blog Inside Social Games. Facebook takes a 30 percent cut of transactions using Credits. For now only games are required to use Credits, but the company could impose the system on other apps, as it noted in its filing for an initial public offering. By getting credit cards on file now, Facebook can make it easier for users to make more purchases in the future.

The company offered some users 80 percent discounts on Credits last year and at the start of 2012. In its blog post to developers, Facebook said it will continue to evolve promotions “to better grow our ecosystem.” At our Inside Social Apps conference in San Francisco last week, some top game developers said Credits were converting at a lower rate than they had hoped. Funzio Co-founder Anil Dharni said that after introducing Credits, his company saw an increased the conversion rate but a gradual decrease in average revenue per paying user. If Facebook cannot improve at converting more paying users, it risks losing developer talent to competing platforms like Apple’s iOS and Google’s Android and Google+.

U.K. mobile billing and analytics provider Bango announced today it signed a deal “to provide payment services to Facebook.”

The arrangement could be part of an upcoming effort to monetize Facebook’s mobile platform. The social network has 425 million monthly active mobile users but so far does not generate “meaningful” revenue from this area, according to its filing for an initial public offering. Facebook might have tapped Bango to help it process payments for apps, virtual goods or other mobile transactions.

Bango did not reveal the terms of the agreement. Facebook, which is in a mandated “quiet period” after filing for an IPO, did not comment on the partnership.

Bango provides carrier-billing services for Research in Motion and Opera’s app stores. This means mobile users are able to pay for purchases on their phone bills rather than a credit card. Many expect the company will to do the same for Amazon’s App Store for Android, following news of a partnership in December 2011.

Facebook opened its mobile platform to third-party developers in October 2011. It currently uses Boku to process mobile phone payments in HTML5 games like CityVille. This is only possible in the mobile web version of Facebook, not native applications because Apple and Android take 30 percent of in-app transactions on their platforms.

The Financial Times notes that Bango is aligned with Facebook’s movement toward a browser-based mobile platform. Following rumors of Facebook’s “Project Spartan” in June 2011, Bango CEO Ray Anderson wrote:

Bango technology has been optimized for browser deployment, and we see the browser as a great platform to enable truly explosive growth of mobile by making apps less dependent on the handset operating system. If you want to share an app or service with others, it makes more sense to mail or tweet out a link to a web app than to try to get your friends to download apps! It seems like Facebook may have the same vision [...]

Facebook and Vevo have met at least twice and the most recent talks took place earlier this month about bringing the popular music video service to the social network’s platform and sharing ad revenue, according unnamed CNET sources.

Scoring a deal with Vevo would be a huge win for Facebook over Google. The social network drives a lot of traffic for videos around the web, but is not a video destination itself. Vevo is an industry-backed website for music videos that are also syndicated on YouTube. According to CNET, the discussions are very preliminary — Vevo’s contract with Google is not up for another year yet – but could result in an ad revenue sharing model similar to what Google and Vevo have now. In November 2011, the NY Post reported that Vevo was looking to renegotiate its deal with Google, which since 2009 has given the company 35 percent of its revenue from the ads played before Vevo’s videos on YouTube.

According to ComScore, Google was the top online video content property in December with 157.2 million unique viewers, mostly on YouTube.com. Vevo ranked second with 53.7 million, and Facebook was fifth overall with 42 million. Vevo, though, is YouTube’s top channel overall, with over 53 billion views generating major revenue for both companies.

What Google could lose, Facebook stands to gain and possibly improve upon. Although YouTube is far and away the most popular video site in terms of unique viewers and time spent per viewer, it has not capitalized on its opportunity as a social network. There is little incentive for users to log in to YouTube and the site is filled with spam and hate from anonymous commenters. Google is likely looking for ways to incorporate Google+ to address these issues, but it’s interesting to see how Vevo is already using Facebook on its standalone site.

