Scoring a deal with Vevo would be a huge win for Facebook over Google. The social network drives a lot of traffic for videos around the web, but is not a video destination itself. Vevo is an industry-backed website for music videos that are also syndicated on YouTube. According to CNET, the discussions are very preliminary — Vevo’s contract with Google is not up for another year yet – but could result in an ad revenue sharing model similar to what Google and Vevo have now. In November 2011, the NY Post reported that Vevo was looking to renegotiate its deal with Google, which since 2009 has given the company 35 percent of its revenue from the ads played before Vevo’s videos on YouTube.

According to ComScore, Google was the top online video content property in December with 157.2 million unique viewers, mostly on YouTube.com. Vevo ranked second with 53.7 million, and Facebook was fifth overall with 42 million. Vevo, though, is YouTube’s top channel overall, with over 53 billion views generating major revenue for both companies.

What Google could lose, Facebook stands to gain and possibly improve upon. Although YouTube is far and away the most popular video site in terms of unique viewers and time spent per viewer, it has not capitalized on its opportunity as a social network. There is little incentive for users to log in to YouTube and the site is filled with spam and hate from anonymous commenters. Google is likely looking for ways to incorporate Google+ to address these issues, but it’s interesting to see how Vevo is already using Facebook on its standalone site.

Vevo has Open Graph integration, which means that when users watch videos on Vevo.com, the activity shows in Ticker, Timeline and News Feed. When people watch the same videos on Vevo’s YouTube channel, the activity is not shared on Facebook. Vevo.com also uses the Facebook comments plugin, which surfaces comments from a user’s friends first and helps demote spam. Vevo.com similarly includes Like buttons that YouTube does not.

The social network currently offers video ads as a premium unit on the homepage, but because the units are small and opt-in, they are not ideal for advertisers who can get guaranteed views on other sites that run pre-roll ads. Facebook wants to preserve the user experience by keeping ads minimal, but billions of Vevo views suggest many users will accept these ads. A partnership with Facebook could allow Vevo ads to play directly in News Feed and Timeline. Currently Vevo.com links do not embed video on Facebook. Videos from Vevo’s YouTube channel do play directly within Facebook, but do not include pre-roll ads.

What is unclear, though, is how deeply the social network would incorporate music videos into its core product. For instance, Facebook could make Vevo videos discoverable from search as opposed to requiring users to visit a canvas app. The company positions itself as a platform for others to build upon, not a media site like MySpace, but to compete with Google, Facebook has to offer Vevo a bigger or at least more profitable audience.

The enhanced and retention viral features, ability for artists set their own download prices, and the fact that Facebook and iTunes take an equal 30% cut of sales could make Facebook Page tab apps an increasingly popular digital distribution channel for musicians.

Facebook has emerged as a digital media store this year, allowing third-party developers to use its Credits payment system to offer an alternative purchase point to iTunes and Amazon for film rentals, pay-per-view video streams, and now music. Facebook isn’t officially pushing this use of Credits, but may offer a first-party MP3 store or payment portal to streaming services such as Spotify, Mog, and Rdio as part of its anticipated Music Dashboard that’s expected to launch later this month at the f8 developer conference.

David Guetta now has the 39th most popular Facebook Page according to PageData, collecting 23.6 million Facebook fans despite not being a household name. He’s accomplished this by being a savvy early adopter of music technologies, using creative tab apps and partnerships with developers such as MXP4 to frequently reach our fastest growing Pages charts.

Guetta’s app prices MP3s at 19 Credits, or $1.90 apiece, making them 1.47 times more expensive than on iTunes. The app may therefore be designed to attract impulse buys and those looking for convenience rather than savvy music shoppers. However, any artist could develop a similar app and sell tracks for equal or cheaper than other popular music services in order to draw customers to where they have a higher lifetime value.

Facebook Offers Musicians Better Retention and Virality

With artists increasingly driving their fans to their Facebook Pages that offer strong retention and marketing capabilities, offering MP3 sales from the same presence could be lucrative. Otherwise, musicians must force users to open the iTunes desktop software or direct them offsite to Amazon or other webstores before they can execute purchases. The friction of these extra clicks and load times cause some users to drop off, diminishing sales that might have been completed if users didn’t have to leave Facebook.

