While everyone is agog over Facebook’s IPO, and $100 billion valuation, blah blah blah, a more interesting undercurrent (for me at least) is the fact that they made more than half a billion dollars from micropayments on their payments platform.
More than half a billion dollars from micropayments!
If you’re not familiar with micropayments, they’re discreet payments made within platforms like Facebook, to purchase real and (often) virtual goods.
Micropayments (or micro-transactions) were initially developed as a way of enabling the sale of online content.
They were envisioned as small payments ranging from a few cents to a few dollars.
Micropayment transactions enabled people to sell content on the internet, and served as an alternative to advertising revenue, which was traditionally the only real way to make money online (we’re talking pre-ecommerce proper).
Having been steeped in the mobile world, I’m abundantly familiar with micropayments, and the impact that integrating a seamless billing mechanism can have on a campaign, business or business model.
Micropayments work well on mobile because content companies connected to mobile aggregators are able to tap directly into the carriers’ billing systems.
As such, they enable subscribers to purchase ringtones, wallpapers subscribe to alerts and other premium programs, without having to input credit card or other payment details.
KGBKGB was one of the most successful mobile content companies to implement an effective premium campaign using mobile billing.
KGBKGB is like Wikipedia for your phone. Text a question to 542542, and for 99 cents, they’ll send you the answer.
Other companies, seeing the success of KGBKGB, soon were launching their own programs, leveraging WAP or mobile sites, to offer increasingly sophisticated products and services to mobile subscribers.
If you’re familiar with Zynga, then you’ve probably seen the most effective application of micropayments in a mobile, online or social media context.
Zynga, the creators of Mafia Wars and Farmville (among their other titles) popularized the practice of encouraging users to pay real money for virtual goods and currency.
Built primarily within Facebook’s platform, Zynga’s social media games, allow users to make purchases within their games, monetizing their games.
I’m sure that a large part of Facebook’s micropayment revenue comes from Zynga’s successful implementation of it’s intra-game payment model.
Facebook’s payment platform, which game developers are required to use, is becoming an increasing contributor to it’s revenues, making Facebook less reliant on advertising sales as the sole revenue generator.
Much in the same way that Apple takes a percentage from music publishers and authors who make their content available for sale in their store, Facebook takes a piece of every payment transaction within it’s platform
A large part of why Facebook may continue to be successful, comes from the popularity of their platform and developers’ desire to access this massive audience.
I’m sure that their IPO will be equally successful, as folks belly up to the bar to get a piece of what may invariably be the largest initial public offering ever.