Facebook Apps Are the Ads

Posted by Nick O'Neill on April 28th, 2008 3:30 PM

Yesterday there was a lot of discussion surrounding the CPMs that Facebook application developers are receiving via various ad networks. While I am working on my own project to more accurately monitor run rates on Facebook ad networks, for now, the sample provided by Justin Smith is sufficient enough to come to the following conclusion: why buy branded Facebook ads when you can launch an application yourself?

I had the opportunity to speak with Naval Ravikant of VentureHacks.com earlier today and he stated that as a whole, CPMs on social applications are going down because there is too much inventory. Chances are good that growth in inventory is going to continue to outstrip the growth in brand advertising. This is bad news for most application developers. So how do application developers make more money?

Well, one way is to hire a sales team but for individual developers this is typically unrealistic. So what are they to do? Well if you have enough targeted inventory, you might be able to get into Federated Media but you better have millions of page views on your application and your application must be something that brands will want to place their name on. Honestly the best option for developers is to get acquired and work with a larger development team.

Most developers can’t expect a million dollar pay out though because their application is going to have decreasing cash flows given the decreasing CPM scenario. Given that apps are basically annuities with decreasing cash flows, the sooner you sell, the better. So who are the people making money in the current environment? Companies with a substantial sales force that are doing direct brand outreach are the winners because they have their fair share of inventory to pick from to fill new branded applications.

So what should brands do? What they already are doing! Brands are creating engaging applications and driving users to their applications with cheap inventory. Do you see any better options for application developers?

This entry was posted on Monday, April 28th, 2008 at 3:30 pm and is filed under Advertising, Analysis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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sav 5 months ago 1 point
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Slide's CPM's are over $3 and Scrabulous would not take anything under $9..

I wonder how much Flixster is.. at this point, I think quality over quantity will matter. Apps who have better demographic have the ability to ask more money to advertisers.

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http://www.vercai.com

Damon Henry 5 months ago 1 point
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Agreed. The CPM approach is dead (or at least dying). If I had a penny for how many calls I get from vendors wanting my company to advertise on/in their apps, I'd be living off the coast of France.

Smart brands know to apply the funds to custom applications that drive *real* brand value, fosters engagement, and builds deeper relationships.

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http://www.damonhenry.org/blog