2007 was supposed to be the Year of the Widget, according to Newsweek, and Jon Swartz of USA Today apparently agrees that the promise has been fulfilled. He says:
[Widgets] are all the rage on the Web. Marketers are thinking of ways to use them to sell ads, and venture capitalists are mulling investments in the hottest widget makers. The stampede reached a roar this month, when market leader MySpace and Facebook expanded their services for targeted ads, including widgets designed by marketers.
But look at the numbers for investments in widget distribution platforms and widget suppliers, and it becomes clear that this not a stampede but more like a Sunday stroll through the widget park.
A widget is just an embeddable bit of web or desktop content wrapped up in a nice user interface. You can put widgets on blogs, social networking profile pages, or on an Ajax start page, though not all widgets can be embedded on all kinds of pages.
Though many companies might use widgets to promote and distribute their content or features, there are two categories of startups that, to me, represent relatively pure bets on widgetization. The first is widget development, distribution, and packaging platforms like Clearspring or Widgetbox; the second, widget suppliers like RockYou or Slide.
I’m leaving out many other kinds of widgets and widget startups, of course. You can have desktop dashboard widgets, widgets to be embedded on blogs like Blogburst or MyBlogLog or Lijit, Ajax start pages that support widgets, video syndication widgets, and more.
But taking a look at widget platforms and social networking widget purveyors, we can get an idea of whether 2007 has seen a stampede towards widgets or perhaps something more genteel. I’ve gathered funding data for widget distribution platforms and widget distributors in the table below.
This doesn’t represent all the funding for such companies. Fox Media is building SpringWidgets, so that investment doesn’t appear here. Widgetbox has been rumored to have taken additional funding from Sequoia. And some companies have reported investments but declined to provide specific figures. Still, this gives an idea of the magnitude of interest in the space.
You could also argue that companies like YouTube and PhotoBucket are widget companies — and if you added in their acquisition prices the numbers do start to get really big, really quickly (partly, of course, because acquisition prices represent the entire value of those companies). But I think those two are examples of how embeddable web content can help promote a broader web service. iLike might fit better with those, too.
The total funding for these companies is just under $60 million, a respectable number but by no means a stampede towards widgets. This could reflect the uncertainty around how to make money with widgets and widget platforms. Or perhaps it’s more evidence of investor sobriety.
14 comments so far
5:55 PM PT
Nice summary Anne. Here’s a breakdown of which VC firms are doing the funding of which widgets:
http://www.sexywidget.com/my_weblog/2007/07/so-who-is-fundi.html
6:02 PM PT
It may also be in part due to the fact that the development and distribution of widgets is extremely cost efficient. The widgets themselves are not much more than AJAX, Flash or other user interfaces accessing existing content on the Internet through APIs, web services, or straight up Javascript, HTML, CSS, etc. Huge experienced developer community for that type of work. Plus the content owners carry much of the cost of infrastructure. And some of the key elements of making widgets work like advertising, analytics, etc., can be relatively easy to recreate for widgets since good solutions already exist for the web.
This cost efficiency is part of what makes widgets a viable business, and makes starting companies on lower capitalization more likely. The ability for users to customize their own digital experiences is what drives user adoption.
6:43 PM PT
I question the fact that you left out Facebook, et al. Just because a company calls their platform an “Application Platform” doesn’t make it so. They are fundamentally the same as all of the widget platforms you’ve listed here. You can add $500m to that list, as far as I’m concerned.
7:18 PM PT
It might help to distinguish between two types of platform. A developer platform, such as Clearspring, and a user platform, such as Blogger. Facebook has built each type of platform and bolted them together within its walled garden.
So it doesn’t belong on a list of pure play widget developer platforms, or on Anna’s list of pure plays in widgeting.
7:26 PM PT
Thanks, Anne, for the post. There are some good examples of how widget companies are making money. RockYou, for instance, is monetizing their vast network of widgets on Facebook by selling distribution to other application developers (making them truly more a platform play than a supplier). Clearspring and Gigya are following suit, though their networks are not as vast as RockYou’s.
The widget distribution business model, of course, is ultimately dependent on a buyer (a 3rd-party widget supplier) who can turn around and resell that distribution at a higher price. Generally speaking, the buyer needs to sell the distribution to either an advertiser or a client who derives economic value from the widget itself. This is a critical piece, otherwise the distribution model comes crashing down.
SplashCast is one widget provider that fills this critical role in the widget ecosystem. Partnering with premium content owners like Sony BMG (Justin Timberlake, Britney Spears, Chris Brown, T-Pain, etc), Universal Music Group, MTV, and star athletes like NBA MVP Dwyane Wade, SplashCast can sell premium widgets to advertisers, guarantee distribution (either organic or paid), rev share with the content partner, and keep a healthy margin.
SplashCast, by the way, has raised $1.8M to date.
Cheers,
Mike
5:33 AM PT
@lawrence: thanks! That’s a great reference for funding of widget companies.
@Patrick: good point, supplying widgets is mostly not capital-intensive.
@Aaron: Facebook isn’t a pure-play widget platform. Many people use it mostly for the social networking capabilities. Distinguishing platforms as user vs. developer is helpful as Andrew said. There are other hybrids like the Ajax start pages. I left out widget “hosts” here though like the start pages, Facebook, Blogger, MySpace, etc.
@Mike: thanks for the info on SplashCast and on how widget companies are making money. I think that might make a good topic for a later article.
6:27 AM PT
I wrote a blog entry a while back breaking the widget industry (if there is such a thing) into 5 segments, then updated my definitions and the segmentation graphic a bit later. I also wrote a summary of investments that I knew of at the time back in April. Guess I should keep updating my blog!
6:52 AM PT
[...] Om, Lawrence, and Nick also have some good stuff following up on this article that discusses some of the leading platforms and players in the space. Much to do as the space evolves. [...]
9:03 AM PT
Patrick, wish I had seen your posts beforehand, my Google searches missed them. Would have saved me some work and also provided really good background and insight. Thanks for sharing the links.
9:46 AM PT
Nice post, Anne!
1:44 PM PT
[...] time to start speculating about what will be hot and what will be not in 2008. After all, 2007 was not the Year of the Widget, despite what Newsweek predicted. If anything, it was the Year of Facebook, as the social [...]
11:35 PM PT
[...] Speaking of widgets, I believe the investment in Clearspring was larger. [...]
9:47 PM PT
[...] I might not call it the Year of the Widget, like GigaOm, 2007 was definitely the year when Internet junkies seemed to finally reach consensus on a word [...]
12:00 AM PT
[...] around MySpace, then Facebook opened its APIs and the widget makers rushed into a promised land of adoption and media coverage. But as social networks and widget platforms, such as Clearspring, begin to explore monetization [...]
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