Widgets are the coolest thing now. InsideFacebook has a story today about a guy who built a "Where I've Been" map widget that has attracted 400,000 Facebook users. Now he is struggling to pay for servers and bandwidth...with no revenue stream. he has basically built a free service layered on top of another free service, something I call The Remora Business Model. The remora is a type of fish that attaches itself to a larger fish like a shark or even a boat. It rides along with its host and feeds on whatever comes by. The remora can also detach from its host, swim on its own, and survive. Can widgets survive separate from their host?
What are widgets? I have several examples of widgets on my blog; things like Lijit (search), MyBlogLog (readers photos), Feedburner (subscriptions) , Sitemeter (traffic stats), and Criteo (blogroll). Other examples are things like stock tickers, news feeds, and of course, Google's AdSense widget which delivers ads to web sites and blogs.
MySpace and Facebook are huge social networking hosts that are attracting lots of widget builders. Some of the widgets are gaining hundreds of thousands of users. Great, but how do you convert those users to revenue? MySpace and Facebook will not allow the widget guys to put advertising in their widget. It is somewhat impractical anyway since widgets are typically small 2X2 applets with no room for an effective advertisement.
What is the business model for widgets?
- The Freemium model, upselling from free to premium services seems to be the best bet, at least for now. Many of the widgets provide a free service with options to buy premium services such as more detailed traffic statistics, more powerful services, enhanced customization, or higher levels of service.
- Sponsorship might make sense. A simple "Sponsored by Big Company" tagline across the bottom of the widget might fit well. I don't see how larger advertising units would work for a small widget, and I doubt the "hosts" would allow it.
- Revenue sharing with your host - Facebook and MySpace don't need to share their advertising revenues with the widget guys, but a smaller social network might want to. If I were the owner of a social network and wanted to build an ecosystem of developers building cool widgets on my platform I would indeed share some advertising revenue with them.
- Syndication network - If your widget distributes content widely,, think YouTube, then the content owners might want to pay you to get their content on your widget.
What other business models make sense? If you can't do advertising, and you haven't figured out any premium services to upsell, what can you do? Clearspring takes a completely different approach. They are a widget network that allow content providers (video, image, text) to use the widget to distribute, control, and monetize their content. Clearspring makes money from content owners that want to use their widget, not end-users that want to play with it.
Do you have any other ideas on revenue models for widgets?