26 Feb 2010

can zynga (or anyone) afford to use facebook credits? how can a company spend 30% or rev for merchant processing?

just a random thought here, but if facebook wants 30% of facebook credit revenue, how can social gaming companies (or anyone) afford to use them?  currently, merchant processing fees (credit card, paypal, etc.) are in the 1 to 5% range.  i'm sure zynga is jumping for joy to see this go up to 30%.  the only way this could possibly make zynga happy is if sales go up by a huge percentage.  HINT:  revenue must go up by much more than 30% to just maintain zynga's net. 

i know apple's app store also takes 30%, but that doesn't mean it is sustainable...  how can you have 30% of your top-line revenue going to merchant processing?!?!  you need X percent for payroll, X for overhead, X for development, X for marketing and now 30% for merchant processing?

app developers on facebook already need to spend a huge percentage of revenue on advertising.  i.e.  facebook already gets a huge marketing dollars from zynga (i'm guessing 10 to 30% of zynga top-line revenue).  so, they now get to give them another 30%.  hooray!

that means facebook can get 40 to 60% (marketing budget plus merchant processing) of their revenue (assuming full-scale adoption of facebook credits).  awesome!  what a business!

http://developers.facebook.com/news.php?blog=1&story=364