Facebook's Impact on the Widget Economy
Last night I attended a technology event, Refresh DC. Refresh DC provides local companies with the opportunity to speak for an hour about a topic of their choice. Last night's event was sponsored by Clearspring and the topic of discussion was widgets.
Context & Ripple Effects
The widget story has been building since May 2007, when Business Week asked who would profit from sharing the widget wealth and CNET wondered whether Facebook widgets were on the way. By September the question is no longer hypothetical: Facebook has climbed to third place in page views, opened listings to public search, and just launched fbFund with Accel and Founders Fund to bankroll app startups.
First-order effects
- Widget distributors like Clearspring — sponsoring events such as Refresh DC to own the conversation — now have to decide whether their business runs through Facebook's Platform API or around it.
- App developers gain a funded path onto Facebook via fbFund grants announced at TechCrunch40 on September 17, 2007, redirecting startup energy from standalone embeds toward platform-native applications.
Second-order effects
- Rival social networks MySpace and LinkedIn are pressed to match Facebook's developer economics, since the discussion at Refresh DC frames the contest as one over where users' social graphs reside.
- Widget makers that built on open embed-and-share distribution face repricing: access to the largest page-view audience now runs through a gatekeeper that can change terms.
Third-order effects
- If the pattern holds, the widget economy splits between independent embeds and platform-captive apps, with the platform owner capturing both distribution and — via programs like fbFund — early-stage equity in its own ecosystem.
- A developer class whose revenue depends on a single platform's policies sets up the structural question the stack-capture debate turns on: who owns the audience, the graph, and ultimately the business.
The trend: Social networks are absorbing the open widget ecosystem into gated application platforms, converting third-party widgets into dependent tenants of the host.