Max Levchin recently wrote an interesting post titled “On social ad revenues“, which evaluates different approaches to social application development and the prospects for monetizing these applications. This post is essentially outlining the different approaches of Slide and RockYou, and explaining why he thinks (you guessed it) Slide’s approach is superior. He basically likens RockYou’s approach to that of a social ad network, and concludes that “the more your business looks like that of an ad network (augmented or not by the current sex appeal of being “social”), the less ultimately valuable it is.” He positions Slide on the other end of this spectrum, implicitly stating that their focus is on depth of engagement and creating what he calls an “inner-brand” (read: “e.g. ‘I go to Facebook when I want to SuperPoke people when I want to be clever,’ to toot my own horn”).
I won’t pretend to know the answer here, but in principal I have to agree with Max about the inherent challenges that the “proprietary apps augmented by partner apps” approach presents – you have no control of engagement on partners’ apps. Social app developers are in the business of creating social media programming, and leaving some of the creation of that programming to others is inherently a risky proposition. But to be fair, if companies like RockYou are discerning in their selection of who they let into their partner network and trust that these partners have and will continue to create engaging apps, in theory they can create a hybrid of proprietary and network apps that collectively have greater reach than could their own apps by themselves. The potential risk is that the “inner-brand” of your proprietary programming is undermined, but the potential reward is that your partners can create vertically focussed programming that is better for these verticals than the programming that you could create on your own – again increasing reach. With so few ad dollars being spent on this type of content today, the hybrid approach and the reach it brings does have its benefits, but what that will do to eCPMs as this industry matures is the (at least hopefully) billion dollar question… You can see where Slide and RockYou are putting their chips, and you have to love the competitive energy between these two.
