• by Liz Tascio , August 2, 2007

In its push to become the social utility of the future, Facebook has offered marketers unprecedented access to the site and its 30 million members.

Click-throughs? Engagement? Does all that sound so last year? Moving on, then.

Or rather, building on. Facebook added another dimension to the structure of online marketing this spring by opening up its API (application programming interface), allowing anyone, from an anonymous adolescent to a team of Google developers, to create new applications for the site's 30 million users.

Now, marketers who had been strategizing about racking up friends on MySpace are building tiny branded applications on top of Facebook Platform, then stepping back as users download and distribute them as they see fit.

The ability to do this came in May, with the launch of Platform, but social networking sites like MySpace were using widgets before that. What Facebook did - opening the API to any developer and letting them make money off their applications (the term the company uses to differentiate from earlier iterations of widgets) - pushed the whole idea a step forward.

Facebook, founded in February 2004, is comparatively small. U.S. traffic to the site increased 9 percent within a month of the Platform launch, but it had only about 11.5 percent of market share as of this spring, compared to MySpace's very healthy 79.7 percent, according to Hitwise.

But its new idea changed the game for online marketing in social networks - already one of the fastest-growing areas of ad spending, expected to account for $865 million this year and $1.8 billion by 2010, according to eMarketer. Even more significantly, Facebook's new approach may well have ushered in Web 3.0, by fusing the various ways online marketers have been trying to reach consumers, creating a targeted, viral, user-generated, highly engaging way to spread a message - all on a network rich with consumer information.

We're All on the Same Page

Engagement used to mean keeping users interested in one spot for as long as possible, such as a branded microsite like Bud.tv or on a Web page with one killer application. This is a practice that excluded other brands, according to Rohit Bhargava, the blogger behind Influential Marketing Blog, who is also head of the interactive marketing team at Ogilvy Public Relations Worldwide.

The use of widgets, he says, demonstrates the opposite of that strategy. "Yahoo can market right next to Google, who can market right next to Bud," he says. "And that's okay, because that's how we consume products in our lives."

Facebook Platform launched with more than 80 applications from 65 partners. Amazon.com introduced a book review app that lets users see what friends are reading and buy books; the Washington Post and Slate.com launched political applications; and Red Bull posted Roshambull, a version of rock, paper, scissors. That one incited a flurry of complaints - users noticed there were suddenly Facebook members named "Rosham Bull" or something similar - a marketing taboo on a network that prides itself on requiring real identities.

As of mid-July, there were more than 1,700 applications. An app from music-recommendation service iLike had 3.8 million users, second only to the 6.2 million-strong Top Friends, which lets users track friends without having to search the site.

The rising tide didn't only lift Facebook's boat. Just before its application launch, iLike had 3 million registered users on its own site. Within two weeks, it added 3 million more.

"The marketers that have the most success on Facebook do so because they create campaigns and offers that are unique to Facebook users," a Facebook spokesperson says. "For marketers to have success, they can't just slap a brand on a widget. They must create a full application that brings utility to users."

Branding a useful application is much better than simply building a branded page on a social network, says Emily Riley, an advertising analyst with JupiterResearch.

"The point of a social network is communication," Riley says. "The No. 1 reason why consumers go there is to talk with friends. That's where the trust happens. That's where the communication is occurring. If advertisers have their own profile, they're essentially competing with that.

"With widgets, suddenly people get to stay on the page, on their friends' page," she adds. "It doesn't look like an ad, it looks like content."

A Personal Dashboard

Social networks don't necessarily drive hordes of traffic to make purchases; most users go next to a portal, an e-mail service, or another social networking service. But users spend significant amounts of time on the leading networking sites - about 18.5 minutes per session on average, more time than they spend on entertainment, shopping and financial sites, according to Hitwise.

"What's happened over the years is that their profile has become their home base," says Bill Tancer, general manager for global research at Hitwise. "It's where they start and end their visits."

Allowing brands to freely distribute widgets to - and make money from - these clearly engaged users may seem like giving away the store, but Facebook says the new initiative won't hurt its advertising revenue; if anything, the company expects ad revenue to increase.

"Facebook Platform opens up even more advertising opportunities for us and for marketers," a Facebook spokesperson says. "Not only do Facebook applications increase the pages on which we can monetize, but application developers can also take advantage of the sponsored content options we offer today to promote their applications."

Besides, when it comes down to it, branded applications have a unique usefulness, but they're still not the most efficient way to advertise on social networks, says JupiterResearch's Riley.

"The most efficient use is actually through text advertising and banner advertising," because of the sheer number of page impressions on social networking sites," Riley adds. "There's just a lot more inexpensive inventory that's not really targeted to any content."

Caroline Little, CEO and publisher of Washingtonpost.Newsweek Interactive, says her company hasn't advertised on Facebook or any of its rivals. But the publisher did put up two Facebook applications, the Post's Compass, a survey, and Slate.com's Political Futures, a betting game, in order to reach a younger demographic than typically visits its own sites.

"I think this is actually more useful than buying a banner ad because it raises awareness of us, and it shows some of the new and upcoming things that we're doing and that we do really well," Little says. "And it's right there, you don't have to click on it."

There's also a benefit that comes from consumers opting in.

"People are going to choose widgets that they have an affinity for and an interest in," says Shervin Pishevar, president of Freewebs, which runs a widget bank. "The visitors to those pages are most likely sharing something in common with those users." The Compass, which tells a user her political affiliation after she answers questions on a few major issues, was picked up by more than 250,000 users in four weeks.

Whether a user adds a bit of "bling" to his profile - a widget that promotes an upcoming movie, say, showing he's in the know - or a photo-sharing or news application, the widget adds context to his online identity and gives him more control over how he receives and shares information.

"Once you start to really be able to personalize your dashboard to the Internet, it's great, and it's hard to go back to something else," says Chris Marentis, CEO of Clearspring, a provider of cross-platform widget services.

The Plumbing's in Place

What does Platform mean for other networks?

Niche networks can survive and even thrive by integrating with Facebook or a competitor that launches something similar, but a general network that still needs to build a huge base of users will be hard-pressed to compete, says Luc Levesque, founder and general manager of TravelPod, an social networking site begun in 1997 and purchased this year by Expedia.

When Platform launched, TravelPod jammed on overtime to post its own application within a week, helping members integrate their Facebook and TravelPod experiences.

"If you build something on Facebook, you have 30 million users right away," Levesque says. "It just got a lot easier to launch something, a social network application, without having to build all the plumbing." Note that success, measured by sign-ups, was most marked for those developers who got in there early (as apparently TravelPod did). Developers who were slow to jump on the bandwagon have been quite disappointed.

But there's plenty of room for improvement. As soon as the list of applications gained bulk, it became difficult to find what you wanted. A search on Facebook for "Amazon" a month after launch brought up three applications with a total of about 70 users, but not the monster book review app. Browsing the list in order of popularity brought up applications involving emoticons, horoscopes, poking and other fluff, alongside more useful photo- and video-sharing apps.

"The No. 1 concern of both advertisers and agencies in the social networking space is clutter," Riley says. "There's absolutely too much content going on, and everybody knows it. I think the most important thing is that consumers can find what they're looking for."

Though the bugs are still being worked out on Platform, observers and analysts agree that widgets and applications have the ability to deepen and personalize a user's Web experience, and establish a richer way for consumers and marketers to interact.

"The structural change to the Web happening now, from unstructured to structured, is going to create another big, profound change in the way people engage in the Internet," Marentis says.

"It's more like, can I interest this person enough that they invite me into their world in some way?" he adds. "Can I maintain a relationship and a dialogue with them and become part of their everyday life?"