Facebook, Zynga, and buyer-supplier hold up(cdixon.org)
cdixon.org
Facebook, Zynga, and buyer-supplier hold up
http://cdixon.org/2010/05/08/facebook-zynga-and-buyer-supplier-hold-up
5 comments
I like how Chris Dixon incorporates stuff he learned doing an MBA into his startup blog. Those are two different worlds and there aren't many people who are fluent in both. I'm not very interested in the bulk of what MBA programs teach; perhaps it's my ignorance, but it seems like a lot of voodoo that is mostly about solidifying corporate culture with an elite caste of guess-who at the top. But some of the ideas that Chris has written about that come from there are quite interesting and relevant to our world -- his post on commoditizing complements, for example -- so it seems like he's a pretty good filter. (It's sort of a unique niche in the startup blog world, too. Positioning?)
"App makers feel comfortable investing in the Apple platform and even having most of their business depend on them in a way they don’t on Facebook or Twitter."
I don't think that's true at all. The headaches on the iPhone platform are many times larger, and the profit many times less. The smart money is in Facebook games, by far. The amount of money invested in making Facebook apps far exceeds that of iPhone.
I don't think that's true at all. The headaches on the iPhone platform are many times larger, and the profit many times less. The smart money is in Facebook games, by far. The amount of money invested in making Facebook apps far exceeds that of iPhone.
Do you have a collected edition of everything you know about Facebook apps somewhere that you'd be willing to share? I decided against doing one for the next project, but there is always a next-next-project, and the little gems I've gleaned out of your HN comments suggests there is a diamond mine hidden somewhere out of my sight.
Really? What about the longer term? I'm pretty confident that in 2015 you'll still be able to make money by writing apps for iPods, iPhones et cetera; I'm not so confident about facebook games.
My confidence goes the other way. Facebook has a strong financial incentive to ensure developers can make money as it will probably be the basis of their financial success.
Apple's is much less, they make far more off the hardware than the apps, and recent past has shown that developers will develop for the phones even with little chance of making any real money. Apple promotes apps only because they sell hardware, much the way they do with songs on the iPod. They don't care about monetizing them directly, they use them for vendor lock-in.
People are bemoaning changes in the Facebook platform that already exist in iTunes. Apple forces you to give them 30%, Facebook at the worst will do the same. Apple forces even major companies to play by the rules, ditto Facebook. If anything Facebook's are still far less onerous and restrictive.
Facebook's viral spread mechanisms appear to be weakening, but they're still leagues beyond Apple's. Distribution is the #1 problem with the Apple platform and why the real money is in Facebook. Even after the proposed changes FB will still crush them there.
Apple's is much less, they make far more off the hardware than the apps, and recent past has shown that developers will develop for the phones even with little chance of making any real money. Apple promotes apps only because they sell hardware, much the way they do with songs on the iPod. They don't care about monetizing them directly, they use them for vendor lock-in.
People are bemoaning changes in the Facebook platform that already exist in iTunes. Apple forces you to give them 30%, Facebook at the worst will do the same. Apple forces even major companies to play by the rules, ditto Facebook. If anything Facebook's are still far less onerous and restrictive.
Facebook's viral spread mechanisms appear to be weakening, but they're still leagues beyond Apple's. Distribution is the #1 problem with the Apple platform and why the real money is in Facebook. Even after the proposed changes FB will still crush them there.
That's the wrong question. The question is not, "Will you be able to make money on the iPad?", it's "Will anyone ever make a couple hundred million per year (like Zynga has on Facebook) on the iPad?" In that sense, Facebook is the clear winner.
It's not just the black swans either, it's the averages. You're a 1 in 100,000 success on the iPhone if you make a million bucks total. You're not even a 1 in 100,000 success on Facebook if you make that much per month.
Has Zynga really made a couple of hundred million a year? Have they even been going for a year?
I don't see any reason why nobody could make a couple of hundred million a year on iPod/iPad/iPhone apps, especially as the huge existing installed base of iPods (over 260 million sold) will probably eventually churn into app-capable devices like the current iPod Touch.
I don't see any reason why nobody could make a couple of hundred million a year on iPod/iPad/iPhone apps, especially as the huge existing installed base of iPods (over 260 million sold) will probably eventually churn into app-capable devices like the current iPod Touch.
Founded 3 years ago:
http://www.crunchbase.com/company/zynga
Estimated to have made ~$270 million last year:
http://techcrunch.com/2010/05/03/zynga-revenue/
http://www.crunchbase.com/company/zynga
Estimated to have made ~$270 million last year:
http://techcrunch.com/2010/05/03/zynga-revenue/
It's kind of humorous to me that someone who doesn't even know about Zynga can express an opinion on this topic.
While 30% seems like a pretty ridiculous number, I don't think there is enough data yet on if Facebook credits will hurt app profits or strengthen them.
One of the nice things about Apple's app store is you just click to buy, you don't have to worry about giving your payment information to individual app makers. I buy many more iphone apps than I would if I had to enter payment information for each of them. Many of the smaller app makers I'm not sure I would trust enough to give payment information to. Many also use more trusted 3rd party systems like PayPal, but they aren't one click experiences which diminishes conversion.
If Facebook credits become the norm and are widely adopted, there could be a significant uptick in consumers willing to pay for apps from the 1-3% which is widely circulated.
One of the nice things about Apple's app store is you just click to buy, you don't have to worry about giving your payment information to individual app makers. I buy many more iphone apps than I would if I had to enter payment information for each of them. Many of the smaller app makers I'm not sure I would trust enough to give payment information to. Many also use more trusted 3rd party systems like PayPal, but they aren't one click experiences which diminishes conversion.
If Facebook credits become the norm and are widely adopted, there could be a significant uptick in consumers willing to pay for apps from the 1-3% which is widely circulated.
The FB developer APIs do make a nice platform. I did a little work a year ago on a customer's Rails app to make it play nice with FB.
That said, I woud hate to base my business just on one platform that I did not control. It seems safer to develop useful web apps and/or game web apps that can integrate with FB, perhaps act as Wave components, and run on the developers own servers.
That said, I woud hate to base my business just on one platform that I did not control. It seems safer to develop useful web apps and/or game web apps that can integrate with FB, perhaps act as Wave components, and run on the developers own servers.
True, but in Zynga's case their audience is going to be drawn pretty naturally to Facebook.
Even at "max diversification" of their platform, it seems unlikely to me that losing their Facebook platform wouldn't be a crippling blow to Zynga.
How many 15 year old girls are really going to want to go to a completely different site to play Farmville? 5%? 10%? Zynga's demographic primarily seems to be whatever the exact opposite of "hardcore power user" is.
Granted, depending on how draconian Facebook's take is, that 5% or 10% might be enough to make them more money, but that seems somewhat unlikely to me.
Even at "max diversification" of their platform, it seems unlikely to me that losing their Facebook platform wouldn't be a crippling blow to Zynga.
How many 15 year old girls are really going to want to go to a completely different site to play Farmville? 5%? 10%? Zynga's demographic primarily seems to be whatever the exact opposite of "hardcore power user" is.
Granted, depending on how draconian Facebook's take is, that 5% or 10% might be enough to make them more money, but that seems somewhat unlikely to me.
I'd agree that the Apple app store is a pretty close comparison. However, wonder how one would compare the value FB delivers for their 30% in fees to the value, say, ebay delivers to the auction sellers for the ~3-5% (guess) they charge in posting & paypal fees?