Guest post: Facebook App Ecosystem Year in Review

This is a guest post by LifeStreet Media CEO Mitchell Weisman.

Facebook is announcing its Q4 2012 earnings on Wednesday, which seems like a perfect opportunity to reflect on the major trends and developments that impacted the Facebook app ecosystem in the last year. From our perspective at LifeStreet Media, three major themes emerged: renewed focus on monetization, significant growth in the gaming channel, and increased adoption of the mobile web. Check out some of the details below.

Theme 1: 2012 was the year Facebook and its app developers got serious about app monetization

Many app developers first realized the power of Facebook as a development platform back in 2010. That was a major growth year for the Facebook app ecosystem, as the number of apps on the platform skyrocketed 512 percent. In 2011 and 2012, though, the market began maturing, and the number of apps rose only modestly by 0.4 percent in 2011 and 2 percent in 2012 (AppData, 2009-2012). During these two years, an increasing number of developers opted for competitive platforms.

In 2012, amidst increasing competition for the hearts and minds of app developers, Facebook released a number of platform changes intended to address two of the biggest factors impacting developers’ long-term success: discoverability and monetization. Facebook launched the new app center to help with discoverability, and to address monetization they released the ability to charge subscription fees for apps, transitioned Facebook credits to local currencies, and improved payment flows for in-app purchases.

Developers applauded Facebook’s changes, but also took their own active steps to monetize their inventory.  Despite only modest gains in the number of apps on Facebook in 2012, LifeStreet Media, the largest in-app ad provider on Facebook, actually experienced significant increases in the number of developers monetizing apps with us. The number of app developers publishing ads on our app inventory rose 68 percent year-over-year from Q4 2011 to Q4 2012. In addition, the number of “ad placements” for display ads within each app increased 74 percent year-over-year from Q4 2011 to Q4 2012, meaning that developers saw that monetization through advertising was working for them and increased the number of ads that they allowed per app. See details below showing a temporary decrease in ad placements in Q1 but then significant quarterly growth thereafter. Ad placements peaked in Q2, up 27 percent over the previous quarter, and publisher growth peaked in Q4 2012, up 20.2 percent over Q3.

Theme 2: Games continued to reign supreme on Facebook, and virtual casino games exploded onto the scene in a very real way

As in past years, gaming apps continued to thrive on the Facebook platform. At the end of 2012, 47 of the top 100 Facebook apps were games, according to AppData, and 251 million users gamed on the platform. In keeping with this trend, LifeStreet Media launched 210 new gaming products in 2012, up almost double from 110 in 2011.

There was a slight change in 2012 to the types of games that launched on Facebook. Arcade/puzzle and simulation games, long dominant in Facebook gaming, continued to thrive, with increases of 161 percent for arcade/puzzle games and more modest gains of 35 percent for simulation games. In addition, anticipation of potential changes to gambling legislation led to a flood of new slot and casino games. Though Facebook casino games are still virtual, meaning that none in the U.S. involve the exchange of real money, LifeStreet nonetheless experienced a whopping 277 percent rise in these virtual casino games over the previous year.

Theme 3: Apps for grew on the mobile web despite challenges

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