So what's fueling the frenzy? After all, many in the industry unofficially crowned 2007 the "Year of the Widget," but sources like eMarketer are only forecasting widget ad spending to reach $40 million in the U.S. this year. That's up 166% from last year, but a drop in the bucket when compared to overall social net spending, which is pegged to hit $1.4 billion.
It's the promise of what widgets can deliver that has VC firms "enamored with the widgets and apps business," according to eMarketer senior analyst Debra Aho Williamson. "The way that these bits of code can spread virally through a social network is promising. And they're self-selective," Williamson said. "So whether it's branded by Coke, BMW, Dell or whoever, the consumer decides whether or not to have it on their page."
Still, Williamson said that consumer widget adoption far outpaces advertiser spending--in the same way that social net usage eclipses social net spending. "Right now, there are far more widgets installed than there is ad revenue to support them," she said. "And there's a lot of experimenting with ad strategies, but none have really been driving growth. So these VC's are taking a gamble on what may be the next big wave of Internet advertising--but it is by no means clear that they're going to win."
Matt Hulett, CEO of the less-than-year-old WidgetBucks, said that the company's growth into an ad network that snags 100 million unique monthly visitors across some 20,000 publishers is what attracted the latest investment. The growth serves as concrete proof that the WidgetBucks monetization model--which includes a tech platform that dynamically changes the kinds of ads served based on real-time performance--is viable, sustainable, and most importantly, easy for advertisers to buy into.
"We're not trying to convince Microsoft or Sony to advertise on a Facebook horoscope application--which is one hard sell," Hulett said. "We're using math and analytics to build dynamic display ads, so a company can look at traffic and say, 'I want to buy ads on your top 100 tech sites' and do that. They can buy ads just like on any other network. Widget is in our name, but we're not really trying to morph advertiser spend into a new concept."
Hulett said that Seattle-based WidgetBucks plans to use most of the funds to fuel the company's technology developments, including tweaking the algorithms that serve ads for maximum publisher yield, as well as sales and marketing to expand into new verticals like travel, financial services and text ads.
"We're known as a contextual shopping ad network with widgets--like an AdSense for e-commerce," Hulett said. "But we'll be expanding into new verticals like travel, debt relief and text ads in the next five to seven weeks. We're moving out of shopping and going horizontal."