How is Facebook Going to Make it’s 1st Billion Dollars?
How can facebook make it
Do you know that there may be a social networking site which is bigger or almost equal to Facebook?
And do you know it earns 2-3 times more than Facebook already?
That site is Qzone (Tencent), and it earns over a billion dollars in revenues per annum. How did this happen? And what can Facebook do to catch up quickly?
‘I will cite a personal example- just before Diwali I was playing this awesome game on Ibibo.com called Teen Patti. I had less money (virtual)- but great cards. My competition had 10 times more money (virtual) than me, but couldn’t have better cards than me. I had an option of getting 10000 credits by sending a premium SMS. In the excitement and heat of game.. I quickly sent 2-3 SMSs so that I could pre-empt competition moves, and it’s only after the game finished and I won that I realised that I had made at least 8-9 SMSs (about Rs 50-real money).’
Here is an interesting and well researched whitepaper on the Future of Monetization for Social Networks and Social Gaming companies- rightly christened as’ HOW IS FACEBOOK GOING TO MAKE IT’S 1ST BILLION DOLLARS? Download it rightway from here.
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Image Source: http://chinadaily.cn
Nov 8th, 2009 at 1:26 pm
Nice post Saurabh, just mentioning few points as below:
1) The popular in China is not exactly what we call Web 2.0 which Facebook is but BBS powered with strong communication tools like IM etc.
2) The nos. coming from Chinese companies are mostly self acclaimed and outside world has no to little ways of measuring and authenticating the same. Unfortunately, there’s no referee available to review such press play by Qzone.
Also point to ponder would be that Facebook is mostly under-reported because many tools measuring social netowrks doesn’t capture all the activity at social networks and instead zooms in only on sites rather than users.
3) The censorship in China allows these ventures to do ‘CPC - Copy to China’ most easily and take the advantage of best across the world to increase interactivity and so get more audience. Example would be Farm Ville 2 Happy Farm for instance
4) Chinese are much more expressive on the web as the same is otherwise missing from their daily routine life in which they are much quieter. This need for them to express works absolutely in favour of such ventures which lets them do so. The same may not be possible to replicate for the truly global venture.
5) Chinese companies which are protected by internal censorship also plays a lot with whole viral effect within such networks to pull more audience which again can not be replicated by global companies like facebook which adheres to strict Privacy Policies.
Differences:
The evolution of virtual money on social networking sites in Asia is partly due to a less developed online advertising market which drove Asian web businesses to seek new ways to profit.
Cultural issues are largely at play too. Gaming is popular among adults in Asia, whereas in the West it tends to be only for kids.
East Asian societies are also very status conscious. Players are loath to be the only avatar without the latest gear and Asians are perhaps more willing than counterparts in the West to buy virtual products to update their avatars or social space
If Qzone wants to compete against the likes of Facebook, MySpace and other social networks for users around the world, it will need to prove it can get everyone everywhere using its service rather than established international competitors. So far, it has just done a good job of dominating in a — relatively speaking — niche market.
Nov 8th, 2009 at 5:26 pm
Hi Anubhav,
A fantastic and well articulated analysis. I also want to point out that this monetization model may not be an isolated example, if you see Dena or Gree in Japan- they are both profitable companies with perhaps more revenues than facebook at perhaps 1/3rd or even less subscriber base. They also focus on a similar monetization model.
While there cannot be a ‘best’ way to monetize today, but the fact as pointed out- is that social networks and social gaming sites need to focus on ARPU (Average Revenue Per User) to optimise their earnings.
I also agree with you that Qzone and the likes need to prove themseleves in an open arena.
keep writing in
Nov 9th, 2009 at 11:30 am
Agree that social media can use Virtual Goods as a way to monetize and that indeed will only rise in future. Not only social media but also in Gaming where paying a dollar gets you better weapons, equipment, health, experience etc. making your playing experience a better one.
While a dollar may seem insignificant but the magnitude of people involved in such social games is huge. We are talking millions and these people could definitely give up a whole lot to outdo their peers.
Plus the Development cost is almost zero which means companies are making close to a 100% profit margin. Whatever you pay is directly translated to profits!
Exciting Times Ahead!