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Big Changes As Facebook Outsources Traffic

Facebook on Monday opened up massive parts of its site to third party developers, a move that effectively allows other sites to let users post updates, share pictures and links, and interact with Facebook without ever visiting "Apparently, the company is prepared to lose gobs of traffic and, in turn, revenue from display ads on the site," notes BusinessWeek's Douglas MacMillan.

Software developers are now likely to build thousands of different Web sites, desktop clients and mobile apps using the new Facebook Open Stream API. "You're going to see people creating a lot of different means of interacting with what is ultimately this incredible engine of communication which is Facebook," says Mashery's Oren Michels. As MacMillan notes, this should sound familiar to Twitter users. For most of its three-year history, the microblogging service has been an open platform, allowing third parties to create Web site and applications like StockTwits and Tweetdeck. In fact, Twitter users now post messages using these services with greater frequency than they do on itself.

This strategy may work for Twitter, which doesn't intend to make most of its money from placing ads on its homepage, but at Facebook, display ads on the homepage make up the bulk of the company's $300 million in revenue. "If a slice of the site's 200 million active users start relying on some third-party app rather than visiting, revenues could take a hit," MacMillan points out. Because of this, many believe Facebook will start selling in-stream ads, which would appear alongside status updates and news stories.

Read the whole story at BusinessWeek »

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