Sharing the Widget Wealth
Widgets jazz up profiles and boost traffic, but eat into social networks' ad revenue. Facebook and others ponder a remedy — Call them Web page bling. They're widgets, the shareable programs that let Internet users do everything from display photo slide shows …
Context & Ripple Effects
The widget story has been building all month: TechCrunch catalogued the wave of advertising-backed widgets on May 7, Read/WriteWeb mapped how shareable mini-apps were spreading across the wider web on May 10, and John Cook's Venture Blog framed Mpire's launch as evidence that 2007 was shaping up as 'the year of the widget.' Business Week now supplies the economic tension underneath that growth.
The confirmed mechanics: widgets jazz up profiles and pull traffic toward social networks, yet they eat into those same networks' advertising revenue by occupying profile space without buying media. Whether Facebook will actually act is unconfirmed — reports say it and other networks are only 'pondering a remedy,' and same-day speculation that Facebook widgets are on the way remains exactly that.
First-order effects
- Social networks such as Facebook are watching their prime monetizable surface — the profile page — fill with third-party widgets that hold user attention without contributing ad dollars, a direct hit to per-page inventory value.
- Widget developers get free distribution and audience reach inside networks whose traffic they help grow but whose revenue they dilute.
Second-order effects
- If the networks follow through on a fix — still only contemplated, not announced — expect gatekeeping mechanisms such as widget approval or revenue-sharing that convert today's free placement into a paid, controlled channel.
- Advertisers gain leverage: with engagement splintering across embeddable widgets, networks face pressure to price profile inventory more competitively or bundle it differently.
Third-order effects
- The pattern points toward platforms formalizing third-party applications into governed marketplaces, where the host — not the developer — sets the terms of distribution and takes a cut of monetization.
- It also illustrates a synthetic-supply dynamic: user-installed widgets expand page content faster than ad demand grows, structurally depressing the value of the surrounding inventory.
The trend: Profile pages are shifting from network-controlled ad real estate to developer-distributed content, forcing social networks to choose between openness and monetization control.