[20 September 2007]
The Seattle Times (MCT)
SEATTLE—Snapvine is a quintessential Internet startup in so many ways.
At its loft in Pioneer Square, Cameron, the dog, follows secretary protocol and greets you at the door, while a beanbag chair large enough for three anchors the far end of the room.
Minus its appearances, there’s one stark difference between Snapvine and other Internet companies: It isn’t trying to create a flashy new Web site to draw in millions of users. Instead it wants to make already successful sites even more engaging.
Well, it’s not if you listen to the many converts.
Companies are starting to forfeit creating communities of their own and leveraging others instead. To do so, they are building applications called widgets that can run on popular social-networking sites, such as Facebook and MySpace. The strategy could signify a shift in the way business is done on the Internet today.
The concept is akin to the early days of personal computing when Microsoft started letting other software developers create applications for its operating system. Microsoft benefited because more applications created a larger and more loyal customer base.
Facebook, a Palo Alto, Calif., site that began as a social network for college students, is leading the charge on the Internet.
In May, it opened up its site to allow third-party developers to build applications. So far, Facebook has drawn more than 2,000 applications. Locally, Snapvine, Amazon.com, Microsoft, BlueNile, Picnik, iLike, Jobster and Shelfari are among those that have created widgets, and the list is growing quickly.
Those companies, including Snapvine, are gaining interest from venture capitalists as widgets evolve into a new marketplace.
The opportunity may be lucrative. MySpace, owned by Rupert Murdoch’s News Corp., still dominates the social-networking arena globally, reaching 74.7 million unique visitors in May, according to Nielsen/NetRatings.
Facebook, a privately held company, was second, with 18.2 million visitors, and Bebo, used primarily in the United Kingdom, had 5.8 million users.
In many cases, those large communities can mean hundreds or thousands of new users overnight for a small, widget-creating startup, although it’s the Wild West when it comes to figuring out which applications will be popular.
David Card, an analyst with JupiterResearch, said few people in the U.S., or less than 25 percent of those surveyed, have ever added a widget into a personalized Web page. And although that figure hasn’t moved much over the past few years, he thinks they’re at a tipping point.
“Facebook is the first sign that we are going to see widespread adoption,” he said. “I think this is a new movement, and it’s starting to show some traction.”
For widget developers, there are still a lot of unanswered questions in this new microeconomy. Primarily, most companies have yet to figure out how they will make money.
Consider what Snapvine has accomplished in the less than two years it’s been in business.
The company’s service allows people to record a voice message and send it to a friend on a MySpace page or similar site. The service is popular because people typically only communicate on social-networking sites via text. Voice adds another dimension of an individual’s personality.
Joe Heitzeberg, the company’s chief executive and co-founder, said Snapvine’s widget is on about 200 different social-networking sites, and its player—which is used to listen to messages—is reloaded nearly 22 million times a day by people logging on to their profiles.
Snapvine is an extreme case. It was so focused on building applications for other sites, Heitzeberg said, you couldn’t figure out what Snapvine did if you went to its own home page. The company redesigned its site last week to remedy that, but he said: “Friends would say, what’s up with your front page?”
But he didn’t care.
“They (the users) were coming through other pages; no one was coming to our front page,” he added.
Thousands of companies and individuals have been quick to develop applications for Facebook, but most companies thought hard about whether it was a good idea to develop an application based on their business.
Heitzeberg said Snapvine knew it had a greater opportunity if it leveraged several communities rather than trying to build its own.
“You could be a niche site that is very small, but by making use of all of them, the opportunity can be much bigger,” he said. “You don’t want to have to compete with other social-networking sites.”
Another Seattle-based Web site, iLike, has seen instant uptick on Facebook. The company’s widget allows groups of friends to share music and make dedications to one another.
Its own site has 4 million users, whereas 7 million to 8 million Facebook users have already added the iLike application since it was launched at the end of May. What’s more, iLike is adding about 50,000 to 100,000 new users a day, said Chief Executive Ali Partovi.
The feedback has been so great, he added, that today most of iLike’s 25 developers work exclusively on building new features for Facebook.
