Facebook's New Revenue Streams Will Be Assists, Not Slam Dunks
Earlier today I argued that Facebook's existing revenue streams are under a lot of pressure. Critics have come out of the woodwork to tell us the platform's ad products don't work. Meanwhile the company's other big source of income -- payments mostly from Zynga games -- are flat and will likely stay that way.
Investors expect the company to come up with new ways to monetize its platform (and live up to its valuation). The problem is, of course, how diversified can the young company get at this point, and which way will it go first? We got a hint on the company's earnings call today.
"You can view our business as an advertising and payments business," CEO Mark Zuckerberg said. (We do; it is.) But Facebook's real value is in facilitating new types of business on top of its platform, he said. "We think we are helping to provide a lot of the value in areas like gaming, so we get a high percentage of the revenue from those transactions," he said.*
In music, for example, companies are being built on the open graph, but Facebook isn't providing as large of a value in those situations as it does for games, so it takes a smaller chunk of revenue from them when they earn money on its platform.
"The real way to think about this is that, over time, more and more nuanced experiences will become social. Gaming is an obvious one, some of the media stuff and commerce will require more nuance. As these things get built out we'll build out the tools to enable and to capture the value we'll help create," he said.
Essentially, instead of building up new lines of business itself, Facebook wants to take a piece of others' businesses conducted on Facebook. It wants to Zynga-fy commerce, or dating, or whatever other kinds of wheelings and dealings might be conducted on its platform.
Sandberg chimed in: "Our view of the world is that things will become increasingly social. Gaming was first. Commerce companies that are really adapting to social are seeing good responses."
*quoted to the best of my typing ability