How Much Money Are Facebook Apps Making? Not Much Apparently

VideoEgg has announced that its ad network for Facebook applications – eggnetwork – has pulled in around $1.5 million in ad revenue over the past five months.

[From How Much Money Are Facebook Apps Making? Not Much Apparently]

This doesn’t surprise me at all. My almost year long affair with Facebook has enlightened me to many realities in this network.

Very few FB apps are what us old timers would refer to as applications, they are more like interactive games and gadgets. Video, music, and images are well mined out at this point and FB users don’t have much of an appetite for consuming content within Facebook. What FB users seem to do a lot of is consume the meta-content that other FB users are creating through their interactions with FB.

For the apps that actually do things, well none of them are all that good when compared to alternatives. Clearly there is value in having these apps in one place, but eventually the development platform strategy has to go beyond the goal of locking users into the platform.

For all the talk of viral features in FB, the fact remains that the most popular apps are still the early apps that benefited from scarcity and an ability to spam your entire friends list with invites.

Triers vs. users. The favored past-time for a vast number of FB users is adding apps to their profile pages, not actually using them for anything. In fact, profile clutter is now so much of a problem that FB released a clean up tool to deal with it.

I am skeptical of the move to enable FB apps outside of FB primarily because FB apps are themselves pretty primitive compared to what is capable in other frameworks. Now this is not to understate the value of the backend network, but getting back to that issue of these apps not being very good when compared to standalone alternatives, it’s pretty hard to drive adoption when the apps themselves are unappealing.

Users in general show little appetite for applications that feature advertising, even in Facebook, so while advertisers may salivate at the notion of driving CPM/CPA in Facebook, I think this goal will remain illusory. As the creative folks get more clever about how to insert brand and ad payloads we will likely see a shift here, and I am also not suggesting that all advertising is bad either. But in the end if we end up with incremental improvements in clickthroughs and other interactions, when compared to traditional forms of online advertising, well how valuable is the platform then?

I realize that much of what I have just written flies in the face of accepted wisdom, and RockYou and Slide both just raised big $$, as well as Facebook itself, but I would caution anyone that private company valuations have never been a proxy for broader mainstream market success. I do believe that gold is indeed in them thar hills, but mozying on up with a couple of picks and shovels and dreaming of riches without understanding the intricacies of what it takes to be successful will probably just result in fool’s gold.