A few days ago we remarked on the inevitability of Twitter looking at the best 3rd party Apps areas and
grabbing them for itself. News comes today of
Facebook throttling developers ability to virally market (aka spam) their apps - All Facebook:
Just over 24 hours after Facebook turned off application notifications, developers are reporting a dramatic decrease in traffic. Speaking to a number of developers, we’ve heard traffic has decreased in the range of 10 to 50 percent, depending on the application, most hovering between an 18 to 27 percent decrease. While our poll sample was small, Facebook developers are now entering the “post-notifications era”.
And why do this? To regain control of their own distribution channels and put their own castles on them of course:
With an estimated $350 million in revenue last year from performance advertising, Facebook is heavily focused on this space. However, virtual goods are also an area which Facebook is hoping to experience a large amount of growth.
While it’s not known whether or not Facebook will force developers to use their Credits platform, there’s a very good chance Facebook will become the primary payment provider of all virtual goods on their site. This means Credits could very well become a business worth over $300 million a year if the platform is expected to generate over $1 billion in revenue each year.
..............
There are two parties now who are “paying to play”: developers, who will now purchase more ads to drive traffic to their applications, and users, who will increasingly pay for virtual goods in games. While it appears that application requests and other channels still drive traffic, developers have become one of the largest buyers of Facebook ads.
Do developers have other options? In theory they can decamp to other platforms but of course those have their own dominant ecosystems so new entrants have to spend even more resources to clamber up the greasy pole, and it is probably inevitable that all ecosystem holders will increase rents over time. But in the sort term....
...developers will have to deal with the short-term implications of the removal of notifications and figure out ways to regain traction, as they always do. The entire time it’s important for developers operating on the Facebook Platform realize: this is Facebook’s world. If you don’t want to put up with the challenges of the platform, you can just set up your application off the site.
So - for app developers a caveat. Its a jungle out there - and its their jungle, not yours. As an ecosystem matures, life is probably going to be nasty, as the interests of customer and ecosystem holder do not align with that of the developer
once the Ecosystem is functioning. Its also going to be brutish, as its about who gets (a lot of) the money, and - if you are a funding VC you will need to take this into consideration - its probably going to be short. In this eat-or-be-eaten world, there is probably only one App in each category that can sell itself to the Ecosystem, the others will have real problems surviving.
