Facebook Apps Monetize Better Than Facebook
Justin Smith, over at InsideFacebook has an interesting article that theorizes why Facebook applications monetize better than the site itself. He provides two main reasons: (1) that adding applications are a clearer sign of interest and intent and (2) that applications lend themselves to branding much more easily. I firmly agree, but add that inventory is a major concern as well.
Facebook simply has a lot more inventory to sell and has it’s click through rate diluted by less active users (application users are simply paying closer attention to what’s on the screen). These factors partly explain the disparity between Facebook or MySpace charging 10 to 35 cent CPMs and Facebook apps fairly commonly getting 70 cent CPMs (although high page view apps are different).
We have seen that highly engaging applications generate greater revenues than low engagement applications. Engaging applications are apps that draw users into a process, be it a game or utility. One great example is “Lil Green Patch”. Lil Green patch draws users into their application through a process of tending to their virtual garden and saving the rain forest. It creates a focused audience that is more likely to respond to advertising.