I enjoyed the recent article on CNET about widgets and the struggling business models associated with these apps. Even if Slide or RockYou (40m people use the Wall app) have an installed base on Facebook, Hi5, Myspace, Bebo, etc etc and millions of dollars in VC funding have been plowed into these social startups, the ability to make money and grow these businesses into a $100m revenue line is elusive.
A few take aways from the CNET article “Widget Makers Get a Makeover”:
– Atomization of the web has proved to be viral and scaleable on the usage front. Not necessarily so on tying revenue to those usage models. I think there is an analogy watching what Google is doing with the Feedburner asset (blog on feedburner), AdSense and RSS monetization?
– Advertisers dont seem to like UGC and are still skeptical on this “new medium” where they still dont understand the interactivity factors. Fast-forward to the end of the article….advertisers take a long time to understand where their customers reside and understand what their customers are doing online. Curious to see how Visa fares, for example?
– Education: Widget makers are moving to language such as “social entertainment applications” to describe the experience; putting lipstick on the pig or evolving the landscape and maturing the marketing message?
– And the forecasts….”Forrester Research predicts.. in a report late last year that ad spending on “emerging channels,” which includes social media and widgets, will grow to more than $10.6 billion by 2012, one-sixth of the overall $61 billion spent on interactive marketing by that time. That’s up from about $2.1 billion it expects in 2008.” Seems really really aggressive? I am quite skeptical to say the least. But these are the types of numbers that support the ridiculous valuations of Slide, RockYou and Facebook (oh yeah, and LinkedIn)!
– Again: “Within emerging channels, the research firm forecasts that social media will drive most of the ad spending. In 2012, it expects ad sales to social media sites will be $6.9 billion, up from $1.5 billion this year and $600 million last year.”
– I completely agree with Ms. Li in that “this market is extremely confusing to marketers, some who even don’t understand what Facebook is,” said Charlene Li, a former analyst at Forrester Research. “The VCs are taking a step back, but what’s the reality behind this, is that it takes a long time for marketers to understand where their customers are at.”