• PaidContent.org, Wednesday, February 11, 2009 11 AM

Last year, AOL scooped up Goowy Media, a widget app developer, for an undisclosed sum. PaidContent.org's Tameka Kee wonders whether this was another hasty investment by the Time Warner company.

Is the widget economy even economically viable? VCs obviously have high hopes, having invested nearly $13 million in widget startups in the past four weeks alone. However, according to eMarketer, app-based social media spending is only expected to reach $70 million this year. That, Kee points out, is less than 6% of the $1.3 billion advertisers are expected to spend on social media overall. EMarketer Senior Analyst Debra Aho Williamson says the notion of a "widget economy"--with sky-high valuations for startups that aren't profitable yet--had no basis anymore. "This is still a developing market, and most of the companies are spending their resources on making the widgets smarter, more intuitive and improving their tracking capabilities," Williamson said. "Are many of them making a profit? I'd tend to say no."

The EMarketer analyst adds: "Last year it was about the rush to just 'do a widget' that's fun but didn't have much use. Advertisers have decided that they need to be more than just fun-they need to serve a purpose. If you can provide real-time pricing info on a product right on a review site, that's an interesting model." To that end, Williamson expects consolidation across the widget the space, soon.

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