Will Selling Goods be the Answer for Social Networks?
If you take a look at social networks in Asia, they are all monetizing their sites primarily through social goods. For instance, 51.com, which recently raised a $50 million round, earns 70 percent of their revenue through virtual goods according to VentureBeat. Compare that to domestic social networks in which only a small fraction of revenue is generated through virtual goods. Honestly, Facebook is the only site that comes to mind domestically when it comes to the sale of virtual goods.
Next month at Facebook’s F8 event, Facebook is expected to launch their much anticipated payment system which will include micro-payments as well as traditional payments. While a fair amount of revenue has been generated through third-party ad networks in the Facebook platform’s first year of operations, Facebook may be betting heavily on substantial revenue generation through their new payment platform.
Tie in the new Facebook Connect service with the payment system and you are looking at a potential monster that could take on competing payment services such as PayPal. With Facebook’s payment system at the center of their platform, they don’t even need to focus on developing top tier applications. Instead, Facebook can simply rely on third-parties who will now have a substantially greater incentive to develop for the platform.
While Facebook has a long way to go with expanding their SocialAds offering, there is a ton of unrealized potential in a payment platform and the expansion of Facebook Connect. Competing platforms including MySpace and Bebo will most likely begin offering similar services but my guess is that Facebook will remain the dominant player in the space.
Right now all we have is speculation but I’m going to put my foot out and say Facebook’s new payment platform in combination with their Facebook Connect service is going to yet again transform the social web space. The industry will soon have substantial revenues to back the hype. I’m not the only person that thinks so though. Do you think selling goods on social networks will help move this industry forward?
Social Times