Too late to get on the Facebook Bandwagon?

Things got interesting earlier this week when it was reported that Microsoft was considering a stake in a 5% stake in Facebook for between $300 million to $500 million. Following the news, Microsoft Corporation (MSFT) shares rose to from below $29 to almost $30 mid-week before closing the week at $29.46 representing a gain of about 2.3%. More importantly, it got people really aware of the Facebook "phenomenon".

I was listening to the 93.8 live DJs discussing Facebook on air and I thought: Wow! Now EVERYONE (even those who aren't part of the usual social network demographic) is talking about Facebook!

Since we officially launched Singapore's first Facebook MMOG (Massive Multiplayer Online Game), MW:BattleStations! about 3 weeks ago, we've been contracted by 2 other companies to create Facebook apps for them. We actually had to turn down 2 more requests because our order book was already full.

While we were working on BattleStations!, I was tracking the user growth of Warbook (another Facebook MMO) when it still had no more than 1200 users. The day after I joined, it grew by 1500+ users; 2000+ the day after that and 2500+ the day after. Beyond that, I didn't bother counting and spent more time working on our own app. With those kinds of growth figures, it's no surprise that developers are churning out hundreds of new applications everyday hoping to enjoy the same success.

However, economic theory dictates that something this good can't last forever and there are signs that it might already be too late to reap the same exponential growth that the first movers did.

Take our app for example:



MW: BattleStations! is growing at the rate of about 300~400 installs per day (~4000 in total). Active user growth is about 100~150 a day (active users = ~50% of total installs). The growth is certainly accelerating, but it's not exponential. The inertia is definitely noticeable and a sign of increasing saturation in the Facebook app space.

I can think of 2 reasons for this:

1) If you think about it, there's a limited amount of real estate on a user's profile that they are willing to use for apps. The apps that manage to get onto users' profiles earlier tend to stay there. Facebook users have also started to get sick of the torrent of invites they get all the time and now tend to ignore new invites.

2) Facebook has been trying to prevent "spam" marketing by apps and they've changed a few things as a result:
- Apps are now rated according to the % of active users they have instead of just installs (total users with the app).
- FB API has changed to prevent apps from spamming users with invites. Earlier apps could allow users to send invites to all their friends and even reward users just for sending out invites. Not anymore, the new system restricts you to 15 invites and the developers don't have anyway to track the invites and new users.

Newer apps are going find it very hard to get any traction even if they are better than existing apps. The way I see it, if you want to launch an app now you have to either:

a) make an app that's very viral and is really going to make users want to add it to their profile
b) you spend alot of money either buying ad banner space from Facebook or advertising on apps with a larger user base.

I think the Facebook Platform still has some ways to go before it hits a mature stage of development. While most of the early apps were created by individuals, I expect to see more companies with bigger budgets really going all out to push higher quality apps which will mean better quality and variety for Facebook users.

For the application owners who are already on Facebook and have managed to secure a stable user base; that user base will become more valuable as time goes by and the barriers to entry start propping up...

...which is why we'll launching 2 more apps very, very soon.