Four factors determine how much a Facebook app is worth
Many people have been asking what a facebook app is worth. — Andrew Chen at MDV says in an interview with Insidefacebook that a facebook app user is worth about 1% of a user on your website. — Read Write Web points …
Context & Ripple Effects
Facebook opened its app feeding frenzy in mid-June, weeks after the May Platform launch, and the developer world has been arguing ever since about what any of it is worth — commentary has run from comparisons of Facebook to a new AOL to warnings that its growth encroaches on LinkedIn's turf.
This piece lands on the practical question underneath that debate: Lightspeed's four-factor framing meets Andrew Chen's estimate at MDV, reported via InsideFacebook, that a Facebook app user is worth roughly 1% of a user on your own website. That ratio is the first concrete number anyone has put on platform-dependent audiences, and Zoho's syndicated writeups of putting its office apps on Facebook show even productivity vendors are treating the platform as a distribution channel worth pricing.
First-order effects
- Developers and small acquirers finally have a benchmark for app valuations: Chen's ~1% ratio turns 'what's my install base worth?' into an arithmetic problem against owned-site user values.
- ISVs like Zoho can now justify porting office tools onto Facebook as cheap distribution, since the platform user is explicitly priced as a fraction of a destination-site user.
Second-order effects
- Investors evaluating platform-built startups will discount them against companies that own their audience directly, shifting funding toward apps that convert Facebook traffic into standalone destinations.
- Facebook faces pressure to raise the on-platform value of a user — through better monetization tools — or watch developers treat it purely as a top-of-funnel acquisition channel.
Third-order effects
- If ratios like Chen's become the standard yardstick, social-app M&A will price users by where they sit — embedded versus owned — rather than by raw counts, formalizing what this debate started.
- Platforms will increasingly be judged on per-user monetization quality rather than growth, forcing a structural shift from land-grab metrics toward [[/concepts#revenue-per-active-device|revenue per active user]] economics.
The trend: Social platform economics are shifting from measuring audience size to pricing the monetizable value of an embedded user against one on an owned site.