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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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YAWP – Yet Another Widget Post

Comments (11)

While the SXSW crowd is a-twitter, I’m still thinking about the range of private emails I’ve gotten about my widget post.  While some of the comments were assertions that I’m an idiot, there were a few that caused me to think harder about the opportunities (or non-opportunities) to build real businesses around the construct of widgets.  In addition, Mike Hirshland wrote a post challenging several people (including me) to debate whether or not someone could build a company around “widget management systems” that could generate venture returns and one of Mike’s partner at Polaris – Sim Simeonov – wrote an extensive post titled Widgets, Widgets, Everywhere on his view of this.

In the emails I got, several people misinterpreted my point of view so I figured I’d start with a quick summary.  I think widgets are an incredible distribution mechanism for web-based functionality.  I love widgets – and love the widgetization of the web.  However, I’m struggling to see where the real business opportunities are in “wrangling widgets” (or – more simply – “widget management systems and infrastructure.”)

Whenever I think of something like this, I start with the assumption that there are no fundamentally new business models.  In my experience, almost every business I’ve ever seen on the Internet either has a non-Internet real world analogy (an analog analogue), a non-Internet software analogy, or a previous incarnation on the Internet in some previous phase (Web 2.0 anyone?)  While the technology, implementation, distribution, user-interface, and infrastructure dynamics change, the business models rarely do.

To me, widgets are application packagers that enable you to embed specific functionality from a web site (or web service) into another web site.  Sim provided a similar view from a slightly different angle in Widgets, Widgets, Everywhere by saying “widgets are the next step in the trend towards disaggregation of content at the production end and aggregation of content by the consumer.”  My view of widgets today is that they are tightly coupled with the long tail – adoption seems exciting (and pageview (widgetview?) ramps seem huge) because of the long tail effect (vs. moving up the curve to mainstream media.)

When I stare at this and think about the different ways to build businesses to support this, I come up with four business models:

  1. a new form of ad network: analogous to DoubleClick
  2. a widget management system (WMS): analogous to CMS’s
  3. a content distribution network (CDN): analogous to Akamai
  4. an analytics business (Stats): analogous to pick-your-analytics package

I don’t buy that #1 (ad networks) is a big moneymaker.  Several people hit me over the head with a brick and have said “widgets will generate 10 zillion ad unit page views per day.”  I’m struggling with this – you’ve got issues around form factor, content rights, revenue share, long tail critical mass, and many incumbent ad networks that are dealing with different approaches to widgets.  Maybe there’s room for one new one to emerge – the way FeedBurner emerged around feed-based advertising, but that begs another question which I’ll leave for you to ponder.

#2 (WMS) is great and helpful to me as a publisher, but I don’t know how to monetize it.  I’d love a single WMS / widget container for all my widgets.  If I’m a Typepad user, I’ve already got this and I assume WordPress.com will nail this also.  I expect the CMS platforms can and should quickly integrate this – it’s not technically difficult and continues to improve the value of their CMS.  As a blogger, I’d be hard pressed to pay an incremental fee to a widget CMS company (I’d do a rev share on #1, but I don’t know where the ads would go!)  Most of the stuff I’ve seen fits in this category and I’m impressed with what a few of them are doing functionally, but I’m still struggling with “turn the money on.”

#3 (CDN) seems like there should be something interesting there.  I’m already having periodic performance issues with some of my widgets and if you’ve been following along with Fred “the king of blog bling” Wilson’s performance issues, you will appreciate that a real CDN could be helpful.  However, the long tail bites (or “tangles”) again – the only people that will pay for this are at the head of it so the real network effect doesn’t pay off big here. 

#4 (Stats) just won’t work.  Google commoditized the long tail stats market when they bought Urchin and made it free.  We already saw this with feed stats – the vast majority of them are now free. I believe long tail stats – like Wikipedia (and – according to the FSF – software) – really want to be free.

If you think I’m missing something – obvious or otherwise – I’m all ears.  And – if you think I’m really wrong, please keep hitting me over the head with a brick.

  • http://www.derekscruggs.com Derek Scruggs

    This is as good an analysis as any I’ve seen. But what I really want to know is, what’s going to happen with Twitter? They definitely had a strong presence at SXSW, but I don’t recall a single person saying “this will be huge” – not even Evan Williams on the panel I saw him on. (I admittedly only saw part of it.)

    But *everyone* I talked to said something along the lines of “how the hell can they possible make money at this?”

