When Facebook opened its platform to third-party developers in late May, mom-and-pop shop widget makers from California to Turkey cropped up everywhere to capitalize on Facebook's fast-growing user base of 52 million people. Now, only six months later, there are 7,000 applications in the Facebook directory, and more than 100 are added each day.
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Initially, it was easy to dismiss this widget economy as a microcosm for another Web bubble. College kids, armed only with a widget and a prayer, developed one-hit wonder applications that spread across Facebook like viruses. Their instant success sometimes led to multi-million dollar offers from overzealous buyers hoping to scarf down the remaining pieces of the Web 2.0 pie. But in reality, analysts say widget makers are not only creating innovative, user-friendly products, they're also making a bunch of money—real money—from ads.
One start-up vendor, RockYou, might be the best example. Its founders got a head start on the widget craze two years ago when they created a widget that allows pictures to scroll interactively on top of MySpace pages. "They caught on like wild fire," says Jia Shen, the company's CTO and cofounder. The investment community around Silicon Valley also noticed RockYou's success, says Ray Valdes, a Gartner analyst. He estimates companies like RockYou and its primary competitor, Slide, are currently valued between $100 million and $200 million.
While most traditional businesses and their IT departments won't be rushing to create widgets for the social networking community (just yet), analysts say there's plenty to learn from this tenacious group of developers. They have fashioned a new paradigm for application development: Technology providers should no longer expect users to seek out technology; instead, the technology should seek out the users by following them to their chosen platform. In many cases, that platform will be sites such as Facebook. The eventual death of the desktop operating system, coupled with the much-hyped Generation Y entering the workplace, means corporate IT departments must learn how to build applications that flow to social networking sites and customized homepages such as iGoogle. "Some people have said this is a function of faddishness, but it's not," says Stowe Boyd, a Web 2.0 expert who runs a consultancy, The Messengers, and pens a blog on Web 2.0 and other technology issues. "There is clearly a collection of unmet needs that are compelling people to adopt these technologies on Facebook in lieu of stuff they've used in the past."
Read on to learn the lessons of the widget makers.