Facebook announces paid app beta program

Facebook today announced that it will begin supporting paid apps on its platform to be featured and sold in the new App Center also revealed today.

Paid apps are a new monetization model for Facebook. Previously, the social network primarily supported freemium applications that users add for free and then potentially pay for in-app items like virtual goods or digital media. For purchases within games, Facebook requires developers to use Credits, of which it takes a 30 percent fee. The company has said it may begin taking a cut of payments from non-game applications in the future, though it might adjust the percentage it collects.

Facebook offered few details about the program and emphasized that the majority of transactions will continue to occur within apps. The company did say that the program will involve “a simple-to-implement payment feature that lets people pay a flat fee to use an app on Facebook.com.” It did not share how many developers would be involved with the beta or mention the possibility of subscription-based models for applications. However, we believe it could be discussing this option with partners like Spotify, Netflix or the Washington Post.

For flat-fee apps, Facebook might see interest from some game and utilities developers. These are typically the type of applications that lead the paid charts on iOS and Android devices, however, most developers are finding that the freemium model is ultimately more lucrative. With the reach and promotion opportunities on Facebook, we could see a new class of applications emerge, but it is hard to think of a range of examples that would benefit from this type of model as opposed to using in-app transactions. This could potentially work for live streaming events, like concerts or sporting events, which social entertainment developer Milyoni has found users willing to pay for on Facebook.

Facebook downplayed the significance of paid applications today, telling us it expects the bulk of transactions to continue to come through in-app purchases. However, it is surprising to have this type of announcement occur while the company is on the road promoting its initial public offering. Today’s updated S-1 regulatory filing with the Securities and Exchange Commission does not include a mention about the potential opportunities or risks associated with this experiment. The amendment instead included notes about how the social network’s mobile growth has led the number of daily active users to outpace the number of ads it shows:

Based upon our experience in the second quarter of 2012 to date, the trend we saw in the first quarter of DAUs increasing more rapidly than the increase in number of ads delivered has continued. We believe this trend is driven in part by increased usage of Facebook on mobile devices where we have only recently begun showing an immaterial number of sponsored stories in News Feed, and in part due to certain pages having fewer ads per page as a result of product decisions.

Developers who want to apply for the paid app beta program can do so here.

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