    I do give them props for best t-shirt, which simply said “wearing my twitter t-shirt”

  • http://simeons.wordpress.com/ Simeon Simeonov

    Brad, in terms of business models, I see (1) as the most likely with (3) and (4) coupled to it as part of a “whole solution” (they are difficult to monetize on their own). Completely agree w/ you re: (2), it’s a non-starter.

    I have a social experiment up to test the wisdom of the crowd in sizing the market opportunity for the widget economy using the ad network business model. I invite everyone to participate.

    http://simeons.wordpress.com/2007/03/15/the-market-size-for-widgets/

  • http://www.vcmike.wordpress.com VCMike

    Brad: Why do you assume that widgets are tightly coupled with the Long Tail? Based on the conversations I’ve been having it seems pretty clear to me that, from a content creation perspective, widgets are being embraced pretty strongly by the head, neck and thorax too. Which — I think? — changes one’s assesment of the 4 models you laid out.

  • http://www.widgetbox.com Ed Anuff

    Brad, it sounds like you’ve made up your mind regarding the idea of widget distribution as an ad network, but consider this. Most widgets today are provided by their developers for the purpose of generating traffic, acquiring users, or driving transactions. That sounds a lot like advertising to me.

  • http://Tasmaniaconsulting.com Adrian Bye

    Given the mass amount of traffic this can drive, you could use the data you will collect (ie stats) to provide a behavioural targeting feed to other ad networks. ie, if you’re collecting real time information about what users are doing, you can use this data to help improve advertising targeting.

    This data is highly valuable and improves the user experience. It needs to be handled carefully so that privacy expectations are met.

  • http://www.ajira.com Nari Kannan

    Long Tail is good but the other part of the body is scary but its non-presence on the web as predicted even before the dot.com boom. If you look at the 100B$+ spent on advertising on the whole it is mostly soap, shampoo, beer, movies and automobiles. Do you see them in any meaningful way anywhere on the web in any advertising?

    No. That’s because currently the branding and advertising mechanisms don’t provide any incentive for anyone to click on any of these ads. If you click on an ad for say Dove Soap, then what?

    That’s where widgets could hold the key! They could do things like enter into a contest right from the CNN web page or download an electronic coupon or do something else that’s interesting!

    Beyond Google, beyond the Long Tail, widgets could hold the power to bring in the biggest bucks beyond “Mom and Pop’s Bobbleheads Shop” in Missisippi somewhere!

  • http://boulderreport.typepad.com Jerry Lewis

    I have to wonder how many people downloaded their first-ever widget this week with both Yahoo and CBS Sports offering NCAA score widgets. Something tells me major advertisers at the sports sites, especially CBS online broadcasts of the games, are very happy with the traffic coming in. And the widgets are just helping increase the numbers. In my circles, when I ask people if they have a widget, they look at me like I’m looking for something to put under a wobbly table leg. I think some very fast growth is going to come to whatever business model can assemble, categorize and offer the most-useful widgets out there. The widgets that really do something — like give you NCAA scores — are going to get a lot of attention soon.

  • http://lsvp.wordpress.com jeremyliew

    Hi Brad,

    Getting here late to the discussion… I am inclined to agree with you that #2-4 are going to be highly valuable to users but tough to monetize as stand alone businesses.

    On #1, I think that artlessly jamming an ad into a users widget uninvited will generate ill will from both the owner of the content within the widget, and the owner of the page within which the widget is embedded. However, notwithstanding the difficulty in creating new forms of advertising, there are some possible business models here. VideoEgg is pioneering a comparable ad network here by explicitly partnering with social networks and sharing revenue with a relatively unobtrusive ad unit. Rockyou has done some experiments with sponsored themes that the user has chosen also. This is comparable to the idea of “friending” an advertisers profile on myspace – in both cases a user willingly associates themselves with a brand.

    The other possibility is a freemium model, where certain premium services to a widget are available for a fee.

    I posted a bit about this in January at the Lightspeed blog on the topic Whither Widgets?

  • http://www.virtuoz.com Pascal Levy

    What do you think of Visu Answers business model? (it is like #1 but with a twist)

  • http://google.com/ Jermaine Eldridge

    This one makes sence “One’s first step in wisdom is to kuesstion everything – and one’s last is to come to terms with everything.”

  • http://www.a1barstuff.co.uk Barry Driscoll

    With our beer dispense equipment any one can dispense and serve both Cask or Real Ale and or Keg Beer.Many licensees are discouraged from offering cask beer since they are afraid they will not be able to keep it but with modern automatic stillages and the amazing Race Cask Ventilator which doubles the shelf life of a cask the all pubs and hotels should be able to serve good cask Ale.

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