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Facebook, Friendster, and others are starting to let third-party developers build new features to attract more users—and profits
Dom Tolli envisions a day when people will be able to push a few buttons on their cell phone and post a list of their favorite ringtones on their social-network profiles. As vice-president of value added services for Virgin Mobile USA, Tolli wants Virgin's 4.6 million customers to be able to do more than passively surf their favorite social-networking site. He even has a team of developers standing ready to build the necessary program—they just can't get access to the software to make that happen.
Tolli and his team need the technical specs that let Virgin or other third-party developers create new services that work smoothly with social-networking sites. In tech jargon, these are called APIs (application program interfaces), and they're the software hooks used by developers to build new applications that can communicate glitch-free with existing programs.
Trouble is, most social networks keep these specs under wraps. Until now. Social-networking sites are realizing that if they want to grow their user base—and build a sustainable business model—they need to attract third-party developers. "Social networks have reached a point of maturity, and opening APIs will help them grow," explains Adam Trachtenberg, a senior manager for eBay (EBAY). The auction powerhouse made its software available so others could easily link to its site. Today, some 40% of its listings are actually posted on other Web sites, providing eBay with billions in revenue from fees.
Spark for Innovation
Now, several social networks are about to open up. Facebook—aimed at college students and a pioneer in opening up its APIs—will move its developer program out of beta testing. The company won't say exactly when it will make its software generally available, but says it will be soon. Rivals such as News Corp.'s (NWS) MySpace.com, LinkedIn, Friendster, and Google's (GOOG) orkut are expected to follow suit and open their code to third-party developers this year as well—promising to kick off a spurt of innovation in social networking. "Part of what's exciting about a developer community is you don't know what people are going to do," says Lucian Beebe, director of product management at LinkedIn, which is considering opening up its software. "It offers you the ability to harness innovation."
Facebook, orkut, and Friendster confirm they are actively looking at making their software specs available to developers (see BusinessWeek.com, 1/27/07, "Building a Safer MySpace"). MySpace declined to comment.
Most social networks say they see clear benefits in opening up their code. Since Facebook, a network of 17 million college students, started a pilot program last summer, third-party developers have created some 100 new applications. Now a Facebook user name and password can be used to log in to content-sharing and chat site Mosoto, and to automatically import Facebook friends into Mosoto's buddy list for chat. Facebook itself does not offer a chat function (see BusinessWeek.com, 11/1/06, "Facebook's Changing Fortunes"). "This is really just the tip of the iceberg," says Mark Zuckerberg, Facebook's chief executive officer. "We realize we can never provide all applications [our users want]."
Traffic and Revenue Growth
Neither could search giant Google. Because its software specs are available, some 30,000 third-party developers have incorporated Google Maps content into thousands of other Web sites, like Yelp.com, which offers restaurant reviews. Whenever Google's map pops up on Yelp, so does the Google logo. "This is tied directly to branding and traffic," says Bret Taylor, a senior product manager at Google. Taylor also points out that new applications allow more people to discover your site, which can translate into greater revenues since more viewers mean higher ad rates.
After social network Friendster opened up its proprietary software to a select dozen or so developers six months ago, the number of unique visitors rose by 17.6%, to 18.8 million, in December, 2006. "This is our biggest [month-over-month] growth since launch," says Jeff Roberto, marketing director at Friendster. Now, for example, Friendster users can create slide shows of photos on Slide.com and then post them directly onto the social-networking site.
If the experiences at Friendster and Facebook are any guide, this may be the year when social networks become even more social.