Sharing the Widget Wealth

Widgets jazz up profiles and boost traffic, but eat into social networks' ad revenue. Facebook and others ponder a remedy

by Catherine Holahan

Call them Web page bling. They're widgets, the shareable programs that let Internet users do everything from display photo slide shows to embed multimedia movie trailers, music, and audio messages. Over the past year or so, millions of Web users have employed widgets to accessorize their pages on social network sites, such as Friendster and Bebo.

For the makers of the applications, widgets are a potential gold mine. Slide, the maker of popular slide show tools, reaches about 50 million viewers a day, says founder and Chief Executive Max Levchin. "These are features for self-expression…that can create very engrossing experiences for users," he says.

They're also good for social networks as they help boost site traffic and time spent on a site—actions that advertisers crave. But there is a downside for social networks, too. As widgets incorporate more advertising—such as movie trailers and brand logos within picture players—they can grab attention away from the ads the social networks sell on their pages, making those spaces less valuable and creating competition for the clicks that generate advertising revenue.

So the social networks want their share.

A Widget "Tax"

Several network owners are discussing with widget makers how they can help disseminate and split the revenue from advertiser-supported widgets and widgets that are advertisements themselves, such as movie trailers. RockYou!, a maker of popular widgets including a countdown-to-event widget, is discussing revenue-sharing deals with several social networks, says Chief Executive Lance Tokuda. Similarly, Friendster is open to revenue-sharing opportunities, says Director of Marketing Jeff Roberto. "The social networks will exact some sort of a tax or a revenue split because the widgets live inside the frame of the social network," says Slide's Levchin. "There is a huge incentive for MySpace, Facebook, and everyone else to make sure that we stick around."

Facebook may be taking extra steps to ensure that Slide and its peers stick around. Facebook is considering letting third-party companies, such as widget makers, provide their services on its site, The Wall Street Journal reported on May 21. A Facebook representative declined to comment on the story, instead noting that the company plans to make some announcements at a May 24 event. Facebook reportedly does not plan to share revenue with the widget makers, who believe such revenue splits are only a matter of time.

Does Traffic Trump Payment?

It's up for debate just how much of a tax social networks deserve. On one level, widgets already give social networks a popularity boost with users. In the five months after Friendster opened its site up to all widgets in August, 2006, it added more than 5 million new users and is now serving more than 200 million pages a day. Roughly 39% of the site's users have a widget in their profiles, and users with widgets tend to be more active, says Friendster's Roberto. He adds that the users who continually update and add widgets to their pages—he calls them "content mavens"—draw more users to those pages. "All of those dynamics play up to more activity and more registered users," says Roberto. "Right after we opened up the site [to widgets] we did see a spike."

RockYou!'s Tokuda says that his company's widgets, and those of other widget makers, had a similar effect on Bebo, another popular social network site. "Widget providers increase their traffic because it gives their users more things to do," says Tokuda, adding that users see widgets as a means of self-expression.