Looking back, the decision wasn’t so obvious when iLike first heard of the opportunity to build a Facebook widget.
“At the time, it was a scary decision,” Partovi said. “In hindsight we can claim we were geniuses, but at the time, there were some worries if we would become dependent on Facebook in some way that we might regret later.”
But in the end, iLike found it too risky not to do it. “If we didn’t, some other music company would be there instead, and take all the spoils,” Partovi said. “We saw it as a once-in-a-lifetime opportunity.”
Jonathan Sposato, CEO of Seattle-based Picnic, had similar reservations after hearing about the platform in April, a month before it launched.
“Of course, I discussed it with my team, and we knew it was potentially a very, very huge opportunity, but a giant unknown,” he said.
Picnic is developing a Web site where people can edit photos using easy-to-learn tools without having to buy expensive software.
So far, the company has had more than 200,000 installations of Picnic from Facebook users, compared with the roughly 2.5 million people who have visited Picnic since its launch in March.
Seattle-based BlueNile, which sells high-end jewelry online, also has a Facebook application, a simple widget that allows people to post a wish list of BlueNile items on their profile page.
Darrell Cavens, BlueNile vice president of marketing and technology, said it helps that the cost of building an application was low. “It wasn’t going to cost us much in terms of time to put it up there, so why not dabble in it a little bit before we go whole hog down the path?” he said. “We are pretty obsessed with value for the consumer, and not just doing Web 2.0 for the sake of doing that.”
Many hope their efforts, small or large, will pay off.
For starters, one benefit of launching a Facebook application is the built-in distribution—access to its roughly 35 million users. As incentive, Facebook also offers each application a home page of sorts that has two spots for advertising. One is for the developer; the other is for Facebook to sell.
But that’s where the easy revenue ends. Everyone is left to figure out the rest on their own.
Seattle-based Jobster, which sells recruiting tools to companies and is creating an online job network, has made at least $218,845 in new business from Facebook.
That revenue stream is two-pronged. For $99 a month, Jobster offers clients the option of adding their company to Jobster’s Facebook application. From there, users add the Jobster application, clicking on the companies they’d potentially like to work for.
Jobster also sells additional ads to its clients to get more attention on the application.
iLike is also seeing some financial success. Partovi said each Facebook user is more valuable than the ones on their own site.
“They are more active, they are more loyal, they make more page views and with those page views we can make more money off of them,” he said.
Part of that value comes from having more demographic information about the Facebook user than about users on its own site. For instance, with Facebook, you know whether a user is male or female and his or her interests, such as snowboarding.
Snapvine is taking a different approach. Instead of focusing on selling banner advertisements, it also sells ads that people listen to on the phone before recording the message to be sent to a MySpace or Facebook page.
It also can partner with a film studio allowing movie stars to send messages to users about their new movies. But most companies are building the applications to gain audience and then will figure out how to make money.
Picnic’s Sposato said: “I think the right answer is we’ll see. I’m optimistic that there is a model.”
THE FACEBOOK MARKETPLACE
What: A widget.
How it works: Facebook launched a developer program May 24 to let third-parties create applications for its site. Widgets may be created for other sites, but Facebook is one of the only ones with a true developer platform.
Opportunity: There are lots of social-networking sites on the Internet, with the three most trafficked being MySpace, owned by Rupert Murdoch’s News Corp.; Facebook, a privately held company; and Bebo, which is used primarily in the U.K.
Here are some applications on Facebook:
Popfly: Built by Microsoft, it is a Web tool that allows Facebook users to create applications and add them to their profiles with no programming.
Book Review: Amazon.com developed the application to let Facebook users write book reviews on their profile pages.
My Questions: A polling application that lets you ask questions and get answers from your friends.
Moods: Lets users add emoticons to their profiles to show how they’re feeling.
Texas HoldEm Poker: Play poker with your Facebook friends. New users get 200 chips, and can get 500 more chips when they invite a friend.
Where I’ve Been: An interactive map to show everyone where you’ve traveled.