The Impact of Product Management

Why Facebook Can’t Shut Down 100% Ad Revenue for App Developers

This GigaOM show with Max Levchin (founder of Slide) has some good insights on why this Facebook app boom will continue for some time.

A few key points I’d like to elaborate on:

  1. Other networks will open up their platforms. Both MySpace and LinkedIn have indicated they will open their platforms. MySpace has specifically said that app developers will keep 100% of the ad revenue on their “canvas” page. As long as competition is offering the same nugget to developers (and MySpace is big competition), Facebook will be forced to keep this offer open in order to keep developers interested in extending their platform.
  2. The market is moving very quickly. This means that innovation on advertising within the social format will also occur very quickly. Even if Facebook or MySpace offer their own advertising tools to developers, it would be silly to cripple or shut down any ad network or format that has learned how to more efficiently monetize their traffic. In fact, it would make more sense to buy such a company or license their technology since it could then be applied to advertising beyond just the “canvas” pages. If they reduce the percentage of ad revenue that developers take home, they would stifle the ad innovation that is ultimately to their benefit.
  3. Facebook, while popular, isn’t the only social network. MySpace is still the king in terms of traffic and will be opening their platform in short order. If a company can figure out how to use information from both to increase effective CPMs across either – than developers will scream for this solution over a locked-down one-network solution.
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