Virality and retention is also much better on Facebook than on other music stores. By hosting MP3 sales apps on their Pages, musicians can gain the opportunity to market to users in the future, especially if they require users to Like their Page to access the app. iTunes only allows users to subscribe to updates about an artist through its failed Ping social network, and Amazon doesn’t offer any long-term retention mechanic.

By using Facebook’s social plugins and stream publishing capabilities, developers can let listeners share albums, tracks, and artists to the news feed with a single click, while iTunes and Amazon require multiple clicks, sometimes through hidden drop-down menus. When users click the Like or Send button on a song through a Facebook app such as Guetta’s, friends can play an audio preview of the track straight from the news feed. iTunes and Amazon’s song shares don’t offer in-line play so users must click through to the desktop app or site to hear a song recommended by a friend.

Since iTunes and Amazon downloads are served from the servers of those services, artists can’t offer free or deeply discounted downloads without approval. On Facebook, though, artists serve downloads from their own servers and don’t need Facebook’s approval for anything. The social network simply gets its 30% cut of any Facebook Credits purchases, so artists can offer free or cheap downloads as loss leaders to win over new fans.

The enormous number of credit cards numbers iTunes and Amazon have collected and their roles as go-to digital media buying destinations means artists aren’t likely to sell exclusively on Facebook. Instead, they’ll add the site as another distribution channel alongside other digital stores, their own websites, and physical retail stores.

Sales on Facebook could cut into those on iTunes and Amazon, though, while creating a new revenue stream for the social network. Established online music stores will need to consider improving their retention and virality mechanics to give artists better access to their customers and improved lead generation through rich media sharing. Otherwise, they could see digital music sale market share slowly slip to Facebook.

Are you in the area? We’d like to meet you!

Mobile Monday Beijing

Inside Network’s Justin Smith and Kim-Mai Cutler will be speaking at Mobile Monday Beijing: The Evolution of Mobile Apps and SNS Games, along with a roster of leading developers and companies in the industry, including Infinity Venture Partners, Papaya Mobile, Gree, Rekoo, Tencent, TapJoy, and more. Details and RSVP here.

Thursday August 25, 2011
6:45 pm at Innovation Garden, Orange Labs, Beijing
View full agenda and RSVP here

Inside Network Developer Happy Hour

Join Justin Smith and Kim-Mai Cutler at the Grand Hyatt Beijing for casual conversation and networking with fellow mobile and social developers in Beijing. We’ll be swapping stories and making connections with no pre-set speaker agenda, so please stop by, say hello, and stay awhile.

Monday August 29, 2011
7:00 pm at the Grand Hyatt Beijing
RSVP here

We hope to see many of you there!

More interesting is the special relationship that Facebook and Zynga have formalized over revenue and traffic, in two developer addendums. (You can find the full set of docs here, although sadly some of the most interesting bits have been removed).

At first glance, the terms read as if Zynga had a special deal with Facebook, where it gets a portion of the ad revenue from Facebook ad units that run alongside its games in canvas apps. However, the terms specific that it is not canvas app ad revenue – instead, it’s referring to Zynga web sites like FarmVille.com, or even Facebook ads that might run within games.

We asked Facebook about the matter and got this response: “When we reached our agreement with Zynga last year, we discussed the possibility of displaying ads sold by Facebook on some of Zynga’s own pages. This isn’t something we’ve opted to do so far, and we are not working on an ad network right now.”

> Continue reading on Inside Social Games.

With Zynga’s IPO filing on Friday, we finally got some numbers to bear out what had been common, but unproven, industry knowledge: that Zynga had been able to overcome handing 30 percent of its revenue to Facebook and weakening virality on the platform by monetizing its existing user base better.

The company appears to have more than doubled average revenue per user across a number of metrics from the first quarter a year ago. So caveat to these figures first: they aren’t perfect estimates since Zynga broke out revenue on a quarterly basis, but showed uniques and actives on a monthly or daily basis. Nor do we have any ARPU figures for individual games, because Zynga did not break out revenue per title in its filing.

But it looks like Zynga boosted monthly ARPU (or average revenue per user) to $0.33 in the first quarter of this year from $0.14 in the same time period a year earlier. We get this figure by dividing reported revenues for that quarter by the number of monthly actives, then dividing again by three for individual months in the quarter.

> Continue reading on Inside Social Games.

