Widget Me This

Last year was supposed to be the Year of the Widget, according to Newsweek, but only in the last few weeks has the beginning of a real monetization story emerged.

The story has consistently been framed as an issue of getting users rather than making money. For a while the excitement was 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 strategies, and as widget makers such as Slide pull in large amounts of capital, the time to prove that widgets can make money is here.

There are few ways companies are doing this, with the most obvious one centered around using a widget as a billboard. If you already make money from your content and can offer something interesting, a widget is a good way to extend your brand and get people to watch your new television show, read your content or see your movie.

Examples of this type of widget includes the film widgets from the likes of MovieFone, or the widget tools The Wall Street Journal and New York Times offer via Netvibes. In fact, Netvibes is looking to take this a step further by charging people for better placement of their widgets on its personalized home page in a manner similar to Google’s AdSense program.

If you buy into the idea of widgets as a billboard, or that some type of advertising could eventually be shown on widgets, then the idea of knowing how many people are snagging or looking at your widget — and how often — becomes interesting. Services such as ClearSpring, MuseStorm and Triggit provide these sorts of tracking and analytics services and already charge — or plan to charge — the widget makers a fee. Those that charge widget makers serving advertisers such as major publishers and sports leagues are in luck. Those that charge consumer widget makers without a clear revenue model might find themselves wondering what to do if their customers don’t make money.

But running analytics and platforms can be a challenge when there are no set standards for widget monetization. Much like the early days of banner advertising, when people just sold whatever unused space they had, the world of widget ads is a Wild West with no set sizes, rules about placements, or even defined success metrics.

Many company executives and their venture backers in the space believe that the Interactive Advertising Bureau, widget makers, social networks and publishers will get together in the near future to hammer out standards, from something as simple as how to determine the appropriate pixel height and width of an in-widget ad to how to figure out when a widget ad is successful.

Some of the metrics currently being considered include charging advertisers based on: the number of people who see the widget (cost per thousand); the number of people who actually interact with the widget (cost per click); and the cost per install, which measures how many people snag the widget for their own page. As much as analytics can tell people about what happens with a widget and where it goes, it’s still hard to say how successful it has been unless it’s tied directly to a purchase. And frankly, even those numbers can be tweaked.

This standardization will likely emerge once a successful model does. So far, Beacon isn’t winning rave reviews and it’s worth waiting a bit to see what some of the more consumer focused widget-creation platforms like RockYou and Slide can contribute with their revenue models, but my bet is this will happen sooner rather than later (like 2009).

Much like Google monetizes their users by giving them something that enough people want (search results, free directory services via GOOG411) and then painlessly taking something Google can use (money from advertisers, a sampling of accents for its voice recognition efforts), a widget monetization strategy needs to keep users happy while also giving something of value to someone.

The challenge facing most widget makers that target consumers is figuring out what it is their widget-watchers have that’s valuable — and who might want it. Those focused on a more ad-centric model are going ahead with their plans to use the widget as a more interactive billboard, but companies like Slide and RockYou may find that strategy more difficult.

Even with the uncertainly, I agree with Satya Patel of Battery Ventures (and a former Google executive) who says, “While widgets have generated a lot of hype, they are certainly an important vehicle for content, commerce, communications and advertising and they are here to stay. There will be several large businesses built in and around the widget market.” But I think we’ll also see a lot of them fail.