Media Money with Julia Boorstin

Facebook: 'Paying' Money To Make Money?


Facebook had a pretty smart deal: get innovative kids to create applications for its site--the kind of cool functions that they want to use, which means higher traffic and more ad dollars. But now, Facebook is going to start compensating those innovators, launching a $10 million fund.

Zuckerberg and Facebook board members will decide how to dole out $25,000 to $250,000 grants for those making "innovative and disruptive" services for Facebook. While other VC firms are investing in the development of applications for Facebook's platform, the FB fund isn't taking an equity stake right away. So does this mean they're allowing the creators to retain a bigger piece of their asset?

Well, Facebook does reserve the right to be the first to invest in those applications it gives early funding to. But this guarantees that the most innovative applications can't go spin off into their own companies without Facebook getting a piece, because at some point every company needs financing and Facebook has the guaranteed "in" at that point.

Questions?  Comments?