Facebook’s $100 Million Virtual Economy
ADOTAS EXCLUSIVE — Could the sale of virtual flowers really generate $30 – $40 million dollars a year? If you’re Facebook, the answer appears to be a resounding “Yes”.
Of course, you can choose from more than just images of flowers.
There are currently 378 different images for sale in Facebook’s Gifts application, such as mojitos, ninja shaped gingerbread cookies, Venus fly traps, and many more. They are just digital images, pieces of clip art, but Facebook users are willing to pay $1 per gift they send to their friends. And now it’s been estimated that sales of these digital images are on pace to earn Facebook $30-$40 million annually.
In a thorough analysis, Jeremy Liew of Lightspeed Venture Partners (LVP) has estimated the number of Facebook Gifts sold. Facebook creates an artificial limit of how many of each image that can be sold (usually 100,000 or 1,000,000) and also lists the number remaining for each gift. Using this information, Liew projected the rate of sales for Facebook gifts, taking into account seasonality and the fact that gifts on the first page account for the majority of purchases. Applying a 25% uncertainty level to their analysis, LVP forecasts a range of 28,500,000 to 43,500,000 gift sales annually at $1 each, creating an average of $34,500,000 in revenue.
But even this $30-$40 million is just a piece of Facebook’s virtual economy. This revenue is generated by Gifts, an application designed and owned by Facebook, but there are more than 30,000 other independent applications in the Facebook economy, many of which employ a virtual currency used to buy and send gifts, feed virtual pets, or unlock advanced features in particular games. While it’s true these other applications may not enjoy the same prime real estate Facebook uses to advertise its own application, I estimate that these applications earn more revenue in aggregate than Facebook’s Gifts.
After speaking with industry insiders , Facebook’s biggest virtual currency platforms ($uperRewards and Offerpal Media), and CPA ad networks, it quickly becomes clear that at current monthly run rates the virtual economies of independent applications are generating approximately $55 to $60 million a year in revenue, with the majority going to directly to the application developers.
As a sum total of revenues produced in the virtual economy:
Facebook’s “Gifts” application – $30 – $40 Million
Independent Applications – $55 – $60 Million
Total – $85 – $100 Million
And, representatives from many of these companies all agree that even though growth has been tremendous over the last few months, there market is still immature and continued growth is expected.
Adam Caplan, President of $uperRewards is “extremely excited about the end of the year,” citing the fact that as the summer vacation ends and people head back to school or college, overall traffic on social media sites increases for the 4th quarter. In addition, Caplan noted that Application developers have largely worked through any necessary changes to their apps necessitated by Facebook’s recent Platform updates, without seeing any permanent decline in overall traffic.
Everything appears to be on track for a record breaking fourth quarter.
Matt McAllister, Director of Marketing for Offerpal Media concurred, stating that his company sees continuing expansion as more and more developers embrace the virtual currency model. Offerpal Media expects the market to continue to grow in Q4 and throughout 2009, estimating that revenues and payouts could easily double or even triple over the next 6 to 12 months.
With even a fraction of this expected growth, it’s almost certain that the Facebook’s virtual economy will be worth more than $100 million in the next twelve months.
And it’s not just as fad. If anything, the US and much of the West has lagged behind Asian countries in utilizing virtual currencies, but that’s changing. According to Liew, “It’s commonplace in Asia and virtual goods models are increasingly apparent in the west.”
Some reports have cited that the size of China’s virtual currency economy is larger than that of its total online advertising market.
In short, virtual flowers are nothing to sneeze at . . . unless of course you’re allergic to cash.
Reader Comments.
- Pingback from Michael Myers | CRUCES: :Utilizing Social Media, the Mobile Internet and the iPhone as business tools
Leave a Comment
Article Sponsor
More Features
- Video from the Westchester Digital Summit
- Automating Core Processes Can Reduce ‘Little Big Problems’ That Ruin Customer Relationships
- Unleash the Power of Mobile: 6 Steps to Lead Generation the ‘Iron Man’ Way
- Who’s Sharing My Brand Images? Why Text-Based Social Media Monitoring Falls Short
- Ads That Look at You: How Eye-Tracking Technologies Will Change the Advertising Game
Spotlight
Take the Display Advertising Survey for the Chance to Win a Jawbone Jambox!ADOTAS – Industry discussions about cookies, privacy and the impact on display advertising have been frequent — and, in some [...] more...
Latest News
- It’s Not Digital – It’s Mobile May 17th 2013 ADOTAS — One of the biggest mistakes advertisers can [...] more »
- Video from the Westchester Digital Summit May 17th 2013 ADOTAS – The first-ever Westchester Digital Summit was held on May [...] more »
- Automating Core Processes Can Reduce ‘Little Big Problems’ That Ruin Customer Relationships May 17th 2013 ADOTAS — Strong marketing strategies attract attention and build the [...] more »
- Adotas Poll: Tremor Video IPO Would Be A Success May 17th 2013 ADOTAS – In this week’s poll, we asked our readers: [...] more »
- Today’s Burning Question: Impact of Google I/O Announcements? May 16th 2013 ADOTAS – We’ve asked our esteemed panel of industry thought [...] more »
- Unleash the Power of Mobile: 6 Steps to Lead Generation the ‘Iron Man’ Way May 16th 2013 ADOTAS – Tony Stark aka Iron Man is restless. The [...] more »
- Pandora is First Digital Publisher to Offer e-Business Advertising Integration into Media Buying Platforms May 16th 2013 OAKLAND, CALIF., May 15, 2013 (ADOTAS) — Pandora (NYSE: P), [...] more »
Features
- Video from the Westchester Digital Summit May 17th 2013
- Automating Core Processes Can Reduce ‘Little Big Problems’ That Ruin Customer Relationships May 17th 2013
- Unleash the Power of Mobile: 6 Steps to Lead Generation the ‘Iron Man’ Way May 16th 2013
- Who’s Sharing My Brand Images? Why Text-Based Social Media Monitoring Falls Short May 16th 2013
- Ads That Look at You: How Eye-Tracking Technologies Will Change the Advertising Game May 15th 2013
-
Loading ...
Reader Favorites
Classifieds
- Print and Web Manager
- SEO Marketing PPC Specialist
- Marketing Summer Internship at Clean-Tech Educatio
- Service Line Manager - Digital Media
- SEO / SEM Specialist
Recent Comments
- Backlinks uk: Within search engine optimisation (SEO), one way links reference hyper-links aiming to a distinct Website
- energy-physics: Media.net is a fantastic ad program. But now a days I cant customize their ads.
- Today’s Burning Question: Impact of Google I/O Announcements? – Adotas | Social Media Strategy Plan: [...] Permalink [...]
- Today’s Burning Question: Impact of Google I/O Announcements?: [...] “What will be the impact of the big announcements coming out of this week’s