Vevo has Open Graph integration, which means that when users watch videos on Vevo.com, the activity shows in Ticker, Timeline and News Feed. When people watch the same videos on Vevo’s YouTube channel, the activity is not shared on Facebook. Vevo.com also uses the Facebook comments plugin, which surfaces comments from a user’s friends first and helps demote spam. Vevo.com similarly includes Like buttons that YouTube does not.

The social network currently offers video ads as a premium unit on the homepage, but because the units are small and opt-in, they are not ideal for advertisers who can get guaranteed views on other sites that run pre-roll ads. Facebook wants to preserve the user experience by keeping ads minimal, but billions of Vevo views suggest many users will accept these ads. A partnership with Facebook could allow Vevo ads to play directly in News Feed and Timeline. Currently Vevo.com links do not embed video on Facebook. Videos from Vevo’s YouTube channel do play directly within Facebook, but do not include pre-roll ads.

What is unclear, though, is how deeply the social network would incorporate music videos into its core product. For instance, Facebook could make Vevo videos discoverable from search as opposed to requiring users to visit a canvas app. The company positions itself as a platform for others to build upon, not a media site like MySpace, but to compete with Google, Facebook has to offer Vevo a bigger or at least more profitable audience.

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.

Inside Network touches down in Beijing this week to discuss mobile apps, social gaming, and monetization and distribution on global platforms.

Are you in the area? We’d like to meet you!

Mobile Monday Beijing

Inside Network’s Justin Smith and Kim-Mai Cutler will be speaking at Mobile Monday Beijing: The Evolution of Mobile Apps and SNS Games, along with a roster of leading developers and companies in the industry, including Infinity Venture Partners, Papaya Mobile, Gree, Rekoo, Tencent, TapJoy, and more. Details and RSVP here.

Thursday August 25, 2011
6:45 pm at Innovation Garden, Orange Labs, Beijing
View full agenda and RSVP here

Inside Network Developer Happy Hour

Join Justin Smith and Kim-Mai Cutler at the Grand Hyatt Beijing for casual conversation and networking with fellow mobile and social developers in Beijing. We’ll be swapping stories and making connections with no pre-set speaker agenda, so please stop by, say hello, and stay awhile.

Monday August 29, 2011
7:00 pm at the Grand Hyatt Beijing
RSVP here

We hope to see many of you there!

A recent set of updates to Zynga’s S-1 document sheds new light about the company’s business position, as it prepares for an initial public offering. For starters, Google has indeed invested, although the terms were not disclosed.

More interesting is the special relationship that Facebook and Zynga have formalized over revenue and traffic, in two developer addendums. (You can find the full set of docs here, although sadly some of the most interesting bits have been removed).

At first glance, the terms read as if Zynga had a special deal with Facebook, where it gets a portion of the ad revenue from Facebook ad units that run alongside its games in canvas apps. However, the terms specific that it is not canvas app ad revenue – instead, it’s referring to Zynga web sites like FarmVille.com, or even Facebook ads that might run within games.

We asked Facebook about the matter and got this response: “When we reached our agreement with Zynga last year, we discussed the possibility of displaying ads sold by Facebook on some of Zynga’s own pages. This isn’t something we’ve opted to do so far, and we are not working on an ad network right now.”

> Continue reading on Inside Social Games.

With Zynga’s IPO filing on Friday, we finally got some numbers to bear out what had been common, but unproven, industry knowledge: that Zynga had been able to overcome handing 30 percent of its revenue to Facebook and weakening virality on the platform by monetizing its existing user base better.

The company appears to have more than doubled average revenue per user across a number of metrics from the first quarter a year ago. So caveat to these figures first: they aren’t perfect estimates since Zynga broke out revenue on a quarterly basis, but showed uniques and actives on a monthly or daily basis. Nor do we have any ARPU figures for individual games, because Zynga did not break out revenue per title in its filing.

But it looks like Zynga boosted monthly ARPU (or average revenue per user) to $0.33 in the first quarter of this year from $0.14 in the same time period a year earlier. We get this figure by dividing reported revenues for that quarter by the number of monthly actives, then dividing again by three for individual months in the quarter.

> Continue reading on Inside Social Games.