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

It’s not news that mobile is a huge growth channel for Facebook. As of Q3 2012, 60 percent of all Facebook users had logged in on a mobile device, and mobile accounted for 14 percent of Facebook’s overall advertising revenue. Facebook app developers, however, have been slower to embrace the mobile web channel because of a variety of obstacles ranging from app discovery to mobile browser fragmentation. Tackling the mobile web challenge head-on, Facebook released in early 2012 a number of support solutions for developers looking to develop applications for the mobile web. Developers can now rely on an easier purchase flow for mobile web users, Open Graph app discovery and a test suite to determine which mobile browsers support their functionality needs.

While there is still a ways to go to make mobile web app development as streamlined as developing for Facebook desktop or Android and iOS platforms, the enhancements to the Facebook mobile web platform appear to be helping. Mobile web impressions on LifeStreet Media’s network increased steadily over 2012. By the end of the 2012, mobile web impressions had increased 2.5X over their January 2012 levels.

Summing it up: 2012 was good for Facebook app developers. 2013 will be better.

2012 was an important year in the battle for app developers’ attention. In the Facebook app ecosystem, three key themes emerged.  First, we saw an increased focus on app monetization, both by Facebook and by developers. Facebook increased discoverability via the app center and launched new monetization options, demonstrating to developers that its platform is still a great place for them to thrive.  Facebook app developers responded by not only relying on features provided to them by Facebook directly, but also by more actively seeking out third-party monetization partners like LifeStreet Media. Second, games on Facebook continued to reign supreme. Established categories like simulation and arcade/puzzle games continued to expand, and virtual casino games joined the platform in a big way. Finally, mobile continued to evolve into an extremely important channel for Facebook, and the mobile web remains a vibrant part of that story.

2013 will be another important year in the battle for app developers’ attention. We expect Facebook to continue to take big steps to demonstrate the vibrancy of its platform. That in turn should make 2013 a strong year for the entire Facebook app ecosystem.

Mitchell Weisman is founder and CEO of LifeStreet Media, the leader in in-app display advertising for Facebook and mobile developers.  Using a new kind of optimization technology called universal object serving, LifeStreet’s RevJet platform engages in high velocity testing of visual and logical objects to increase the value of ad impressions for advertisers and publishers. LifeStreet has driven over 275 million app installs for advertisers and has paid out more than $125 million in ad revenues to publishers.

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