The Fragile Facebook Economy: Developers Struggle As Rules Change

Among the more than 650,000 developers who make a living in the ecosystem around Facebook, resentment is brewing. A redesign to the service several months ago has made it tougher to recruit new app users and make money. But Facebook says third-party developers will play a big role in the future.

By C.G. Lynch
Wed, January 28, 2009
Page 2

After Facebook Traffic Spikes, Relationship Changes

But the redesign represented what Rafer calls the "coup de grace" in a sequence of events during the last year that showed Facebook was clamping down on the number of ways that application developers could enable their products to incubate across the social network.

When the Facebook platform first launched, the company put few restrictions on how developers could market their products. After a Facebook user installed a new app, the application maker would often invite the user's friends to install it as well, flooding homepages with invitations in what became known by blogs and publications covering the space as "app spam." Facebook, one by one, began closing or constraining these channels.

Rafer says Facebook kept the platform so open for a period of time to gain traffic, and when they had garnered the eyeballs and surpassed MySpace as the largest social network, they closed the door a bit.

"They had this huge amount of traffic by then, and they were big enough to get Madison Avenue's attention," Rafer says. "So they clamped down on some of the apps, which, frankly, many of which were trash anyway. The developers thought the Facebook platform in its 1.0 version was their God-given right. They thought it was Facebook's moral duty to maintain it. Well, it's their [Facebook's] playground and they can do what they want."

Since the fall 2008 redesign, the smaller Facebook app developers have likely fallen hardest off the monkey bars, since these developers relied heavily on the profile pages for their applications. Without the clout extended to bigger shops like RockYou and Slide, they also feel much less inclined to complain about Facebook's move publicly, for fear their situation could worsen, especially if they have investors funding their long-term business plans.

Today, many of these smaller developers won't talk on the record. An organization called SF Beta arranges a monthly mixer cocktail party for members of the Bay Area start-up community. Earlier this month, at an event held at 111 Minna St., a bar in San Francisco's South of Market district, some young application developers were in attendance mingling over six dollar beers and colorful drinks. Many developers who had started small companies talked with passion about the effects of the Facebook redesign, now that they've had several months to monitor the effects. When asked how his apps fared after the redesign, one developer made the sound of a plane crashing.

Some small shops do say publicly that the new Facebook Platform landscape has evolved into a more challenging business environment. Game developers have fared better than others, because in addition to ads, their applications derive money from users paying them directly for extra features.

Akron, Ohio-based developer Matt Maroon has taken $20,000 in funding from yCombinator, a venture capital firm that gives small rounds to start-ups in their infancy. His company, Blue Frog Gaming, builds fantasy sports applications that run on top of social networks, including Facebook. He says the redesign hurt big and small developers alike, especially if they weren't mindful that the rules could change.

Facebook "really hurt the Slides and RockYous and those guys," he says. "As a developer you're always cognizant of the fact you're playing in someone else's backyard. They put display ads on [those apps] which pay almost nothing. The games are making money and no one else's seems to be."

Chrys Bader got out of the Facebook app-making business nearly a year ago, before the trouble really began, he says. He co-created an application that integrated Yahoo! Answers on top of Facebook, then sold his half of the business in February 2008. The app today still enjoys a small following, but it wouldn't be a big business, he says.

"At first, the platform opened up and there wasn't any limits," Bader says. "You could automatically invite anyone to the app. If someone was coming to me now and saying they want to create a Facebook app, I'd tell them all the problems and how hard it is."

All the developer shops also live with the knowledge that Facebook might someday push any third-party app aside by providing similar services to users itself. iLIke, a service that allows people to share music interests and playlists, is one of the of the most popular applications on Facebook. Rumors have gone around Silicon Valley that Facebook would make its own version of just such a service. Rafer says it would be better for Facebook's image to purchase iLike.

iLike declined comment for this article. But some other leading Facebook developer firms say they're confident that Facebook doesn't want to allocate the amount of necessary resources to compete in that way.

"If you build an application really vibrantly, and you're incredibly dedicated to it, it's actually very difficult for Facebook to copy and improve the user experience," says Rabois of Slide. "As an example, we have a whole team that does nothing but innovate on top of the Top Friends application."

Continue Reading

Our Commenting Policies