Facebook is adding subscription billing for app developers, in what should help gaming and media companies earn more revenue from their most loyal users. Starting next month, developers will be able to offer premium plans or special content from a monthly fee.
Kixeye, a mid-core game developer, for example, is going to give exclusive items for $9.95 per month. Since they target a smaller core of users that are more inclined to spend, this might produce a pretty interesting revenue stream for the company. Kixeye already said it was going to break $100 million this year in annualized revenue.
Facebook is keeping the same 30-70 percent revenue share that it has with in-app purchases. The company hinted in its road show video that it might lower its 30 percent take for other verticals, but it hasn’t officially announced plans to do so. The lowest price point a developer can set for a monthly subscription is $1.
The other thing that Facebook is changing is that it’s backing away from having Facebook Credits be the primary way items are priced. Two or three years ago, Facebook had pushed Credits more as a primary currency. That would have given Credits more mindshare with consumers and made it easier for them to associate spending online with Facebook.
However, game developers preferred to price things in their own virtual currencies. It was easier manage a virtual economy this way and also lock-in consumers to a single title or portfolio of games. “Most games on Facebook have implemented their own virtual currencies, reducing the need for a platform-wide virtual currency,” the company said in a blog post.
Now items will be priced in the local currency, whether that’s the U.S. dollar, the British pound or Japanese yen.
This mirrors what Apple and Google do in both of their app stores. There’s no single Apple virtual currency, for example. But developers can charge anywhere from 99 cents to $99.95 for packs of their own virtual currency. Facebook says it will convert any Credit balances into the equivalent amount of value in local currency. Google’s app store also recently added subscription billing.
Zynga said in a statement that subscription billing might affect some of the company’s accounting methods. Right now, Zynga using a metric called ABPU or average bookings per user. There is a difference between the way they report revenues and bookings. Bookings are what the user pays for upfront while revenues are acknowledged when the consumer actually uses the item.
“Today’s announcement doesn’t change the economic relationship between the two companies,” Zynga said in a statement. “We’ll be working with Facebook over the coming months as they phase out Facebook credits and will be sharing more details on this when we report our Q2 earnings.”