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Just about everyone I meet these days seems to be interested in creating a Facebook application. Every 20 something entrepreneur I talk to is expecting to create a Facebook application, attract a few million users in a few weeks and then sit back and count all the advertising revenue coming in every day. After all, it worked for Top Friends, Super Wall and Scrabulous so why can’t it work for everyone else?

Here’s the harsh reality - Less than 1% of all Facebook applications have more than 1 Million users. The large majority of facebook applications fail to attract any significant number of users. The table below is a summary of Adonomics statistics of the approximately 16,000 applications on Facebook (as of Feb 5th 2008).

If the data above is not sobering enough, it is important to remember that it does not take “daily active users” into account i.e. the number of users of an application who actually return to use the application every day. A quick survey of the top 10 most actively used applications on facebook shows that their daily active use averages 10.8%. Of course, this assumes that you are constantly improving your application on a
regular basis to ensure that your users are engaged enough to keep coming back.

Let’s say that you do create a moderately successful application that attracts around 100,000 users (you’d have to be in the top 5% of all Facebook applications to do so) - how much money could you make from advertising? Let’s look at a possible scenario below. Note: This scenario assumes that all your revenue comes from advertising since this is the case for most Facebook applications today.

100,000 users
10.8% daily active users
4 average page views per user per visit

100,000 * 4 * 10.8% = 43,200 page views per day

Wow! That’s a lot of page views for one app right? So, I should make $$$!
Unfortunately, the answer is - not really.

Assuming you don’t own an advertising network and happen to use one of the Facebook friendly ad networks like Appsaholic you are going to earn CPMs of between $0.30 and $1.

For this discussion let’s say you earn $0.55 CPM

43,200/1000 * $0.55 = $23.76 per day

$23.76 * 30 days = $712.80

$712.80 * 12 months = $8553.60 per year

Sure, that’s a lot of money if you are a college student or if you happen to own 10 applications that produce similar results. Sure, it will more than pay for your server and hosting costs. But - it definitely won’t make you rich overnight.

Lessons Learned
1. A very small percentage of Facebook applications can actually cross the 100,000+ user mark (< 5%). Creating a successful Facebook application with a lot of users is a lot harder than just coming up with a good idea. It is important for every application to be designed to maximize viral growth on the Facebook platform (more on that in a separate post).

2. Even if you have an application that attracts a 100,000+ users you will not get rich overnight.

Bottom Line
The goal of this post was not to discourage people from creating Facebook applications - far from it. However, it is important for anyone interested in creating a Facebook application to ask themselves the following questions:

• Do I have a real business model behind the application I’m trying to create? (assuming that you’re not trying to build the application just to amuse yourself)

AND/OR

• Do I have an existing brand or product that I can extend to Facebook thereby creating additional buzz (or adding a distribution channel) for my products and extending my brand presence?

I think asking (and answering) these questions will not only improve the quality of applications being created but will also stop application developers from spending time creating applications that they have not put some genuine thought into.

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