NI-Limits Blog

The Future of Widgets and Their Role within Advertising:

The future of widgets and their role specifically within the advertising distribution and eventual control of mass-marketed media has been a subject floating around our office for quite some time. Many a conversation has been kicked-off at stand-up, resulting in scribbles on the whiteboard and a whole host of heated explanations as to what exactly a widget is and why it is likely to help smooth-out the transition that will surely occur when traditional advertising slips from under our feet and fades comfortably into history…

Basically, a widget is one of those fancy things the cool hip kids have on their desktops, or the modern slick websites have scattered all over the place:

A widget essentially combines a collection of media-rich programming languages into a transportable paragraph of code that can be easily exported to other websites and online services:

The most distinguishing characteristic of a widget is that it is viral, in the sense that from wherever the widget is seen, it can be just as easily copied to another site, from where it continues to spread:

There has recently been much attention to the value and future of widgets, which was in part brought on by an article published by USA Today:

For nearly a decade, GarageBand.com was the quintessential struggling Web company, barely hanging on as it burned through $17 million. Until widgets. Since it developed a widget, one of the mini-Web applications now flourishing on Facebook and other social-networking sites, the company — renamed iLike — has become an overnight sensation.

In May, iLike had 3 million registered users of its music website. After its widget became available on Facebook, it ballooned to more than 10 million users on Facebook, 15 million overall. And iLike is now growing to the tune of 3 million users per month. “We’ve become as big the last few months as during the entire history of this company,” says iLike CEO Ali Partovi, tracing the San Francisco-based company’s origin to 1999.

Though most Americans wouldn’t know a widget from a sprocket, widgets are all the rage on the Web. Marketers are thinking of ways to use them to sell ads, and venture capitalists are mulling investments in the hottest widget makers. “Widgets are an extension of someone’s personality,” says Chris DeWolfe, co-founder of News Corp.’s (NWS) MySpace. “It offers a window into their taste in music, how they feel at a certain time, their opinions. Just having friends and sending messages on a profile can be utilitarian.”

Widgets run the gamut from the useful — comparing music and film tastes — to the inane — biting each other to become virtual zombies. A classic example is Renkoo, the producer of Booze Mail,which lets Facebook users send virtual tequila shots, hot chocolate and other beverages. FunWall, the most-popular widget on Facebook, with 2.8 million daily active users, lets users post photos and videos on the profile pages of their buddies.

It may sound like a fad, but YouTube, which was sold to Google for $1.7 billion last year, was once a widget. The new widget wave took off in May, when Facebook opened its site to third-party developers to create widgets to run on the social network. Widget-mania has helped more than double Facebook’s membership to 50 million, and elevated its market value to $15 billion after Microsoft (MSFT) paid $240 million for a 1.6% stake in it last month.

Although the USA Today article may have made an impact on those already not paying attention to the world of widgets, even the All Facebook Blog pointed-out that the article was in fact referring to Facebook Applications, rather than widgets in general…

Facebook is just one platform upon which widgets can be spread…

Are widgets different than Facebook applications? I sure think so. According to Wikipedia, a web widget is “a portable chunk of code that can be installed and executed within any separate HTML based web page without requiring additional compilation.”

The key is that a web widget is portable. Among the top applications on Facebook, the majority appear to be widgets. I don’t actually think all of these applications are actually widgets though since they can’t be exported to other sites. Content that appears on your Facebook profile won’t be able to show up on your blog. In theory the “Fun Wall” application should be able to display content posted by people that visit your blog as well as your Facebook page.

So how does this effect the advertising world…?

For a start, when TechCrunch UK announced that Channel 4 had launched a widget contest, we certainly paid close attention, not only to TechCrunch’s UK division finally picking up on a decent story, but Channel 4, wow… We never dreamed of looking at their site until we heard about the competition and the fact that they were giving away RM 10,000 to anyone able to mash-together something from their hordes of RSS feeds:

Two runners up will also get £250. They will create a gallery of all the mash-ups received that meet the judging criteria. The full guidelines of the competition are outlined here. The submission deadline is 10th January 2008 at 5:00pm. And winners will be announced on 8th February 2008. First prize is £1500 cash with two runners-up prizes of £250 cash each.

When O’Reilly gets serious, you know it’s time to pay attention, especially as they were the ones that coined the phrase "Web 2.0"

This is especially true and yet more mysterious and intriguing when they start-out by demonstrating a very interesting new advertisement from (do not want to spoil the surprise) from Bring The Love Back:

O’Reilly goes on to explain:

The conceit behind this video is that advertisers think they know consumers and know what they want but they really don’t. Nearly every Web 2.0 business model depends upon the promise of delivering more targeted advertising. The ability to make advertising more relevant will determine whether Web 2.0 succeeds in the market.

Ad agencies will admit to the limits of traditional media, saying, okay, maybe we don’t know consumers the way we ought to but this new technology is going to give us all that. With social networking and viral videos, we will learn more and more about consumers, and produce advertising that is more relevant to them.