For example, here are a few of the bigger changes to date:

• In 2009, Facebook suspended many applications for using ads provided by banned third party ad networks, sending ripple effects throughout the third party monetization ecosystem.
• In 2009 and 2010, Facebook made substantial changes to the way the news feed worked and removed application boxes from the profile page, two of many product updates that created significant changes for the ways some developers designed application interaction patterns for “viral” growth.
• This year, when Facebook announced Credits universal virtual currency would be mandatory and all other paid virtual currencies would be banned, this created major changes for developers’ payment flow designs and, not least, operating margins.

In general, when Facebook has made these changes, it has received feedback from developers through a variety of channels, including direct feedback to Facebook’s (relatively small) team of developer relationship managers, group meetings with larger developers concerned about specific changes, and public channels like the developer forums and comments here.

Less visibly, updates to Facebook’s broader Platform product and policy direction have clearly impacted the private financial markets as well. Funding has become harder to come by for many small developers over the last 18 months, though some larger and growing developers have still been raising money at healthy valuations.

However, when Zynga’s IPO occurs, the market will become the most visible real-time feedback channel yet for Facebook’s Platform product and policy teams. Although a couple of smaller developers, like SNAP Interactive, are listed (in STVI‘s case on the OTCBB), Zynga will be the first large independent developer of social games on Facebook (and thus a company whose fortune depends to a relatively high degree on Facebook’s product and policy directions) to be listed in public equity markets.

Thus, when that happens, the stakes will be higher for Facebook to detail how changes to its Platform features, monetization services, organic communication channels, and developer policies fit into its its vision for the long term success and growth of the Platform. If it doesn’t, the consequences will be increased volatility for not just developers and private investors, but now public investors as well.

A relationship had at one point seemed natural. Facebook wanted to counter the threat of Google social products, while Apple was aiming to differentiate itself from the Android mobile operating system. Facebook for iPhone, the best-in-class mobile social networking app that has dominated the iTunes App Store for years, seemed to prove that millions of people wanted the two companies together.

Instead it has been Facebook’s microblogging rival, Twitter, that has gotten the special attention, as Apple reinforced yesterday at Apple’s Worldwide Developer Conference in San Francisco. Twitter is being built directly into iOS 5, the new version of the mobile operating system coming this fall. Users will be able to tweet directly from in-house apps including Camera, Photos, Contacts, the Safari web browser, as well as (Google-derived) Maps and YouTube. Meanwhile, Twitter API access in iOS 5 will make it easier than ever for mobile app developers to integrate it as a single sign-on option.

The only time Apple speakers referenced Facebook yesterday was an off-hand mention of its iPhone app as one of a variety of apps that you could get notifications for in the new Notifications Center.

> Continue reading on Inside Mobile Apps.

New hires per LinkedIn and Other Sources:

• Marion Beaufrère – now an Analyst, User Operations, previously worked in public relations at Orange.
• Andras Biczo – now a Software Engineer.
• Miguel Camilo – currently doing freelance illustration.
• Arda Cebeci – now a User Operations Analyst, formerly worked in e-marketing and central content management supprt at Air France KLM.
• Ionel Gog – Software Engineer Intern.
• Marisa Jorgensen – changed from working as a Manager of Online Sales Account Management to being a Team Lead of Online Sales Account Management.
• Arturo Marín – currently an Account Executive, formerly the Head of Digital Press Unit at PRISA.
• Javier Martinez-Zaporta – Payments Analyst, formerly did the same work at Sportingbet PLC.
• Paul Peterman – Account Director, Marketing Solutions, previously a Regional Sales Manager-West at About.com.
• Anne Marie Sanftner – now a Receptionist, formerly did similar work at KnowledgeQuest Learning Center.
• Sunayana Sen – currently an Analyst, Online Sales Operations, previously worked as a Digital Marketing Intern at Iridium Interactive Limited.
• William Schurman – now a Software Engineering Intern.

Recent departures, per LinkedIn:

• Amit Jha – previously a Software Engineer at Facebook, now works in a similar job, SDE II at Microsoft.
• Jack Simpkins – formerly MSTR Admin, now a Consultant at MicroStrategy.

