The Evolution of Widgets

I’ve been following the changing widget business with some interest lately. While I have doubts about the future of little boxes of purported entertainment that you can cut and paste into your blog or social network profile page, I am pretty excited about widgets that mesh shopping with advertising.

Yesterday, I had an extended conversation with PaidContent, which ran an article questioning the future of the widget economy (and quoting me). I do think there will be a shakeout in the business, and the companies that can create and track widgets that do more than merely entertain you have the best chance of survival.

CNET’s widgets, for example, which are powered by Gigya, provide relevant reviews and shopping deals. Other widget providers such as WidgetBucks create ad units that update automatically with content that relates to the topic on the page.

WidgetBucks ad

I should back up and clarify the difference between widgets and applications, terms that are often used interchangeably. Widgets are chunks of content (often rectangle-shaped) that you can “grab” (by copying some code) and embed into blogs, start pages or social network profile pages. Applications are more full-featured and are designed for a specific platform, such as Facebook. They can use data from a person’s social network profile and take advantage of the connections between friends. I’m not talking about applications here (they have their own issues to contend with).

Much has been written lately about the waning fortunes of the display ad. Widgetized display ads have the potential to bring new life to the format.

Banner Ads Get Widgetized

One of the online ad tricks that is gaining steam is making banner ads more dynamic. The idea is that when a consumer mouses over an ad, it changes in some way, or it offers different places where someone can click depending on their interests. Some ads are even designed to be “grabbable” – allowing consumers to place them elsewhere on the web.

All this pushes widget advertising in a new direction that I think makes a lot of sense. Much more sense than creating a standalone widget to promote jeans or a movie and hoping that someone interacts with it. A lot of these kinds of widgets get lost and forgotten in the sea of Web content.

Several companies are widgetizing advertising. WidgetBucks is one – it is delivering shopping links dynamically within a self-contained ad. VideoEgg is another: Its AdFrames program has several new features to allow consumers to pass along ads or grab them, and to add shopping details to banner ads.

“We need to replace the banner with portable media experiences that leverage the power of video, feeds, maps and localization,” VideoEgg’s CMO Troy Young told MediaPost’s Online Media Daily in an article today.

I haven’t been a big fan of the widget ad business thus far, but the closer widgets get to looking like amped up banner ads, the more likely it will be that major brands will be interested in using them.

Uh-Oh for Facebook Developers

23,857 Facebook applications later, the elephant in the room is making itself heard.

According to an analysis by Jesse Farmer, creator of the Adonomics application-stat-tracker, “the excitement over the Facebook Platform and its promise have waned. Application companies are branching out to other social networks not because they necessarily show more promise than Facebook, but because the future of the Facebook Platform has become murky.”

In a lengthy blog post, Farmer lays out the reasons for his viewpoint. First, activity in the Facebook developer forums has fallen off. Second, application activity has dropped off.

While he concentrates most of his argument on the forum activity, where developers post questions and talk business, it’s the application activity that marketers need to pay attention to. In one chart, he shows that between October 2007 and May 2008, the percentage of applications with at least 100 daily active users vs.  the total number of Facebook applications has dropped from around 27% to around 18%.

That speaks to the signal-to-noise ratio of Facebook but also to the challenge of promoting and virally spreading an app. Facebook has clamped down on developers that take advantage of friend networks, which is good, but it’s clear from this analysis that the viral infrastructure is also starting to crumble.

Whether this is a Facebook-only phenomenon or if it will spread to MySpace and other social networks is worth watching very, very closely.

BBC Clips Facebook for Lax App Security

The BBC posts the results of an investigation into the security of personal information on Facebook. It created an application designed to mine user data and made up a fake profile. Then, it used the application to gain access to the personal information of “Bob Smith,” including his name, hometown, interests and school.

That applications can do this shouldn’t be surprising, since nearly every application requires you to allow it to access your profile in order for you to install it. Still, the reminder of this fact is unsettling.

