Sharing the Widget Wealth

(page 2 of 2)

The extra boost in traffic and time spent on social networks may seem like payment enough from widget makers. But considering the potential for competing advertisers to detract from the network's own advertisers, some networks have been reluctant to open up their pages to an influx of third-party widgets. Widget makers say News Corp's (NWS) MySpace, for example, has blocked some third-party widget makers who either sell, or are hoping to sell, ads on their small programs. The most well-known example is MySpace's block of popular photo-sharing widget maker Photobucket (see BusinessWeek.com, 4/12/07, "MySpace Plays Chicken with Users"). The company is now reportedly acquiring Photobucket for $250 million. MySpace did not return requests for comment.

Revenue-Sharing Inevitability

After MySpace, Facebook is the second-largest social network, according to Hitwise. Widget creators are hopeful that, should Facebook open its doors to them, even with a revenue-sharing deal, MySpace will have little choice but to follow suit. "It certainly puts pressure on social networks to be more open," says Haroon Mokhtarzada, chief executive of Freewebs, the maker of a tool that lets users select and customize a variety of widgets from a Widgetbank, launched May 21. "Users are going to go to where there is more freedom."

Mokhtarzada believes a revenue-sharing economy is inevitable. The reason is that most widget makers are willing to share their revenue with the sites they rely on for distribution, provided the sites don't want so much that widget makers can't run their businesses. And provided they don't want that money before the makers have had a chance to generate revenue to share.

The widget economy is, in many ways, still in its infancy. Freewebs plans to host a widget conference in New York at the beginning of July. At the conference, widget makers will discuss how to charge advertisers in order to then be able to work out such revenue deals with social networks and others.

Meantime, social networks may just have to settle for the traffic boost. "I think, at this stage of the game, they are just going to have to allow it to happen," says Alex Blum, chief executive of KickApps, a company that enables publishers to customize widgets and serves widget advertisements. "But as time goes on there may be a widget economy that comes out of all of this," he says. And its chief currency is all those attention-grabbing features filling up Web pages.

Holahan is a writer for BusinessWeek.com in New York.