Monday, April 23, 2012

Zynga Drives Content Sales (or Virtual Currency) at Facebook

facebook paymentsAdvertising still drives the overwhelming portion of Facebook revenue, but growth of digital content sales is faster, according to Facebook. Much of that activity was driven by users of Zynga games. 


In 2011 and the first quarter of 2012, Zynga directly accounted for approximately 12 percent and 11 percent, respectively, of total Facebook revenue, mostly from virtual goods payments. 


If you consider sales of digital goods to be a "content sales" operation, you'd be right. But since Facebook also requires use of its captive Facebook Credits mechanism to do so, those revenues might be considered "virtual currency" operations. You can take your pick which description is more accurate. 


Zynga also generated about five percent of Facebook ad revenue from third parties in 2011, and about eight percent of first quarter 2012 third party display ad revenue. 


 According to a 2010  In-Stat report, the worldwide revenue generated from the sale of virtual goods on social networking sites, online worlds, and casual games increased from $2 billion in 2007 to $7 billion in 2010, and is forecasted to increase to $15 billion by 2014. 


Still, the advertising opportunity is an order of magnitude bigger than that. 


Revenue from Facebook's payments division nearly doubled between the first quarter of 2011 and the first quarter of 2012, though. 


Facebook advertising of 37 percent occurred on a far-bigger base. 

Facebook brought in $186 million in revenue from its payments division in the first quarter of  2012, up from $94 million in the first quarter of  2011. But Facebook had total revenue of about $3.7 billion. 

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