This only goes to support IBM’s claims that traditional advertising will come to an end within 5 years:

To survive in this new reality, broadcasters must change their mass audience mind-set to cater to niche consumer segments, and distributors need to deliver targeted, interactive advertising for a range of multimedia devices. Advertising agencies must experiment creatively, become brokers of consumer insights, and guide allocation of advertising dollars amid exploding choices.

Consumers have tired of interruption advertising, and are increasingly in control of how they interact, filter, distribute, and consume their content, and associated advertising messages. Amateurs and semi-professionals are increasingly creating low cost advertising content that threatens to bypass creative agencies, while publishers and broadcasters are broadening their own creative roles.

This correlates very well with what the O’Reilly team continue to explain:

Now, there are many different views of advertising. Some people even like ads. Few people say they do. Advertising might be viewed as a kind of tax that we agree to pay on the pleasure we get from media. If the tax gets too high, it begins to take away the pleasure. One seeks to avoid advertising (if possible through pop-up blockers or TiVO), just like death and taxes.

In traditional media, there are common practices governing the proportion of commercials to programming on TV or the amount of advertising to editorial in newspapers and magazines. Google also established a fairly comfortable mix between advertising and content on its search pages, reducing the amount of clutter found on other search engines. How much advertising is enough on YouTube videos or your Facebook and MySpace homepages?

Google also followed traditional media’s rules that kept a clear separation of paid placement and useful content. This separation has defined the dual role of modern media — to serve its audience while also serving its advertisers. This so-called separation of church and state serves us well, but it’s not clear whether the distinction between content and advertising will survive the web.

Through all this turmoil regarding distribution, the widget can only evolve…

Newsweek claimed 2007 to be The Year of The Widget:

If you sit in front of a computer at work, chances are there are certain Web sites that you monitor throughout the day, every day—to check e-mail, weather, stock portfolios or sports stats. But, thanks to widgets, taking multiple steps to track down headlines in one place and then check your e-mail in another may seem woefully outdated this time next year. These mini applications, also called “gadgets” are simple bits of code, easily dragged onto a desktop or pasted into a personal page, where they are constantly updated with whatever information you want.

If 2006 was all about social networks, user-generated content and YouTube, then it’s a fair bet that 2007 will be about further personalizing life online. Already, portals like Google and Yahoo! offer customizable pages. Want to see a calendar, learn a new word-of-the-day and check local windsurfing conditions all from your homepage? No problem, you have thousands of widgets to choose from. And the fact that they’re so intuitive has made the features very popular.

This has not gone unnoticed by content providers. Old-media juggernauts like The New York Times, The Wall Street Journal and ESPN have begun allowing users to design the page they see when they log on. Flickr.com, the photo-sharing site, lets its members create a “badge” that they can post on their blogs and personal home pages to let friends know when they’ve uploaded new snapshots. Last month, Fox Interactive Media (comprising all of Fox’s sites as well as MySpace, RottenTomatoes.com and AskMen.com) launched its own platform, called SpringWidgets.

This, of course, is music to advertisers’ ears. Target has a gadget that counts down to Christmas; Wrigley’s sponsors a Winamp media player that looks like a pack of gum; UPS has a package-tracking widget. Purina put its name on a weather widget —to let users know if it’s nice enough outside to take Spot out for walkies—that was downloaded more than 15,000 times in its first two months. This may seem like a paltry audience for two months of advertising. But consider the fact that the Purina logo now sits on every one of those 15,000 desktops.

In truth, and as pointed-out by Giganom, the corporations are obviously not joining the dots quite as well as the rest of us are, because when one looks "at the numbers for investments in widget distribution platforms and widget suppliers, and it becomes clear that this not a stampede but more like a Sunday stroll through the widget park"

A widget is just an embeddable bit of web or desktop content wrapped up in a nice user interface. You can put widgets on blogs, social networking profile pages, or on an Ajax start page, though not all widgets can be embedded on all kinds of pages.

Though many companies might use widgets to promote and distribute their content or features, there are two categories of startups that, to me, represent relatively pure bets on widgetization. The first is widget development, distribution, and packaging platforms like Clearspring or Widgetbox; the second, widget suppliers like RockYou or Slide.

But taking a look at widget platforms and social networking widget purveyors, we can get an idea of whether 2007 has seen a stampede towards widgets or perhaps something more genteel, as seen through the gathered funding data for widget distribution platforms and widget distributors in the table below:

This doesn’t represent all the funding for such companies. Fox Media is building SpringWidgets, so that investment doesn’t appear here. Widgetbox has been rumored to have taken additional funding from Sequoia. And some companies have reported investments but declined to provide specific figures. Still, this gives an idea of the magnitude of interest in the space.

You could also argue that companies like YouTube and PhotoBucket are widget companies — and if you added in their acquisition prices the numbers do start to get really big, really quickly (partly, of course, because acquisition prices represent the entire value of those companies).

The total funding for these companies is just under $60 million, a respectable number but by no means a stampede towards widgets. This could reflect the uncertainty around how to make money with widgets and widget platforms. Or perhaps it’s more evidence of investor sobriety.

It is for this very reason that we started Widget Pi, in order to develop custom-built widgets branded to meet the specific needs of our clients.

 

 

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