Wednesday, June 03, 2009

Could Zynga Inc = Financial Hope for Facebook?

 With hundreds of millions of members on social networks and thousands more joining Facebook and Twitter by the hour,  it's easy to assume ad revenue would cover most of the overhead.

  As Facebook founder Mark Zuckerberg has discovered, the path to profitability isn't a walk through the park. Earlier this year, the network's financial frustrations led me to ask: Will Facebook Remain Free?
Options such as subscription fees may thwart the remarkable influx of new members, so the best route to revenue appears to be through social game fees, and that's where Zynga comes into the equation.

Founded by Mark Pincus, Zynga is the largest applications developer on Facebook.
Millions of Facebook users engage in multi-player games such mafia Mafia Wars and Scramble (Zynga's version of scrabble), Pirates, Yoville, and others. An excerpt from a related article in the Financial Times reads:

Users are increasingly spending real money buying virtual goods and credits on the applications that run on Facebook’s platform. Zynga, the largest applications developer on Facebook, with 42m users of its games, is reported to be nearing annual sales of $100m. Together, developers working on Facebook’s platform are expected to make more than $500m this year - perhaps more than Facebook itself.

These games and similar, known as "virtual goods", are also available from other developers,including Offerpal Media.  Venture capitalists must view these developers as the most efficient  route to capitalize on the habits of network users who spend long amounts of time on the network.

I'm curious to see the percentage of Facebook users who frequently play these games,because I'm willing to bet there's a large portion of users who still strictly use Facebook for its original intent-keeping in touch with friends and family. That's why I'm not convinced that virtual good fees are the silver bullet for killing the financial monsters.

How about you? Do you play the Mafia War games or do you consider those apps a waste of time?

Vote in our poll from Polldaddy.

Posted By Matt O'Hern at 10:31 AM
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