The Upcoming.org Facebook App: Synching Costs with Revenue

There’s been quite a bit of discussion recently around trying to understand what a successful Facebook App means for the publisher.

Inside Facebook shares the story of the Where I’ve Been app whose popularity is leaving its developer trying to figure out what to do now, in the face of escalating costs and zero revenue.

Brad Feld acknowledges the brilliance of the Facebook platform, but questions what value there is for the publisher.

However, as far as I can tell, none of these Facebook apps developers are deriving any real benefits (if you are a Facebook apps developer and ARE deriving a tangible benefit, other than customer acquisition within the Facebook infrastructure, please weigh in.)  In addition, Facebook has shifted all of the infrastructure costs to these apps developers, creating the "I have 250,000 users, now what?” problem.

Andrew Chen, an expert in advertising campaigns on social networks, is even more specific in his warning to application publishers:

It’s unclear how much a Facebook app user is worth, compared to a user on your destination site. On a destination site, you can probably get a $0.50-1 CPM, whereas the CTRs and conversion rates on Facebooks apps imply a much lower CPM. Facebook app users are potentially worth about 1% of what users on your website are worth in my view, but the opportunity is to make it up in bulk.

And this blog goes through a long, rambling discussion of why a Facebook app user is not as valuable as a site user.

So what’s a Facebook app publisher to do?  One approach would be to follow the model used by Yahoo owned event site Upcoming.org and build an app that spans Facebook and the home base site.

Here’s what I mean.  Many of the most popular Facebook apps exist wholly on Facebook.  For example, despite the fact that services like Flixster and iLike have large destination site communities, they have chosen to build apps that can exist on a standalone basis within the Facebook community.  Zero click through to the home base site is required for users to enjoy these services.

From a user perspective (and from a Facebook perspective), there’s a lot of value in this approach.  The Flixster and iLike apps are seamless extensions of the Facebook experience.  There’s no bouncing back and forth between domains, and no confusion for the user.  Perhaps the user doesn’t even realize they are using third party apps.

But for the reasons laid out by Brad and Andrew above, this sort of app may not be sustainable for the (bootstrapping) app developer. (note: I expect that affiliate supported business models will do better within the Facebook environment than ad supported business models).

What Upcoming has done is to build its application in such a way that users need to bounce back and forth between Facebook and Upcoming.org to use it.  While iLike and Flixster created Facebook hosted pages for all of its content hubs (band pages, movie pages), Upcoming kept its core content hub (the event page) on Upcoming.org.  What this means is that to actually sign up to attend an event, you need to do it on Upcoming.org.  Clicking an event link on Facebook takes you to an Upcoming hosted page.  Activity that occurs on Upcoming is synched with the user’s Facebook account.

This approach isn’t as elegant from a user experience perspective, but it’s MUCH more sustainable from a business perspective as Upcoming can monetize its Facebook traffic back at home base.  Additionally, it preserves a single community of Upcoming users across Upcoming and Facebook, as opposed to the parallel communities managed by Flixster and iLike.

However, it’s worth noting that at the time of this post, the Upcoming app has 430 or so users, while Flixster and iLike are in the millions.  Whether this is due to a later start, less aggressive viral marketing, or a clunkier user experience remains to be seen.

So who has the right model?  Flixster and iLike with their parallel communities, native Facebook apps, and explosive growth (of both users and costs), or Upcoming with its synched community, clunkier user experience, but clear path to Facebook generated revenue?

It’s way, way too early to tell.  Facebook may decide to help native app providers monetize via advertising as Brad Feld suggests, or charge a CPC toll to apps that link out excessively as Andrew Chen suggests.  Either action would change the economics dramatically.

But I can say this: as things stand today, from the bootstrapped publisher perspective - the prospect of knowing that your Facebook generated revenue will grow together with your Facebook driven infrastructure costs is soothing.  I’m just not sure you get that with the apps that exist on a standalone basis within Facebook.

Comments

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Hi, Found a cool news widget for our blogs at www.widgetmate.com. Now I can show the latest news on my blog. Worked like a breeze.

[lawrence]

Ack! widget spam.

[Paul]

I think you're wrong about sites like Flixster creating Facebook apps that can be used on a standalone basis. I think that they provided a full-featured experience as an opening gambit, and once they've collected a Facebook user base, they plan to slowly revoke features to 'herd' that base onto their website. They are on Facebook to poach, not to cooperate. See here.

http://www.facebook.com/group.php?gid=2401194267&ref=mf

I'm sure more examples will be forthcoming as these apps age and the bigger developers become preoccupied with words like 'conversion'.

[lawrence]

Paul, great catch and thanks for the link. I haven't been able to recreate the issue described in the post - all of my Flixster functionality seems to be available without linking out. Could they have switched it back?

[Neil Kandalgaonkar]

I wrote the Upcoming/Facebook widget. Thanks for a very interesting essay. All these questions are on our minds as well.

I have to point out one inaccuracy. Our widget does not require you to log into Upcoming or to even have an account there.

Facebook users already use their native events platform. So by default, our Upcoming/Facebook widget just displays your future Facebook events on your profile. But if you link your Facebook account to an Upcoming account, then we merge both sources of events and display them all on your profile.

I don't know of anyone else following this "Facebook plus" strategy.

The del.icio.us widget is a better example of the strategy you were talking about. That's just another way to observe someone else's del.icio.us bookmark stream.

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