Facebook launches app store before IPO


Facebook has launched a new application store that will soon allow its 900m users to buy content upfront, creating a potential new revenue stream as the social network prepares to go public next week.

Facebook’s new “App Center” will offer an improved storefront for users to browse through the wide array of apps on its platform, just as Apple’s App Store and Google Play on its Android smartphone system do.

Although many Facebook apps, particularly games such as Zynga’s CityVille or dating services such as Zoosk, allow users to buy upgrades and extras once they have installed the app, Facebook does not currently allow content owners to charge for apps upfront.

It takes a 30 per cent cut of all transactions using its Facebook Credits virtual currency, which is mandatory for games developers on its platform.

A Facebook blogpost on Wednesday invited developers to apply for the new scheme and prepare their apps for its App Center, which will list apps on Facebook itself and those on other platforms – including Apple’s iPhone and Google Android.

“Many developers have been successful with in-app purchases, but to support more types of apps on Facebook.com, we will give developers the option to offer paid apps,” Facebook’s Aaron Brady wrote.

Although some media companies, such as Warner Bros and BBC Worldwide, have experimented with using Facebook Credits to pay to watch films including “The Dark Knight” and shows such as “Doctor Who”, the new payment system may make it easier for them to charge for content. Facebook is also expected to allow payment by subscription, which could allow music apps such as Spotify or newspaper apps such as the Washington Post to sign up paying customers more easily because they can pay with a single click.

By widening the use of its Credits payment system, Facebook could bolster its content ecosystem in the same way as Apple’s iTunes laid the foundations for the success of its App Store. Third-party applications are seen as crucial to attracting and retaining users on social networks and smartphone platforms alike.

Boosting Facebook Credits into new areas will also allow the company to diversify its income stream. The majority of Facebook’s revenues come from advertising, where marketers remain divided on the long-term success of their campaigns on the platform, while about two-thirds of its Credits revenue comes from Zynga, the largest provider of social games.

The way Facebook will showcase apps on App Center will depend on both their initial popularity, user ratings and their ongoing usage. This marks a departure from Apple’s App Store, which mainly relies on the number of downloads to rank its “Top 25” iPad and iPhone apps, which can be driven by advertising.

“Success through the App Center is tied to the quality of an app,” Facebook said. “Well-designed apps that people enjoy will be prominently displayed. Apps that receive poor user ratings or don’t meet the quality guidelines won’t be listed.”

Piers Harding Rolls, analyst at IHS, a technology and media consultancy, said he was surprised that Facebook had not launched a full app store sooner, after retiring a basic app directory last year. “It’s taken them a bit of time to develop something which has been needed since they launched Facebook apps,” he said.





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