Widgets: From Hype to Hits

Peanut Labs, a company that integrates market research surveys into online communities, approaches monetization from a different angle. It offers developers and publishers 50 percent of revenue generated from hosting surveys on applications. The surveys are integrated into the applications by allowing users to earn virtual currency, redeemable through the application, for each survey they take.

Along with allowing their publishers to monetize content, widgets also enable them to tailor this content for specific audiences. "They're a pull mechanism rather than a push. Consumers take it themselves," explains Cunningham. "With banner ads, you say, 'I want to get people back to my site,' but that's not the behavior users want to do unless it's for something specific."

In this sense, widgets exist as a strategy not only for marketing but also distribution. According to Lawrence Coburn, who founded evaluation site RateItAll.com and authors the blog Sexy Widget, widgets form part of a "hub and spoke" model for companies' online presence. "The holy grail here is a distribution service," Coburn says. Flixster's Facebook application, for instance, syncs with the main site, offering users different platforms of access to its services.

Widgets also serve as a key method of distribution for other sites. Social music sites iLike, Last.fm, and imeem allow members to embed modules for searching for music, sharing playlists, and playing songs onto their pages. Spleak Media Network's CelebSpleak allows teens to create, share, and rate short briefs (between 50-250 words) on celebrities through widgets and instant messages, which sync with each other.

Rather than visiting individual sites for different types of information or entertainment, users are increasingly designing their own online destinations -- whether blogs, profiles, or other personal pages -- and adding content from multiple sources. Startpage aggregators such as NetVibes capitalize on this trend, and widget embeds are one of their top functions. In some ways, this trend resembles a personalized, more interactive version of the Web portal, which was popular during the heyday of AOL.

The click-through is far from extinct, however. "The radicals in Silicon Valley are saying that destination sites are dead, but that's risky," says Coburn. "Facebook could be dead tomorrow. For branding, monetization, and insurance, you still need a central site."

Rather than replacing the banner ad, widgets are slowly influencing the older Web advertising strategy. "I anticipate, based on the things I've been working on with partners, that soon there will be a big move in advertising toward focusing displays on interactive advertisements," says Hooman Radfar, CEO of widget company Clearspring Technologies. Clearspring, in partnership with rich media advertising company PointRoll, enables widget publishers to make widgets appear as ads.

EyeWonder, another leading rich media ad company, also allows widgets to appear on Web pages as banner ads through its SocialWonder service in partnership with Gigya. According to Mike Griffin, EyeWonder's EVP of corporate development, widgets enhance the interactivity already present in rich media ads by "rewarding" viewers of advertisements.

"There are three phases of advertising," says Griffin. "There's the initial engagement, where you're grabbing attention, then interactivity. The ability to download the widget is the reward part. [Viewers are] taking a piece of the brand that they can revisit as often as they want."

July's Widgetcon offered preliminary evidence of widgets' impact on marketing. At the conference, Cunningham introduced the Widget Marketing Association, whose goal is to define standards and key metrics for widgets in order to serve customers as well as online research firms such as comScore. In addition to Webs.com, the association's members include Widgetbox, RockYou, yourminis, Gigya, Google, and Slide. Eventually, says Cunningham, he hopes to see the creation of a universal ecosystem online for widgets.

Such an ecosystem may be well on its way. In response to Facebook's application platform, Google announced its OpenSocial platform, which allows developers to create widgets for all its member sites using a single API, greatly simplifying the task of programming for multiple sites. OpenSocial members include RockYou and Slide as well as social networks such as Ning, Google-owned Orkut, and the biggest of them all, News Corp.'s (NYSE:NWS) MySpace. Google's success in enlisting these members, particularly MySpace, fueled speculation that OpenSocial would overtake Facebook as the preferred widget ecosystem. OpenSocial does not yet, however, allow for sharing widgets across multiple sites, limiting its distribution potential.

For now, OpenSocial and Facebook will most likely serve as complementary platforms for developers and advertisers. Nonetheless, the competition between the two demonstrates that over a year after the first pronouncements of the "widget craze," the appeal of widgets not only remains intact but also continues to grow.