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?
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There are a lot of potentially interesting business models that widget companies including yourminis are experimenting with...
Some are...
1. master affiliate and referral model - ie you act as the master affiliate in widgets that drive traffic / conversions / actions to a site like amazon, ebay, etc...
2. once in widget transactions are enabled widget companies will be able to take a percentage of the sale or charge a transaction fee to the vendor rather than the user...
3. sponsorships - you can charge companies to skin / wrap a widget with their brand or content...
4. super syndication - ability to be able to quickly distribute a widget for a brand that is time sensitive - ie movie premiere and charging for this super syndication...
There are a lot of other creative models that are all in early experimentation form - we will see which ones rise to the top.
Posted by: alex | June 22, 2007 at 02:50 PM
Facebook does indeed allow the widget developers to show their own ads and keep all the money. This is what is so special about the Facebook plattform.
On MySpace, you were either taken over by News Corp., had to contract with them or had to charge your users for the service.
On Facebook, you can do whatever you want.
Posted by: Sebastian | June 22, 2007 at 02:52 PM
This is a great question. I keep seeing entrepreneurs who have these great ideas that they want to use to build traffic. Traffic can be a great thing if you have something else to offer. Look at the whole open-source template thing for websites with Joomla. It's an investment in your future. It's like entering an art contest. You give your work in the hope that if you win you will get paying gigs next.
Posted by: Roger Anderson | June 23, 2007 at 05:55 PM
I would suggest that you can re-frame your question on widgets to also include the immediate benefit that the business offering the widget gets from the placement and use of it by the right target audience v. CPC/CPM.
Along your original thought, widgets as a stand alone element can easily be relegated as primarily a brand-building exercise for content-only players. I'd agree that the footprint of a widget doesn't allow for much more than a text link ad (which does happen to have a market).
At PatentMonkey.com, we're making patent data access more accessible and portable (e.g. our patent pdf widget: www.freepatentwidget.com). Our goal is to offer an expanding amount of functionality that was only available by going to another site (=widget 101 stuff). We can showcase our ease of use with free access to content while trading for branding awareness + an option to engage more with our target user base along our larger strategy which extends beyond just patent search and content delivery.
In marketing terms, we can measure how much a widget is worth by comparing traditional CPC and ROMI costs with the traffic the widget offers. Monetizing the widget beyond those terms is gravy, kind of like asking why ads aren't being run on this blog. :)
Posted by: CoryS | June 24, 2007 at 11:48 AM
That is a very interesting story. I believe fully that the answer lies in a platform that is designed to reward the developers as much as the content owners and the distribution sites. Check out my blog post about this: http://www.someelement.com/2007/06/from-libraries-to-platforms.html
Posted by: Ryan Gahl | June 24, 2007 at 07:47 PM
the superstar model work for the applications;
they become popular, someone notice it and buy it. http://mashable.com/2007/06/26/facebook-frenzy/
Posted by: ld | June 26, 2007 at 07:15 AM