For its part, Facebook defends its practices, saying in an online Q&A: “Access by applications to Facebook user data is strictly regulated and if we find that an application is in violation of our terms and policies, we take appropriate action to bring it into compliance or remove it entirely.” It also repeated the idea that users have the ability to report a rogue application.

The problem is that the way someone might become aware of their private information being misused is by it being, in fact, misused. What Facebook needs to do (and I’ve said this before) is to prevent personal data from being misused in the first place.

Where Will Facebook’s Developers Get Revenue?

First, apologies for the extended absense from posting. It’s not very blogger-like, I know. Between travel and presentations, my schedule got away from me.

TechCrunch reported yesterday that some developers are dissatisfied with Facebook. This is nothing new. What is new is the public debate over the (lack of) revenues developers are getting from being on Facebook. According to the blog post:

“The session started off with a disagreement over how much money developers are actually making through Facebook. Naval Ravikant from Venturehacks estimated that over $100M would be made in 2008, whereas Joyce Park of Renkoo and Matt Sanchez of VideoEgg predicted revenues as low as $10-35M this year.

All panelists agreed, however, that CPM rates on Facebook are miserably low, perhaps averaging 15 cents.”

I’ve believed for some time now that the widget and app space will not be the giant revenue generator that developers seem to think it is. Why? Too much clutter, not enough measurement, rogue apps, spam, to list a few quick reasons. Add in a messy US economy and things are starting to look dicey.

Facebook Revs Up New Features

Facebook’s on a new-feature roll. Last week it was new privacy tools to segregate the kinds of things friends and coworkers can see.

Next up: chat, which will launch next week, according to TechCrunch. And in the future, more preferential developer relationships like the one Facebook has with CBS for March Madness.

TechCrunch has a problem with the latter, but the way I see it, it’s nothing new and totally expected. The developers that bring the most traffic to Facebook SHOULD be recognized and supported, and the CBS March Madness application is clearly driving usage. I couldn’t find the total number of users of the application, but there are over 2000 discussion topics on the page and CBS Sports says that more than 3.6 million fans are playing some form of CBS bracket on the Web. Granted, some of the commenters on Facebook are people who have been irritated when the app doesn’t run right, but come on, folks. Big corporations will always get the best treatment when it comes to media.
My prediction: This will keep happening.

Widgets in the News

Lots of tidbits in the widget and application space lately. Here’s a recap:

ShareThis gets $15 million: A new VC round brings $15 million to the widget maker. (News.com)

Will Price joins Widgetbox: The Hummer Winblad general partner and Widgetbox investor will be CEO of the company. In his open letter posted on TechCrunch, Price (sounding as grandiose as Mark Zuckerberg did when he unveiled Facebook’s SocialAds concept last November) says: “The best markets and the best companies ride the tide of history. Widgets are such a market.” I could do a lot with that tide analogy but this Thai proverb seems most apt: “At high tide fish eat ants; at low tide ants eat fish.”

March Madness apps: The Chicago Tribune reports that there are an incredible 20,000 March Madness pools operating on Facebook. One Facebook application, from tournament broadcaster CBS Sports, lets friends create their own brackets and compare them with others. It’s not gambling, since there’s no payout, but because it allows people to create brackets, some think the app provides an assist, to coin a term. Promoting online gambling was “not our intent with the application,” LeslieAnne Wade, a senior vice president at CBS, told the Chicago Tribune.

Everything You Wanted to Know About Widget Marketing

Businessweek devotes this month’s CEO Guide to Technology to widgets and it’s an interesting package (full disclosure: I was interviewed for one of the articles). In one article describing why widgets are a fad, there’s this great quote from Ben Kunz in his opinion column:

The entire mindset of a person engaged on MySpace or LinkedIn is different from that of a hunter on a search engine. A Google user is walking into a store. A Facebook user is walking into a bar.

Later, he describes a conversation he had with an ad network exec, who said his clients’ widget clickthrough rates were down, so they were running ads promoting the widgets.

