Facebook acknowledged in a regulatory filing that it might reduce the percentage fee it takes from developers building on its platform if it expands its payments business beyond games.
Currently, the social network requires social games to use Facebook Credits, of which it takes a 30 percent cut of revenue when players buy virtual goods. Some developers have experimented with using Credits for digital goods like song downloads and streaming movies, but Facebook’s currency is not mandatory for these apps.
Monday’s S-1 amendment is the first time Facebook has publicly suggested that it might change its revenue share structure. However, it is important to note that before the company goes public, it is required to include any relevant risk factors and forward-looking statements that could affect its business, however theoretical.
Nonetheless, is widely believed that Facebook will one day change this policy and require non-game applications to use Credits — “Payments,” as the program is known to investors. And while a 30 percent cut is an industry standard for revenue sharing models with developers — Apple and Google take this much from mobile app developers — it might be too high to encourage growth in areas outside of virtual goods.
For example, Spotify requires users to sign up using a Facebook account. The app benefits from prominent distribution across the social network, but so far Facebook doesn’t generate any direct revenue from the music streaming service. If the social network were to one day say to Spotify, as it did to game developers last year, that it would begin taking 30 percent of every $9.99 subscription, the music provider likely wouldn’t be able to sustain its business. However, if Facebook takes a lower percentage, then Spotify and apps from other industries might thrive from the virality of the platform and unified payment processing.
It’s very likely that Facebook’s payments infrastructure will support subscription billing in the near future, and when it does, it could allow developers to retain a greater share of revenue. Facebook has board members Don Graham and Reed Hastings, CEOs of The Washingon Post Company and Netflix, respectively, to provide insight about the type of model that would be mutually beneficial for the social network and other industries building on the platform. Those two companies, along with Spotify, would likely be launch partners if Facebook decided to provide this option.
Exactly how Facebook would decide to distinguish between games and other apps is unclear. What it might do instead is charge different percentage fees for virtual goods like decorations or power-ups versus digital goods like mp3s or livestreams. If Facebook began to support payments for physical goods, those too could fall under a different tier for revenue share. The company could also take a smaller cut of purchases over a certain dollar amount and maintain its 30 percent share of micropayments. Then again, Facebook might simply decide to take a lower percentage fee across all applications. This would give developers more incentive to build on the platform, and Facebook could overcome its loss of revenue share by operating at a larger scale than before.