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Micro-transactions and Future Revenues from the Social Space

Last week, Facebook announced that it was discontinuing its Gifts feature as of August 1, 2010.

I have previously blogged about important Facebook changes, but you can only come up with eye-catching titles like “Facebook Changes You Need to Know About” so many times… it is pretty clear that Facebook is a constantly shifting space and you need to stay on top of it both tactically as well as strategically.

Discontinuing the Gift Feature

In past posts, I had presented the idea of micro-transactions – small dollar value ($1 or $2) transactions – as a possible revenue stream for the social space. Conveniently, Facebook did a very good job of facilitating and sharing Gifts – small icons that users could buy (with $ or credits) and display on their own profiles or give to friends. This seemed straightforward enough, and a strong fit for sports marketers to leverage a team logo, a player or other aspect of their sport.

Micro-transactions could generate some fairly high numbers (once the initial outlay was built and in place) for strong sports brands with tens of thousands, or hundreds of thousands of fans. For example, a .5% conversion on $1 from 500,000 fans = $2,500.

Perhaps it was a good idea, but also a bit late. Gifting across Facebook was certainly more popular in 2005-2007/08 – add the recent economic downturn and it results in the closing of the gift store today.

Of course, teams can still continue with gifts on their own – but it seems that the gift/revenue legitimacy is now over; however, the concept of micro-transactions is still a powerful one and will have an increasing role in online revenue  and also from the social and mobile space as well.

Micro-transactions

A familiar example of a micro-transaction is iTunes – $1 per song. Pretty easy to execute, and some serious revenues follow as a result.

Micro-transactions have been very successful in “free-to-play” online games represented by both the purchase of virtual items as well as in-game progression. Recent years have seen rapid growth in the popularity of micro-transactions in social gaming (consider famous titles such as “Farmville” or “Mafia Wars” on Facebook).

So how can sports marketers benefit?

For one, I am confident that  social platforms will increase their focus social gaming. Sports games make very good sense and offer a wide appeal. While some of these opportunities will exist at the league level, imagine a social game in which you are able to manage “your team” as a GM. There could be integrated sponsor opportunities to give your players more energy by providing them with Gatorade for a micro-transactional fee…

As DVRs (or PVRs in Canada) continue to erode effective messaging opportunities on TV via traditional advertising, product integration will increasingly show up in spaces where consumers spend their time or draw their attention. Similarly, consumers are spending more time on their smart phones and social networking platforms. This is not a “better or worse” type of situation or evaluation, but it is clear that things are changing (fairly quickly) and marketers need to adapt, not to mention, innovate.