More than a social phenomenon, Facebook harbors a lively and growing ecosystem of game and other application makers, ad networks and retailers of virtual goods. What happens when businesses running on Facebook become bigger than Facebook itself?
That could very well be the case in 2009. Facebook, which just surpassed 200 million global users, is expected to bring in about $500 million in 2009 revenue, mostly from advertising. Tech blog Venturebeat estimated that Facebook developers make a combined $500 million on the platform. Ad Age estimates the collective revenue from Facebook of developers to be between $300 million and $500 million. All in all, numbers big enough that Facebook is looking to cash in.
Not all the developer revenue is from advertising. San Francisco-based Zynga, the top developer on Facebook with more than 41 million users, according to AllFacebook.com, makes much of its revenue from the sale of chips for its Texas HoldEm Poker or weapons in Mafia Wars. Zynga is expected to break the $100-million-sales mark in 2009, split between Facebook and MySpace. In addition to Zynga, there are at least a half dozen other companies in the $10 million to $50 million range, as well as many smaller players.
“It wouldn’t surprise me if apps on Facebook generate more revenue this year than Facebook,” said LivingSocial CEO Tim O’Shaughnessy, whose app is Facebook’s most popular at the moment, thanks to its “Pick Your Five” feature. “The overall platform is in the hundreds of millions of dollars.”
Ad Age Digital DigitalNext MediaWorks Lisa Marino, who runs West Coast business development for RockYou, estimates developers will earn $300 million from Facebook this year primarily from three streams: virtual currency, branded sponsorships and ad-network inventory. “These are three strong revenue models that Facebook isn’t participating in but that might overall be bigger than what Facebook brings in revenue,” she said.