David Gelles. Financial Times. London (UK): May 26, 2009. pg. 18
News analysis ; Software developers look for new ways of benefiting from social networking, writes David Gelles
Facebook chief operating officer Sheryl Sandberg has a second job. On top of managing growth of the popular social networking site, she is also a chef in Restaurant City , one of the thousands of games that run on Facebook.
Facebook's platform, which allows third-party developers to build services and games that run inside the social network, celebrated its second birthday over the weekend. In that time, it has spawned a new industry of profitable application developers, and a host of imitators. It has also allowed Facebook users, such as Ms Sandberg, to interact with friends through the new category of social gaming.
"The world is moving more and more towards applications that are layered over social networks, whether it's Facebook, FriendFeed or Twitter," said Michael Wolf, the former president of MTV Networks who is now on the board of advisers at Slide, one of the leading application developers.
"The Facebook platform set the standard for creating these ecosystems."
The growth of Facebook's platform has mirrored expansion of the site itself. Facebook now has more than 200m active users, and the company says most users have at least one application.
There are now more than 52,000 applications in the App Directory, and more than 100 of these boast at least 1m active users.
Interacting with applications keeps users on the site, and in some cases, drives them to it.
"Users that are using the platform are more engaged and spend more time on the site," said Ethan Beard, Facebook's director of platform marketing. "And people are coming to play some specific applications. Some of them are borderline addictive."
Most likely, the addictive ones are also moneymakers. All the major developers are private, and do not release revenue figures. However, the major social game developers all claim to be profitable.
Zynga, the largest developer with 42m users for its games, which include Texas Hold'Em Poker and Mafia Wars , is reported to be nearing annual sales of $100m. Playfish, the maker of Restaurant City, is said to be approaching $30m in sales. Together, developers working on Facebook's platform are expected to make more than $500m this year - perhaps more than Facebook itself.
"That's the beauty of having game DNA instead of web DNA," said Sebastien de Halleux, chief operating officer of Playfish. "Games have no problem making money."
Since the Facebook platform launched, several other media companies have introduced similar offerings. MySpace announced its own platform in October 2007. Apple has found enormous success with its iPhone application platform.
But while Apple takes a cut of all applications sold through its App store, Facebook applications are free to use, and the company receives no share of the revenues developers generate through the sale of virtual goods or credits for advanced game play.
Instead, Facebook says it sees value in building an audience and selling advertisements around the applications.
The networking site is also working on a payments system that would let it get a slice of the transactions being made within the applications.
Working with the Facebook platform is not without its challenges. Frequent changes to Facebook's design mean developers have to adapt quickly.
"It feels like the rules of engagement seem to change every three months," said Mark Pincus, chief executive of Zynga. "You don't sleep much."
And the success enjoyed by leading developers is inspiring imitators, which means more competition.
In an effort to help users identify the best applications, Facebook last week launched its Verified Apps programme, through which the company gives an application its stamp of approval.
Now Facebook is using the popularity of its platform to expand into other parts of the web.
With Facebook Connect, users can access more than 8,000 other sites, including Netflix and Citysearch, with their Facebook logins.
"With the platform, Facebook is becoming the social plumbing wherever people go and wherever games go," Mr Pincus said.
Credit: By David Gelles in San Francisco
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