Social Game Developers Spending Millions on Facebook Advertising
While Facebook’s in-house platform ad network is still in early stages of alpha testing, it may in fact be driving significant revenues from social game developers purchasing Facebook Ads to help boost the launch of their games. This slightly more indirect method of monetizing its platform may actually be a pretty substantial line of revenue for the company.
For example, in an interview with Silicon Alley Insider, Zynga CEO Mark Pincus said the company regularly spends large sums when launching new titles.
“We do spend a lot of money on advertising when we want to, like when we launched Farmville,” Pincus said. “We spent a couple million dollars advertising it and we’re not shy about that.”
While Pincus didn’t say that that its advertising spend is exclusively focused on Facebook Ads, it’s likely that a hefty chunk of its was spent through Facebook’s performance advertising system. Therefore, we believe that large app and game developers like Zynga are likely some of Facebook’s largest advertising customers. Facebook sells ads on a CPC or CPM basis, but doesn’t offer a pure CPA/CPI (cost per install) product.
At the same time, Zynga probably directs a portion of its spend to Facebook Platform ad networks like RockYou, SocialCash, and AdParlor, many of which still operate CPI programs for other app developers to drive traffic to their apps.
At the end of the day, as competition between social game developers grows, it’s likely to mean good things for Facebook Ads revenues and others helping drive game adoption. Developers like Zynga who have figured out how much new users are worth are likely to be happy to pay whenever new titles launch or new competitors are encroaching on their territory.