Good News, Bad News about Facebook Application Market: Long Tail Rules

My team at O’Reilly Research has been crunching the numbers on the rise of Facebook as application platform, and we’ve released a new report today, entitled simply The Facebook Application Platform.

The good news has already been widely disseminated: there are nearly 5000 Facebook applications, and the top applications have tens of millions of installs and millions of active users. The bad news, alas, is in our report: 87% of the usage goes to only 84 applications! Only 45 applications have more than 100,000 active users. This is a long tail marketplace with a vengeance — but unfortunately, the economic models (for developers at least, though not for Facebook itself) all rely on getting into the very short head. Here’s the distribution of active users among the top 200 developers. (Some developers have multiple popular applications.) As you can see, the drop-off is extremely steep:

Facebook long tail

This doesn’t mean that Facebook won’t become an important platform for developers, just that a throwaway Facebook app is not the ticket to quick riches. Embracing the Facebook opportunity requires more than just optimism.

The report includes details on the top suppliers (developers with multiple applications), the average adoption rate by category (some categories are more competitive than others), and “historical” growth rates for the top 200 most popular applications. (I say “historical” in quotes, because the history is so short. This is a marketplace where anything can happen. As a result, anyone purchasing the report will receive access to two downstream updates.) The report also includes interviews with Max Levchin of Slide, the top supplier of Facebook apps, and Ali Partovi of iLike, also one of the top suppliers, and thoughts on Facebook as a social network operating system, plus Facebook marketing advice from Dave McClure and overall market perspectives from Niall Kennedy.

While the report focuses on the market for current Facebook applications, it seems to me that the future opportunity is less in Facebook applications per se, and more in the development of applications that use the social graph embodied in Facebook for entirely new purposes.

I’ll be presenting data from the report, and my thoughts on the next generation of social graph applications, at Dave McClure’s Graphing Social Patterns conference next week. The conference will be held in San Jose, CA from October 7th-9th. Main conference sessions are Monday 10/8 and Tuesday 10/9; an optional pre-conference workshop is Sunday, 10/7.

If you’re working on a Facebook application (or other social networking application!), you might also want to come to Appnite at GSP, with a hackathon that kicks off Sunday evening 10/7 , and a live AppNite Demo Contest session on Monday evening 10/8.

Update: A number of readers have chastised me for reversing the sense of the “long tail” in this piece. They’re right. It should correctly be called “the short head rules.” The significant news here is that the tail doesn’t show lots of volume, not that it does, which was Chris Anderson’s original point about the long tail.