Prior listings now removed from the Facebook Careers Page:

• Head of Business Operations (Dublin)
• Business Analytics Manager (Dublin)
• Business Operations Manager (Dublin)
• Oracle Application Developer, Finance
• Oracle Application Developer, Procure-To-Pay
• Solutions Engineer
• Manager of Content Strategy
• Account Executive (New York)
• DSO Account Manager (New York)
• Manager, Online Sales Operations (Austin)
• Strategist, Market Solutions (Chicago)
• Strategist, Market Solutions – Entertainment (New York)
• Strategist, Market Solutions – QSR (Chicago)

Who else is hiring? The Inside Network Job Board presents a survey of current openings at leading companies in the industry.

If MXP4 can demonstrate that social games can be a significant money maker for musicians, it could convince major record labels to loosen their grip and become more willing to license their songs. Social game micropayments might then help save musicians and record labels that have been struggling to earn money off of recorded music since the widespread adoption of the MP3.

Previously, MXp4 only offered games that musicians could brand and install on their Pages as tab applications, but there were no in-game purchases. This meant that while useful for familiarizing fans with music and drawing users to a musician’s Page, MXP4′s games didn’t monetize directly, making musicians and labels weary to pay the developer or license their most popular songs to it.

Licensed music has been available for listening in some games such as NightClub City, and developers such as CrowdStar have allowed musicians to sell digital downloads through their games. However, this appears to be the first time a prominent developer has allowed users to pay for music that can only be listened to in a game. This is important because these purchases are less likely to cannibalize download sales, and instead create a parallel revenue stream or even encourage download sales.

Along with its existing game Pump It!, which focused on triggering sounds in a style of reminiscent of Guitar Hero and recently reach 1.3 million monthly active users, Mxp4 has added several new game types.

> Continue reading on Inside Social Games.

The site has also become an even more crucial tool for organizers of SXSW events this year, since the conference reportedly grew 33% to 20,000 registered attendants from 15,000 in 2010. Eventbrite’s ability to cap or cease RSVPs while leaving an event’s page up helps party sponsors avoid negative sentiment by reducing overcrowding and the number of people they have to turn away at the door.

Facebook Events, which experienced a surge of popularity at SXSW 2010, doesn’t offer this function, allowing thousands to RSVP to a party with a capacity of 300. This limits the feature’s value to organizers of popular or exclusive events. Facebook should consider adding RSVP cap or suspension functionality to expand the scope of the gatherings the feature can be used promote.

Eventbrite has previously indicated that Facebook is its top source of referral traffic, but today co-founder Julia Hartz also noted that it ranks Google search at number two, Twitter at number three. and LinkedIn at five or six.

Prior to the Facebook integration, Eventbrite’s referral sources in 2008 ranked:

1. Direct traffic
2. Google /organic
3. Eventbrite.com / referral
4. Yahoo / organic
5. Google / cost per click advertising
6. Facebook / referral

The self-service event promotion and ticketing service website has deepened its Facebook integration since 2009, now allowing users to see events their Facebook friends are attending. The average Facebook share of one its events drives 11 clicks and $2.52 in sales, compared to $2.34 via email share, $0.90 via LinkedIn, and only $0.43 via Twitter.

Last year it looked as if Facebook might partner with Eventbrite to let Facebook users earn affilate fees from ticket buyers who they referred. However, the system never went live and Hartz confirmed the sites have no official partnership at this time.

Post-Purchase Shares and Music Generate More Revenue

Hartz explained that 40% of Facebook shares from the site occur pre-purchase, but that the 60% occurring post-purchase generate 20% more sales per share. This indicates that ecommerce sites should focus more on driving post-purchase shares.

Another new data set Eventbrite revealed was the breakdown of average revenue generated per Facebook share of different event categories. Music events drove an enormous $12 per share, suggesting that musicians have a lot to gain from selling their own concert tickets via EventBrite, especially those with existing Facebook followings.

The rough breakdown of revenue per share by category is:

1. $12 – Music
2. $11 – Fundraising / Charity / Giving
3. $6.75 – Social Events / Mixers
4. $5.75 – Food / Wine
5. $2.10 – Classes / Workshops
6. $1.90 Conferences / Seminars
7. $1.10 – Networking / Clubs / Associations
8. $0.90 – Business / Finance / Sales

These figures could be slightly confounded by total number of events in each category and the quality of the event’s page. Still, they demonstrate serious revenue potential from promoting fundraising, food and wine, and social events through a combination of Eventbrite and Facebook.