Facebook does not seem to have a very large advertising footprint. In fact, it relies in great measure on two major partners, Zynga, the producer of Farmville, and Groupon. Gaming and group buying partners are responsible for 2/3rds of Facebook’s revenue. While Business Insider spins this as a positive thing, thinking that this is just a beginning for a longer campaign of recruiting new app makers, this could also be a very problematic situation. What if Zynga or Groupon decide to look for customers somwhere else? What if Zynga sinks under the weight of its business practices?
Groupon and all its clones buy lots of Facebook ads – about a third of all the ads Facebook sells, in fact, a source at a Facebook-ad buying firm tells us. Zynga and the other social games publishers buy another third. These gamesmakers also pay a 30% tax to Facebook for use of its credits system. Facebook revenues from the games business was around $400 million in 2010, we recently heard.So, what does this tell us about Facebook?It tells us that Facebook is not really in the advertising business. It’s also not really in the virtual currency business.
- Zynga valued at $7 to $10 billion (slyvisions.com)
- Facebook, Groupon & Zynga: Off-The-Chart Revenue (blogs.wsj.com)
- Zynga, Facebook, Groupon Colossal Valuations (businessinsider.com)
- Korea to join Groupon craze on the 14th (thenextweb.com)
- Initial public offering possible in 2012 for Zynga (tech.mit.edu)
- Zynga Reveals Profit And Revenues As It Looks To Raise $500 Million (blogs.forbes.com)
- JP Morgan angles for Twitter and Zynga stakes (guardian.co.uk)