The business value for Facebook remains hotly debated, but Tien Tzuo, the CEO and co-founder of on-demand billing company Zuora, is hoping that starts to change with the company's newest announcement. A month after its release of the Zuora Z-Commerce platform-billing and commerce services for subscription-based companies-for what Tzuo calls "the business cloud," the company is bringing its subscription service efforts to Facebook. "The [subscription] business model is really the right business model for Facebook applications," Tzuo contends.
Despite social networking platform Facebook's growing ecosystem-now supposedly more than 175 million members-businesses and marketers are still, in many instances, in a tailspin when it comes to monetizing their Facebook efforts. Research shows that Facebook users aren't all too receptive of marketing on the site. (In fact, this IDC research survey of social network users pointed to poor clickthrough rates on Facebook ads, despite adept targeting.) Since opening up its application programming interface (API) to developers nearly two years ago, the site has seen a proliferation of created apps, yet developers see little to no revenue from their efforts.
Tzuo maintains that Facebook's success as a social networking platform is obvious, but it's the site's capabilities as a cloud platform that have yet to be truly tapped into. Zuora's stance is that the missing link for Facebook application developers exists within subscription-based products and services. Zuora, essentially, takes the pains away for companies offering subscriptions and handles all of the billing and commerce for them in the cloud. "Running a subscription business is hard," Tzuo, the former chief strategy officer of Salesforce.com, says. "Our vision is to provide a suite of commerce solutions to make it easy for any company to build manage and grow a subscription-based company."
At the recent DEMO conference in Palm Desert, Calif., Zuora debuted its Facebook service, demonstrating a subscription example called Friendship Relationship Manager (FRM). In essence, FRM brings additional contact information into Facebook. Instead of exporting Facebook data into, say, a CRM system, why not bring some of the CRM data into Facebook and work within that platform? Tzuo explains that FRM could be offered at two pricing levels-the billing is flexible. To illustrate the power that subscription-based offerings could bring to Facebook, he suggests we consider the effect if 100 million members each paid for a dollar-a-month subscription to a game or application.
Just doing the math on the possibilities of this model is significant, says Denis Pombriant, founder and managing principal at Beagle Research Group. Pombriant notes that the Facebook business models to date have not been attractive for businesses wanting to get involved. "There's a pool of apps that are ‘commercial grade' that are being sold right now and the billing is pretty much manual or difficult to do," he says. "Then there's another pool that are ‘professional grade' that aren't being sold because developers can't figure out the way to monetize." He points out businesses view selling applications in microtransactions-a few dollars per transaction per month-as risky and cumbersome. "With Zuora's different business model that mitigates that risk, I would expect we will see an acceleration in the number and kind of applications that come to market," he says. With the commerce and billing end securely in place, perhaps more "professional grade" applications and services will surface on Facebook.
"It also enables us to think differently about apps integrating with Facebook that will do things for us that may not be have been done by any other applications to date," Pombriant says. "It's a great impetus on which to innovate."
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