Can Facebook's Stream API Revive The Widget Economy?

-Stream Icon-Earlier this week Facebook officially opened the stream API and with it came many new opportunities for developers. The most significant opportunity is the one provided to widget developers. Facebook let’s developers post audio, video, and best of all: flash application directly within the feed. Right now it appears that there are few restrictions although the feed API is still not fully implementable.

Great New Opportunities

Rather than building standalone applications on Facebook, from a user experience perspective, it makes much more sense to extend large feature sets directly to the feed. Imagine that you’re in the middle of playing a game on a website and not only is a notification published to Facebook but a small version of the game is included directly within the feed.

I’ve also mentioned on a number of instances the opportunity for streaming video to be posted directly to your Facebook feed. Unfortunately there isn’t currently an application that provides streaming video to your feed but it’s only a matter of time. With Facebook’s expanded feed functionality, the possibilities are limitless.

How Do Widgets Monetize?

While developers can create just about any form of interactive content to be displayed within the feed, is that really in the developer’s best interest? If all of the interactivity takes place within the feed and none of it takes place from a developer’s application, how on earth can they monetize? Clearspring is one company that has been asking this question for a while.

They most recently launched ConnectedAds which aims to leverage Clearspring’s reach to build branded (widgitized) applications for advertisers. The value proposition is similar to the one presented by Buddy Media except that these applications instantly function on every social platform on the web.

Don’t expect Clearspring to start monetizing widgets that have been built on the company’s free developer platform though. While Facebook can display ads next to applications built on their platform, widget companies haven’t figured out how to most effectively monetize existing widget traffic. I’ve always argued that the monetization opportunity is in analytics but when I spoke with Tim Schigel, CEO and Founder of ShareThis, earlier this year he dismissed analytics as the best monetization opportunity.

Conclusion

Facebook’s open feed presents many opportunities for widget companies to expand their reach but it doesn’t solve the monetization solution. In an economic environment where billions of impressions no longer guarantees funding, these companies are quickly searching for ways to drive revenue. For now, the companies will be forced to take advantage of the new distribution opportunities provided by Facebook’s stream API despite the continued search for an effective revenue model.