Facebook Developers Are Getting Too Cocky

Last week, Slide Inc. got a big $50 million investment round. It’s definitely the largest funding of an application/widget developer that I’ve heard about.

Max Levchin, Slide’s founder, has every right to be proud of his accomplishment. His company’s applications are among the top time-wasters on Facebook, and he’s getting ready to unleash more apps for the upcoming MySpace platform.

But, in an interview with The New York Times’ Bits blog, he makes what I consider a very disturbing statement. According to reporter Brad Stone’s blog entry, Levchin said:

“It’s impossible for social networks focused on scaling the network itself to build all the niche applications that bring people and keep people on these sites,” he said. Just as consumers bought Windows to play games, organize their taxes or create documents, application makers like Slide “add the bulk of perceived value to the consumers of these Web platforms,” Mr. Levchin said.

It’s disturbing because without access to Facebook’s code, Slide’s apps wouldn’t even exist. No doubt Facebook feels like IT offers a lot of value to its members. Not to mention the fact that Facebook lets developers keep all of the revenue they generate. More time spent on developers’ apps = less time with Facebook features = less revenue for Facebook.

It wouldn’t take much for Facebook to change the terms and start taking a cut of what the developers generate. Levchin and others ought to remember that.

Widget Advertising: How Big Will it Get?

Businessweek reporter Aaron Ricadela has a great article about the widget ad business. In it, he quotes Will Price, a managing director at the Hummer Winblad VC firm, estimating that the entire widget ad market will amount to just $20 to $40 million in 2008.

It’s not clear from the article if this figure is simply including advertising placements on widgets or if it includes the money marketers will spend to create widgets and applications to promote their own brands and properties.

With widgets promoting movies becoming the norm for entertainment companies and even Hellman’s mayonnaise getting into the act, this could be a big ad business indeed.

Facebook Phishers, Spammers and Adware, Oh My

It was bound to happen. Phishers are putting fake wall posts on Facebook profile pages. When you click the link, you’re redirected to a fake Facebook login page. Type in your user name and password and voila, it’s now in the hands of the phisher. Not cool.

Meanwhile, some unscrupulous application developers are tricking people into installing apps they don’t want. Facebook is trying to stop this behavior, according to a post on its Developer Blog.

And a Facebook app called Secret Crush reportedly tricks users into downloading adware to their computer. This is particularly worrisome because Facebook members routinely install apps on a whim, without knowing much or anything about the developers behind them. As Fortinet states in its description of the rogue app: “In a digital world where web traffic equals money, such a user base attracts spammers, virus/spyware seeders, and other ethic-less online marketers like honey would attract flies.”

If Facebook doesn’t stop all of this activity in its tracks, the app business will be in big trouble.

UPDATE: Zango, the advertising company named by Fortinet in the “Secret Crush” investigation, is denying any involvement with the matter.

Too Much Noise in the Widget Marketplace

Thinking about adding widgets and Web applications to your online marketing strategy this year? Then your head is probably spinning. I haven’t seen this many companies falling all over themselves for a piece of the action since the late 1990s.

Which brings me to this article in Forbes. According to data in the article from Adonomics, which tracks installs and users of widgets, there are 100,000 companies worldwide developing widgets. Widgets and applications already in use — such as FunWall, Super Wall and Scrabulous — have a combined market value of $374 million, the article says.

Of course, Adonomics — owned by Altura Ventures, the “first Facebook-only VC,” according to its Web site — would naturally want to promote the widget marketplace to the fullest.

But even at half that market value, this fledgling widget/application economy is looking pretty robust. Now, it’s up to the developers to find concrete ways to monetize all those Zombie downloads.