Ever since Facebook launched its f8 platform for application developers in May 2007, the tech industry has agreed that widgets are big business. Trouble is, for a long time venture capitalists and entrepreneurs couldn't seem to agree on what the business actually was.
First, there's the tricky job of defining a widget. Some use the term to describe bits of code that can be copied and pasted into a social network profile page or blog; others use it to refer to all embeddable Flash-based tools, and still others refer to widgets as entire applications built around site-specific application programming interfaces (API).
Regardless of your preferred definition, VCs were initially hesitant to invest in developers of widgets, reasoning that the growth of widget companies could only be secondary compared to the growth of the third-party sites on which their tools were hosted. At the same time, entrepreneurs were cranking out thousands of wacky new programs by the day in the hope that something -- anything -- might stick with consumers.
As the industry has grown over the past year, both investors and developers have gained a better grasp of what to do with widgets. But many misconceptions still remain, preventing marketers from taking full advantage of these tools. Let's take a look, and separate the fact from fiction.
Myth #1: Widgets are trinkets
Many consumers still see widgets as tools for "buying each other drinks and throwing sheep at each other," according to Eric Alterman, founder and CEO of KickApps, a white label producer and tracker of widgets and other social media tools. Users also often view widgets as simply accessories for a site -- to make it pretty or add features with limited functionality but lots of visual appeal.
Alterman admits that early on in widget development those were some of the main ways consumers used the tools, but he says widgets have evolved exponentially since their Jurassic days.
In fact, U.S. companies will spend $40 million in 2008 -- up from $15 million in 2007 -- to create, promote and distribute widgets, according to eMarketer.
Which leads us to our second myth…
Myth #2: Widgets aren't important
Originally, widgets may not have been important, but (perhaps unsurprisingly) Alterman sees widgets as the future of the web. Many of today's most popular websites, such as ESPN.com, were initially hand-coded, built one page at a time. Content management systems soon replaced such arduous coding of websites, but many industry experts predict widgets, which can easily be plugged into any site, will soon be the new model for the construction of whole websites. Soon, Alterman says, many major websites will be composed almost entirely of widgets.
That's because not only can site developers use widgets to easily swap content in and out of a page, but users can do the same, tailoring major media sites to their personal preferences. In the process of constructing their dream pages, consumers provide publishers with key information about their media and information consumption preferences.
"Widgets will be the basic building blocks for pages that make up every network site," Alterman says. "We're already seeing widgets appearing on sites like CNN.com, but soon it's going to be the lion's share that's going to be like that."
Myth #3: Widgets are only about social networking
To date, the majority of widget-based activity has centered on sites such as MySpace and Facebook, as well as around personal blogs. Alterman attributes this trend to the fact that the main focus of these sites is on personalization.
However, as more traditional media companies and web portals become more comfortable with user-generated and user-mediated content, the industry is likely to see the widget world expand far beyond the realm of social networking.
Myth #4: Widgets are social applications unto themselves
Ro Choy, vice president of business development at leading widget developer RockYou, says this is not so. Although widgets have grown increasingly sophisticated over the last several years, they are still fairly small components of larger pages -- not distinct microsites. Widgets must still compete with other widgets and other content on a page.
Choy says this distinction between widgets and social applications is key to advertisers because each tool -- an embeddable widget and a microsite -- offers its own value.
While a lot of advertisers may be uncomfortable with widgets because publishers can't promise control over what's happening in the next widget over, those same advertisers can comfortably monetize social applications (see Scrabulous on Facebook, for one popular example) that offer much more containable environments.
Choy points out that advertisers can use widgets to drive users to these social applications where they can employ all of the standard web business models, from advertising to subscriptions to the sale of virtual goods.
Myth #5: There's no room for ads on widgets
When web widgets made their debut, traditional advertisers still struggling to overcome their discomfort with newfangled web banner ads certainly weren't about to invest their web budgets on such uncharted territory. But, as Alterman points out, widgets are ads. At least, they can be. With the ability to insert dynamically changing feeds and run video within widgets, advertisers can take advantage of the medium to develop much more dynamic, richer campaigns. Alterman describes such tools as "widgeads."
Myth #6: You can't make money on widgets
According to Choy, another key misconception of advertisers about widgets is that there's a dramatic difference between banner ad CPMs and widget CPMs. But Choy says CPMs on widgets are "the same, if not better," than those of banner ads.
That's because, unlike banner ads, which simply hover at fixed points on a page, widgets can be the source of interaction between millions of users. When consumers use widgets to exchange notes or send messages, the widget itself becomes a product or a conversation. And for the successful advertisers who can use widgets to build a user base and generate clickthroughs, "The value of that conversation is ridiculously high," Choy says.
Myth #7: Widgets are blind
Another widget myth is that widgets aren't informed by the pages on which they appear. Sure, you can add a widget to a social network, a blog or myriad other sites, but the widget (and its owner) can't possibly know what else is going on a web page.
Like Facebook and MySpace, widgets are informed by social data. Each widget can be used to construct a unique social graph that tracks both user demographics and time spent with that widget across the web. In this way, publishers can collect data valuable to advertisers about entire communities of web users.
As of now, many publishers aren't making use of this data. They may allow widgets, but they're not yet collecting the data about their users. "In a sense these widgets are now untethered," Alterman says. Publishers need to collect data, organize it and use the data to feed ads. Every website needs to find a way to feed its own widgets.
Myth #8: Widgets don't bring traffic
Another common complaint about widgets is that they don't drive traffic to a widget publisher's website. According to Choy, if that's the case, the publisher isn't using the widget correctly. As an easy example, Choy says he has spent exactly zero dollars marketing his website but sees 11 million unique visitors via widgets.
Perhaps one reason this myth has persisted is that many of the main web metrics companies still struggle to track how widgets affect the flow of web traffic. Last year comScore launched a widget-specific metrics service to help determine exactly how and where widgets are being used.
Myth #9: Widgets aren't viral
If a widget isn't viral, then the advertiser or publisher behind the widget hasn't done his or her job well. Advertisers still getting comfortable with the medium tend to rely on old tools such as lots of text presented in a less-than-thrilling way.
To make widgets viral they have to contain video, photos or music, as well as some content that offers genuine value to users. Another key to virality is the ability to generate clickthrough traffic to an advertiser's own site.
An added bonus, Choy says, would be some sort of user-generated component that consumers can share with their friends.
Leah Messinger is a freelance writer.