Flavio about Business 2.0

In a very interesting article, the New York Times talks about several developers-entrepreneurs who are building facebook applications and try to earn money with it. And really no application is reporting profits. Most people can barely cover their server costs.

A couple of reasons why it is so hard to monetize an application:

• Ads can be displayed only on the canvas page but not on the user profiles, where most user attention goes.
• An application that gives user no incentives to come back and explore more stuff, or that is simply not social enough will not generate enough pageviews to generate a reasonable income - even though it might get a lot of installs, e.g. My Heritage app : has 600′000 installs but only 2% daily active users!
• An application on the other hand that is highly addictive has the same problems that all social networks have. Users are focused only on the content because it is so interesting.
• An app install is a really low commitment by the user, he barely clicks on add application. He is not a qualified prospect at all and is not likely to buy a product featured in the application.

A lot of people are building applications just for the fun of it. But how can people with a VC in their back make apps that much better than the 1000 of developers who code for free?

The only people that are making money with facebook apps right now are people that are selling advertisment in their apps for other people’s apps (like google adsense in a way with pay per install/click ). And that’s certainly not sustainable.

The facebook applications are in an extreme hype. Facebook only VC’s like Lee Lorenzen certainly help the fantasies

growing.

via allfacebook