Today, CNET published an article, Widget Makers Get a Makeover, that reviews the challenges inherent in being a business dependent on Facebook or MySpace.  It is definitely worth reading. CNET quotes several prominent investors who question the viability of building a stand-alone business on a single platform – one that restricts advertising and can at any time change the rules of the game and/or build your app into their platform.

As long as platforms have existed, so too have the tension between application developers and the underlying platform.  Microsoft steadily builds features and applications into the operating system – Netscape, etc – and it can be of little to no surprise that Facebook and MySpace are acting in similar fashion.

Perhaps the news here is not that building an app business on a single platform is a risky idea, but that anyone ever thought otherwise.  Unfortunately, the article seems to suggest that the widget space itself is somehow suffering as a result of a recognition of the obvious, i.e. that dependency on one/two platforms that are constantly changing is a major business risk.

Widgetbox is now serving close to 60m uniques per month, up from 49,000 uniques two years ago. Importantly, Facebook is well less than one percent of our traffic. Why?

Widgetbox is premised on the fragmentation of the web and a belief a healthy network is one comprised of hundreds of thousands of nodes and not 4-5 large walled garden nodes. Yes, there are millions of users in the gardens, however, the balance of power is not favorable and the garden owner’s interests are often not aligned with your own.  Our network comprises not only tens of millions of users, but importantly it is comprised of over 1.1m different domains.  The diversification inherent in our network ameliorates the concerns CNET mentions. Channel masters – Wal-Mart, Dell, Microsoft – make life hard for product companies. App vendors need to be careful not to end up like Levi’s – commoditized by Wal-Mart, enjoying huge volume, but losing value and appeal in the process.  On the web, will access to users concentrate like retail sales or will the very different economics of digital allow for mililions of front-doors to users and an even balance between providers of syndicated content and services and their “distributors.”  We are clearly betting on the latter.

The article also goes on to address the real advertising and monetization challenges facing the social media space. While the forecasts look rosy, $10.6bn by 2012 (Forrester), media buyers and brands continue to wrestle with very real issues regarding how to buy distributed media consumption – lack of ad standards, lack of analytics, fears of unknown domains and brand risk, etc. My last post noted that the top 10 sites on the web account for 28% of web page view and yet 76% of ad spend. In my experience, the article is right on in detailing how media buyers are in the early stages of understanding how to buy, how to build creative, and how to measure social media advertising.

Changing behavior is always a challenge, however, with major media is leading the way and selling distributed consumption – think Hulu or CBS Interactive. Widgetbox is working hard to break down the frictions that are limiting social media advertising, and we look forward to sharing with our peers and colleagues best practices that can help turn the space from novelty to standard line-items in the media budget.

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