Facebook revealed that 15 million users paid for virtual goods on the platform in 2011, according to a filing Wednesday with the Securities and Exchange Commission.
This is less than 2 percent of the social network’s 845 million monthly active users. Payments from virtual goods and other fees made up $557 million or about 15 percent of total revenue in 2011. The remaining $3.154 billion in revenue came from advertising.
Facebook has focused on creating platform upon which developers can build games and apps, but it still seems to be struggling to monetize it beyond advertising. This concerns developers and could concern investors ahead of the company’s initial public offering.
The payments side of Facebook’s business is newer, however. The social network first introduced what it called “Pay with Facebook” in May 2009. That eventually got combined with the Credits program associated with virtual gifts that users could buy and post to each other’s profiles. In July 2011, Facebook made Credits mandatory for social games, leading payments and fees revenue to make up 17 percent of the company’s revenue in the most recent quarter — up from 10 percent share a year ago. But it’s far behind platforms like Apple, which has more than 250 million iTunes accounts with billing information attached to them.
Facebook has tried a number of promotions, such as “Buy with friends” and “Frictionless Credits” to encourage users to pay for virtual goods. It is currently running a buy $1, get $4 free offer. And today it announced an incentive program to drive transactions in Europe. Any developer that drives more than US$100,000 in sales to European customers in a given quarter will be rewarded with an additional 3 percent related to those sales.
Beyond games, Facebook is likely considering how to expand Credits beyond games and into more entertainment apps, possibly letting users pay for subscription services like Spotify and Netflix. On Wednesday, Apple announced that Apple TV users will be able to sign up for Netflix and pay with their iTunes account. With Netflix CEO Reed Hastings on the board of Facebook, the social network could work out a similar deal.
We’ll be exploring this idea in our SXSW panel, “Facebook Credits: Not Just for Virtual Goods” on Tuesday in Austin, Texas.