On a small project I’m involved with, we’ve recently decided on what platform we want to roll out with, or rather how we wanted to deliver our application. We could have picked quite a few different delivery methods, it could have been a web app, downloadable software, an iPhone app, a Facebook app or a few others.

Ultimately we chose to roll out a Facebook app using Silverlight. Nice combo right? I’ll probably talk about that later, but the real focus of this article is about what happens after you do step “A. Make the Gizmo”, skip past part “B. ???” and onto “C. Profit!”.

How much can you “expect” to make with a Facebook app?

Well if you read the news on Bloomberg that Zynga could be valued over $1 billion then this is just a stupid question because you’re going to make a lot of money. Well if ethics are not a problem. Of course there is also the valid point that not everyone is a Microsoft, Google, Apple, or *cough* Zynga. There are a lot of happy Joe’s in the middle between $0 and $1 billion. If you’re a happy Joe with the potential to be something great, then again I ask, how much can you “expect” to make with a Facebook app?

With that question in mind I was pointed to an interesting article on Mashable asking a similiar question about how much Facebook apps are making. Which led to an even more interesting article which estimated the value of a Facebook application user.

The article suggested back in January 2008 that such a user was worth $1.40 (using a 5x valuation). It’s actually an interesting way to go about answering the question. Find a company that is publicly traded that pretty much does nothing but make Facebook apps. Turns out Snap Interactive, Inc.is exactly what you’re looking for. Its a publicly traded company, thus it is required to produce SEC filings which are packed with a lot of information.

In January of 2008 it was surmised a Facebook user install was worth $1.40.

The article goes on to calculate the value of a Facebook application user by looking at Snap, how much it made in a quarter and how many Facebook user installs they have and seeing how much revenue each install brought in. It found that over a year the actual worth is a whopping 28 cents. That’s $388,000 in quarterly revenue / 5.5 million user installs * 4 quarters. Yup, 28 cents. That’s not a lot of money, but with 5,500,000 users it scales just nicely.

But that was almost two years ago you say! Well I said that.

So off to Yahoo! Finance I went and delved into Snap’s SEC recent filings. What I found was interesting.

1. Facebook installs are worth less then they used to be.

2. SEC Filings are boring.

But even boring material can be fun to decode. In November of 2009’s quarterly SEC filings Snap stated it has now delved into iPhone apps and a paid apps as well. So it is no longer trying to live on “freevertised” app only. But reading between the lines I don’t think these accounted to much of their profits. So with that out of the way Snap has grown its Facebook install base to over 18,000,000. That’s almost a 328% increase in less than 2 years. Good for them.

While their quarterly profits have dropped since the last quarter in 2008 they have remained stable for all of 2009 with an uptick in this last quarter.

For the last four quarters that’s an average of $860,250 / quarter.

Using the same calculation that makes a Facebook user install worth: $860,250 in quarterly revenue / 18 million user installs * 4 quarters = $0.19 / year. Only 68% of their previous worth.

Using a 3 to 4x valuation, which is what EA used for buying Playfish, that makes the current worth of a Facebook user install $0.57 to $0.76. That is half to a third of what it was at two years ago.

Facebook user installs two years later may be worth only $0.57 to $0.76.

There are many possible reasons why the value apparently has dropped. First off, this is using data from only one company. Second, perhaps Snap’s apps are stale, after all we are talking installs not active users. Third, maybe Snap has a lousy ad deal. Either way 18,000,000 installs means they’ve done something right at one point or another. Fourth, ad revenue is simply down because of the recession. The list of possibilities goes on.

Personally, I am not expecting to make a truck load of money with our Facebook app; I’ll settle for a nice spoon of money and a lot of experience thank you. Clearly when you look around the many apps on Facebook it is apparent Snap and Zynga (and it’s ilk) are the exception. While my cohorts and I are going to put our best foot forward with our app, we have no glamorous visions, we’re in this as much for the experience as anything else.

And at $0.57 per user I think most Facebook apps developers are more in for the experience rather than the glamorous lifestyle ahead of them.

Tags: Facebook, Freevertise, Valuation