Facebook apps need their own sites

Social games and app developers got a bit of a shock when Facebook snuck in some platform policy changes last week. Facebook rewrote some rules: forbidding cross-promotion to competitive social networks and tightening up the use of sponsorships that use virtual currency, the big revenue source for most games. What does this mean for apps and games developers trying to gain an audience and revenue stream from Facebook?

Even a minor change in how Facebook developers can communicate with their customers causes huge waves. When Facebook phased out mass gaming updates some time ago, customer acquisition costs went up 30 percent for some apps developers. Sending what Facebook might think of as spammy promotions can attract the wrath of Zuckerberg, with the terrifying potential consequence of being shut down.

Facebook says it’s not preventing games from promoting their apps that run on iOS or Android, at least. And Facebook’s promo ban is consistent with its advertising policy. But according to Google, even messages from individuals that mention competing social networks get spiked. Facebook claims the story-ranking algorithm on its news feed was only demoting less-relevant messages and indeed, CNET didn’t see the effect that Google was protesting. But clearly, it’s hard to use other social networks within Facebook, other than importing Tweets.

Using Facebook with “protection”

So what can an app developer do to get the most out of Facebook and insulate itself as much as possible from Facebook’s policy changes? Build its own site. Yes, in all likelihood, most of the activity around the app will come within Facebook, but an app can promote its own site and use a site to multiply revenue opportunities for several reasons:

  • Besided promoting its site with its app, developers can use Twitter – which may be more influential than Facebook fans – for site promotion outside and inside Facebook. At the same time, Facebook seems to take kindly to sites that use its Connect Like, sign-in and commenting functions outside Facebook. Those are proven audience builders, and while they cede some control to Facebook, they assist in two-way content syndication between the site and Facebook.
  • Given Facebook’s strict controls over its Credits, it is unlikely that an app site could bring in its own or alternative virtual currencies and integrate them with Facebook’s via some kind of currency exchange marketplace. However, an app site could offer richer advertising opportunities (branded sponsorships, video ads, coupons) on its site than it could inside its Facebook app. And a developer could provide in-app placement on its Facebook app the way, for example, that Electronic Arts’ new Sims app integrated Dunkin’ Donuts, which could complement and drive traffic to a site sponsorship.

Opportunities for new platforms?

When Facebook reversed an earlier policy and opened up user comments on company pages run by pharmaceutical companies, many were caught by surprise and chose to shut down their pages to avoid compliance and regulatory issues. Facebook risks getting a Twitter-like reputation for inconsistency in managing its platform and API usage policies, or at least being justly accused of a lack of transparency or clarity. Could this open up opportunities for competing social networking platforms?

Google just announced limited games support on Google+. Kevin Chou, the CEO of game developer Kabam, thinks Google will challenge Facebook as a game distributor and has already forced Facebook to create some new game-promotion tactics in response. But Google has yet to roll out APIs for Google+, and its developer support is thin. Google+ is only starting to add the mainstream users that play most social games.

If it doesn’t kill them, competition usually makes competitors better, and that goes for partnering with developers. For example, Google’s promising to take a smaller cut of virtual goods sales than Facebook does, at least for a while. Sure, developers with enough resources can try out Google+, and Myspace still has a large, if shrinking, audience. But for now, Facebook’s really the only game in town.

Question of the week

What other activities could an app site feature?
Relevant Analyst
P1040724

David Card

VP Research Gigaom Research

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1 Comment Subscribers to comment

  1. Nice write up again David. It would be interesting to see what FB defines as a “competing social network”. Will it focus mainly on the large ones like the obvious G+, or also the niche networks? I’m involved in one in the music space, with deep integration into FB and Twitter, so my question is more than just out of intellectual curiosity :)

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