In a world full of answers you start your journey by asking the right questions
You may even recall me quoting Bo Peabody who said “Facebook and Twitter will always be a crappy businesses” because the social web is not a media platform it’s a communications platform?
Last week Union Square’s Brad Burnham wrote a post that repositioned Web Services as Governments.
“Facebook is a government. Facebook’s users are citizens, and Facebook’s applications developers are the private companies that drive much of the economy… We talk about these networks as communities, communities have governments.” - Brad Burnham
This insight raises the obvious question: What if Social Media is a “crappy business” because it isn’t a business at all? What if success in the Social Media business is just about providing “Governance of the Public Commons”? After all governments the world over are renown for being “Crappy Businesses” and yet they continue thrive and grow by collecting taxes, printing money and administering the laws of the “Commonwealth”.
What if, instead of talking about CPM, CPC and Monetizaton of Social Networks, we begin talking about Taxes, Tariffs, Monetary Policy and Citizens Rights for Social Networks?
“If you think of [Facebook] “Credits” as simply a payment card, the merchant, here the game developer, is paying more than 10 times the sort of fees they would pay their processor including interchange fees and everything else.” - Pymnts
So are Facebook Credits a new “virtual” Currency or a new Tax?
Facebook members purchase 10 cent “credits” that they can spend anywhere on the Facebook platform. These credits can then be converted back into “real” money by the vendors by selling the credits back to Facebook at the exchange rate of 7 Cents. (i.e. 7 4 U 3 4 Me ).
Viewed as a FOREX currency deal the exchange rate being offered by Facebook is exorbitant – if not extortionate.
Viewed as a payment, credit or debit card merchant processing fee the charge is again exorbitant – if not extortionate.
Viewed as a VAT, GST or Sales Tax the rate is again exorbitant - though hardly extortionate by Government standards.
But viewed as a Company or Corporate Tax the impost of 30 cents in the dollar is acceptable by world Corporate Taxation standards. Although Company Tax is normally only payable on the profits. Not the revenues.
Therefore it could be viewed as a Super Tax. Perhaps even a “Face Mining” Tax
The only question is will the developers and traders wear the new tax impost or will they look at other platforms to “ply their trade”? After all the barriers exit are very low. For example, Zynga has already taken the precaution of porting its popular Farmville game onto a stand-alone platform by creating the Farmville Website. Just think what would happen to the Facebook brand if the social gamers moved en mass to create their own social gaming platform.
Plus, Google has proven time and again, you don’t need to own the Platform to profit from the Platform. What you need to do is use your platform as the primary gateway for others to profit from the other platforms.
The primary difference between Facebook and Google is one is making a very small profit building an exclusive walled garden while the other is making a very large profit helping others to navigate and profit from an inclusive and open global network. It will be interesting to see which strategy eventually wins the day or if indeed the two can coexist profitably side by side.
This then is the “over night” success story that is Facebook today: A 6 year old startup with a $10+ Billion Valuation, 450+ Million “Citizens” and “Tourists”, an estimated $800 Million in Revenues, an ARPU of less than one SMS Txt message per month and a revolutionary new growth strategy based on Taxation.
Internet as a Social Movement - n+1 Magazine
Central to the Facebook Zynga Deal: Credits – TechCrunch
In the end, I believe that “social games” as we know them will be a forgotten internet fad, ultimately consumed by the already mature online market for downloadable and multiplayer games. The only NEW discoveries that remain will be the realization that social networking itself is a new kind of game play, social graphs are an extremely efficient way for games to market themselves and that microcurrency business models blended with advertising are a superior way to monetize online games in general. – TechCrunch Social Gaming Market Reaches Its Final Stage…and It’s Not Looking Pretty
“Facebook is a very innovative company, but we have had two large innovative companies, Google and Amazon, that have spent a fair amount of effort on payments,” said Mark Mahaney, an analyst at Citigroup. Those companies have yet to gain much traction, he said. “I have to think that the odds against Facebook are steep.” – New York Times
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