Widget Ad Model Remains Unclear

NEW YORK Internet widgets, tiny applications like photo slide shows that users can embed on personal Web pages, have wide reach online. Yet the makers of such applications have yet to crack the code for turning those eyeballs into advertising sales opportunities.

Consider Slide. According to new figures from comScore, it reaches 177.8 million Internet users per month with its application that turns photos into slide shows, but its ad revenue is limited to placements on Slide.com, which reached just 13.4 million that month.

The same is true for the No. 2 widget, RockYou, which reached 82 million through its applications but just 7.4 million via its site.

“There’s several questions that have to be resolved,” said Max Levchin, CEO of Slide and a former PayPal executive. “They’re being resolved right now. The big question is: What is the revenue split between the widget maker and the host?”

That question took center stage in April, when social networking giant MySpace, which hosts most widgets, blocked popular photograph-hosting site Photobucket for developing a Spider-Man-branded slide show.

The matter was eventually resolved, and MySpace parent Fox Interactive Media bought Photobucket outright for $250 million six weeks later.

Facebook fully embraced widget makers earlier this month when it opened its platform to third-party developers for applications that tie into Facebook’s user data. (It is allowing developers to run advertising on its application pages, although not within the application on user profiles.)

Not everyone thinks the missing economic model is the major hurdle to widgets taking off as an ad medium. Chris Cunningham, vp of ad sales at Freewebs—which has also built widgets for clients like T-Mobile and Cingular—said the biggest obstacle is the confusing widget landscape.

“The biggest challenge is getting the industry together to figure out who does what,” he said.

Cunningham has seen interest in widgets spike among brands and agencies.

ComScore has seen enough interest from its clients to develop a tracking service to provide third-party measurement of widget reach.

According to its April figures, widgets reach 40 percent of the Web audience. Levchin believes the service and its initial numbers validate the space, which has been knocked in some quarters for lacking a sustainable business model.

“The biggest thing about this is finally there are some hard numbers that say if you’re not thinking about advertising here you’re missing out on something,” he said.

What is still unclear, in addition to the revenue split between widget creators and hosts like MySpace, is what form ads will take. Levchin said Slide is considering several approaches, while remaining mindful that its users will not tolerate overly intrusive commercialization of what they regard as self-expression tools.

“Even one percent attrition because of the advertising is too much for us,” he said.