myYearbook: Would You Pay for Social Networking Extras?

In many ways, myYearbook is the polar opposite of Facebook. While the average age of Facebook users gets older and older, myYearbook grows its core demographic of 13-17 year-olds, which make up 43% of users on the site. Facebook allows third-party developers to write applications for its site; myYearbook makes all of the games and activities on its site, like the popular “Battles,” on its own.

On Monday, the Pennington, New Jersey company detailed another factor that sets it apart from Facebook: it’s turning profits partly by getting users to pony up for extra features. Though myYearbook doesn’t disclose revenues, it says that it’s profitable, that revenues are up 120% this year and above $1 million total, and that more than one-third of its revenue is coming from sales of virtual currency.

myYearbook’s 31-year-old CEO Geoff Cook, who founded the site with his younger brother Dave and sister Catherine in 2005, stopped by BusinessWeek’s offices last week to discuss how the “Lunch Money” virtual currency system works and why it’s becoming such an important part of the business. Here’s a short video I shot with him:

Geoff Cook, myYearbook from Doug MacMillan on Vimeo.

Facebook can't afford to ignore this news. The world's largest social networking site now has more than 250 million users, and is estimated to bring in as much as $500 million this year -- that's an average of a measly $2 per person annually. If Facebook implemented a virtual currency system along the lines of Lunch Money (and the company has hinted that it plans to do just that) it would instantly open a new revenue stream to complement ad sales on the site.

What could Facebook charge for? myYearbook appears to be profiting most from its "VIP Club," which charges users between $7 and $20 per month to get extra Lunch Money and unlock extra features in many of the apps on the site. Since Facebook doesn't control the third-party apps on its site, it would have a hard time unlocking premium features in a similar way. Perhaps it could add premium features to its native applications, like photo editing or specialized event invitations.

I have asked this question of readers before, who said they would pay for these things: e-commerce storefronts, ability to "export data," remove limits on friending, vanity URLs (which has since launched free of charge), removal of ads, better privacy, and better management of "fans" for businesses.

Should Facebook pursue a model like myYearbook's? If you're a Facebook user, what would you pay to have added to the site?