Facebook Initiative Will Help Define Digital Future

Facebook's independent developers' forum--an unprecedented call for innovation transformed into a capitalistic free-for-all--will have wide-ranging universal impact.

It is rare for any company to lower its walls and make an at-large appeal for future growth ideas. Although Facebook is uniquely positioned to host this event, it is first and foremost the product of enlightened management, which understands that individual talent and intelligence are a company's most valuable assets.

Founding chief executive Mark Zuckerberg, 23, who keeps tight rein on his private little enterprise, has not strayed from his launching vision three years ago. Facebook has the vibrant users, agile platform, and nimble company structure necessary to capitalize on inventiveness at every level. Since it opened its platform last spring, Facebook has hosted and integrated new features and functions from 4,000-plus registered active developers; some 120,000 people have accessed the developers' online application.



While Facebook and the more successful developers are the immediate beneficiaries, all companies and consumers are winners. It is the epitome of the amorphous digital interactive marketplace, with the Internet at its core. Yet in some ways, the initiative is almost academic. Participating developers and others share their insights and information on dedicated blogs called Developer Garages. While competing for the favor of Facebook users, there is a unique level of camaraderie and shared intelligence. It suggests what it must have been like for the young founders of Yahoo, Google and Microsoft when they were unknowns brainstorming in their home garages and basements.

(Some suggest that a founding affinity between Zuckerberg and Microsoft chairman Bill Gates has driven the software giant's interest in making a $500 million-plus minority investment in Facebook. So much for Microsoft chief executive Steve Ballmer's warning that Facebook and other social networks run the risk of becoming fads.)

Relative to the results, any costs associated with the developers' showcase has to be minimal for Facebook, even as it allows developers to share its users and potential ad revenues. In the end, the developers' forum may be the most cost-efficient research and development initiative in the history of American business. So far, the winning applications provide more service and functionality than fun, and deep interaction with other Facebook friends. However, sustained revenues and the prospect of profits are uncertain.

Many of the participating entrepreneurs already are generating hundreds of thousands in advertising-related revenues. Venture capitalists have created funds to support and even to buy some of the new applications that mesh with some of their other online portfolio investments.

The initiative has quickly progressed from developers being invited to build new businesses on Facebook's backbone to receiving grants of up to $250,000 from the company to create tools, services and enhancements for the site. The Facebook economy, as it is being called, is rendering some fascinating developments., an ingenious Web tool created by Chicago college graduate Jesse Farmer, provides a stock market-fashioned monitor of and analytics for new Facebook applications that tracks its hourly value based on the number of users among Facebook's 40 million-plus active base. On Friday, Adanomics assigned a valuation of between $10 billion and $15 billion to Facebook, which translates into $250 to $375 per active user. The analytics provided for each application is tantamount to independently generated data on which advertisers and potential investors can base their assessments and pricing. Adanomics generates revenues from sponsored links and services to help developers monetize their applications.

Overall, Adanomics had tracked more than 350 million installs across 5,268 applications on Facebook. The applications had been used more than 25.6 million times in the previous 24 hours, giving them a combined total valuation of $292 million. It wasn't long after it opened shop that Adanomics (originally called Appaholic) was acquired by Altura Ventures for its first Facebook-only VC fund, which is seeking to back other entrepreneurs.

Perhaps the most enduring byproduct of Facebook's developers' platform will be the collaborative headway it provides on many creative and financial levels throughout the Internet. To that end, News Corp.'s owned MySpace--which is working to add new dimensions to its platform--could gain footing by adopting some of the same applications, even as it reportedly is losing maturing users and some of the nearly $1 billion ad dollars spent on social networks to Facebook's more progressive functionality.

Sources say Facebook's biggest payoff will come from the development of more advanced mobile applications and the development of its own personalized ad network, which may encompass newcomers to its site, such as Lookery, Slide and AddFuel. Facebook also is under pressure to create new support services to maintain developer interest and momentum, and to decide how much of the viral access it will continue to provide.

Facebook already is reaping the wealth of embracing or duplicating its own new applications. They range from file storage of members' digital media and a brand-name virtual food fight, to pasting signs and symbols on Friends' walls. Some have funky names, like Zombies and iLike. The applications that can be easily ignored, adopted and eliminated by Facebook members widely vary, from games to the exchange of products.

Overall, this time of testing and harnessing talent is critical to Facebook successfully maintaining the soft lines between engaging user communications and content, technology and advertising. "We believe this may be the beginnings of a very efficient business model," observes RBC Capital Markets analyst Jordan Rohan.

Facebook's trailblazing has taken center stage in the Silicon Valley gold rush. Google has always mandated innovation as part of its annual budget. Google and Microsoft fund and enable outside developers to build widgets supporting their new services. Yahoo founding CEO Jerry Yang says he'll give developers access to build new tools designed to keep users longer. General Electric and Microsoft are among the select public companies that place a heavy emphasis on innovation. Not surprisingly, all of these public companies have market valuations in the hundreds of billions of dollars.

Well, if Facebook isn't yet worth $100 billion, as Zuckerberg believes, it soon could be.

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