“If you need to run ads to get people to your ads, maybe you have a problem,” Kunz writes. Probably not a problem if you’re an ad network exec, though.

Another neat feature: A series of profiles of Facebook apps from major marketers that flopped. I can add one more: the Hellman’s Holiday Kitchen app (no longer available, seeing as it’s now March). One of the cardinal rules of social network marketing is that the brand has to be something people feel passionate about. I’m sorry, but I just don’t feel passionate about mayonnaise. And moreover, even if I were, would I want to let all my friends know about it?

Facebook Needs to Stand up to Rogue Apps

Facebook’s modus operandi almost since its inception has been to launch a feature, listen to feedback from users, and then tweak it. Standard operating procedure for thousands of businesses, right?

Remember the News Feed launch and the huge uproar over that? And what about Beacon? The problem is that the amount of time Facebook waits before making changes is getting too long for comfort.

Case in point: yesterday, Facebook announced a series of changes designed to reduce application spam. You know – the apps that force you to invite friends so you can see the results of the quiz you just took, or the ones that send mail to your personal email account (such as the Movies app that spammed me 5 times over the weekend).

According to the Facebook Blog (emphasis mine):

• When you get a request from an application, you now have the ability to “Block Application” directly from the request. If you block an application, it will not be able to send you any more requests.




• A few weeks ago, we added the ability to “Clear All” requests from your requests page when you have a lot of requests and invitations that you haven’t responded to yet.




• Your feedback now determines how many communications an application can send. When invitations and notifications are ignored, blocked, or marked as spam, Facebook reduces that application’s ability to send more. Applications forcing their users to send spammy invitations can wind up with no invitations at all. The power is in your hands; block applications that are bothering you, and report spammy or abusive communications, and we’ll restrict the application.




• We’ve explicitly told developers they cannot dead-end you in an “Invite your Friends” loop. If you are trapped by an application, look for a link to report that “This application is forcing me to invite friends”. Your reports will help us stop this behavior.




• We’ve added an option to the Edit Applications page that allows you to opt-out of emails sent from applications you’ve already added. When you add a new application, you can uncheck this option right away.




• Applications must now give you advanced warning if you’ll need to invite friends to get information or access content. So you should always know ahead of time if that quiz you’re taking will require you to invite friends to see your results. If you see applications withholding content without warning, go to that application’s About page to report it.

The changes come only after Facebook members griped for months about spammy apps. And notably (see the boldfaced sentences above), Facebook isn’t being nearly as aggressive as members may have hoped. Instead of simply banning rogue apps, Facebook tells members that THEY have to do the complaining.

I think it’s time for Facebook to take more responsibility within the app ecosystem it created. ISPs routinely blacklist email spammers. Facebook ought to do the same for bad apps.

MySpace Learns From Facebook

Yesterday, MySpace finally launched its developer network. Soon, you’ll be able to bite, pinch and slap your friends on MySpace just like you did on Facebook.

Although MySpace is 9 months late to the third-party-application party (Facebook opened its platform last May), it’s clear that the social networking giant has learned something from Facebook’s experience thus far:

1. App developers can use MySpace tools to sell advertising. This is smart because it allows MySpace to keep its hand in the game. Facebook’s hands-off approach means apps have to come up with ad strategies on their own. Developers don’t have to use MySpace’s tools, but they will undoubtably make it easier for apps to generate revenue.

2.  Apps are hosted on MySpace servers. Correct me if I’m wrong about this, but I’m pretty sure Facebook apps are hosted on third-party servers outside of Facebook. If that’s the case, then MySpace probably will have a lot more visibility into how the apps work and the way they interact with user data. Some of the problems Facebook has had with rogue apps using deceptive practices may not happen on MySpace.

3. Apps must pass a “safety review process.” All apps running on MySpace will need to go through a safety check to make sure they don’t overstep privacy boundaries, according to a company statement.

The true test will be whether developers will flock to MySpace as they have to Facebook (now with 15,000+ apps and counting).  But surely the parameters outlined above will bring more legitimacy to the app marketplace.