By RIVA RICHMOND
September 4, 2007; Wall Street Journal Page B4
Site's Growing Ranks Seen as Potential Source Of Revenue, Customers
Another online gold rush is on. Entrepreneurs are
scrambling to create small software programs for Facebook Inc.'s
social-networking site and grab footholds in its emerging economy.
Three months ago, the Palo Alto, Calif., company
invited software developers to create applications for its site. The
response was immediate: Facebook says more than 70,000 developers, from
college kids to big-corporation engineers, have signed up for the tools
needed to build the free applications.
PROFILE BOOSTERS
• What's New: A growing
number of entrepreneurs are creating software programs that allow users
of social- networking site Facebook to dress up their profile pages.
• The Uses: Some
applications allow people to share reviews on, say, a book, movie,
vacation spot or outfit. Others send virtual presents and play games.
• The Potential: To
capitalize on the revenue potential, some firms sell advertising, while
others promote their products and services on Web pages shown to users
of their applications.
Meanwhile, Facebook members are energetically
embracing the applications. They use them to dress up their profile
pages with everything from maps showing what countries they've visited
to outfits from a retail site to favorite YouTube videos. They send
virtual cocktails and gifts to each other, share reviews of favorite
books and movies, and play poker together among myriad other things. So
far, Facebook says, there are some 2,000 applications on the site that
regularly attract more than 100 users, and quite a few other programs,
including the games and reviews, that entertain tens of thousands of
devotees daily.
Many of the developers of these applications are
entrepreneurs looking to start new businesses while others are
expanding existing ones. And the applications, which are inexpensive to
create, have the potential to become a large source of revenue and
customers for those companies that can successfully mine Facebook's
30-million-strong community. To that end, companies are using a host of
business models. Some, for instance, are selling advertising around the
applications, while others promote their own products and services on
Web pages shown to users of their applications.
"This is a watershed event that is going to affect
business and technology for many years," much the way Microsoft Corp.'s
Windows operating system did, says Rodney Rumford, editor and publisher
of FaceReviews.com, a Solana Beach, Calif., company that reviews
Facebook applications online and provides consulting and
application-development services. "It's a tool for people to discover
[businesses] in a way they couldn't be discovered before."
Promising Platform
The applications are garnering a big buzz among Web
companies and venture capitalists alike. Menlo Park, Calif.-based
venture firm Bay Partners has raised $300 million specifically for
companies developing Facebook applications and is making $25,000 to
$250,000 investments per application. "All Internet companies need a
Facebook strategy or a presence on Facebook," says Partner Salil
Deshpande, because Facebook usership is growing so quickly.
Indeed, Facebook's monthly visitor numbers doubled to
30.6 million in July from six months earlier, according to measurement
firm comScore Networks Inc. That growth has been propelled by a mass
movement onto the site since Facebook opened itself to nonuniversity
email-address holders.
The Facebook platform is so promising in part because
its members use it to connect with people they know -- or want to know
-- in the nonvirtual world. Unlike News Corp.'s
MySpace and most other social-networking sites, Facebook members aren't
anonymous. They use their real names and connect with each other to the
degree they choose. Facebook also allows businesses to interact with
Facebook users fairly freely, while restricting access to any personal
data.
"They make it a safe place for communication and for
doing business," says Lee Lorenzen, chief executive of Altura Ventures
LLC, a Monterey, Calif., firm that also is funding application creators
and has purchased several applications.
"We're certainly pleased with how much it's taken
off," say Brandee Barker, a spokeswoman for Facebook. "We already have
a thriving ecosystem of businesses built on the Facebook platform."
Getting More Sophisticated
Applications are easy to create. Developers build,
test and debug their applications and, when they're done, submit them
to Facebook for review and testing. If approved, Facebook simply turns
them on.
The first wave of Facebook applications were simple
and designed to win over large numbers of people. For instance, more
than two million users have been recruited by their friends to put
cartoons of ninjas and pirates on their profile pages, thanks to a
contest created by a trio of developers.
![[photo]](http://online.wsj.com/public/resources/images/MK-AL693_SHOPST_20070903190427.jpg) |
| A sample of a ShopStyle application that was added to a Facebook profile page. |
But the new entrepreneurs entering the arena are
bringing with them applications that are more sophisticated and can
engage users more often and for longer periods of time. To do so, they
try to harness the connections that link its members, or what has
become known as Facebook's "social graph."
Take "Neighbors," an application launched four weeks
ago by Point2 Technologies Inc., a Vancouver-based company that
operates a Web-based real-estate listing service called Point2 NLS. The
application uses the company's broker-defined neighborhood system to
help Facebook members meet other people who live near them and share
local information and photos. It also shows properties for sale in the
neighborhood from any of Point2's broker and agent members, which the
company says number about 140,000 in 86 countries.
"We're trying to help these real-estate professionals
connect to the Facebook community," says Brendan King, Point2's chief
operating officer.
"My Style," which was created in June by
online-shopping site ShopStyle Inc., lets Facebook's fashionistas place
on their profile pages pictures of items they like from the retailer's
site, such as Oscar de la Renta dresses. Los Altos, Calif.-based
ShopStyle.com, which debuted in February, sells brand-name products
from about 100 retailers.
"Our aim is getting more people involved in the
ShopStyle community," says Andy Moss, the company's founder and CEO. He
says ShopStyle.com has gotten 5,000 of the 25,000 members of its own
fashion-focused community from Facebook, but it remains unclear whether
the application will successfully drive product purchases.
Help Getting Away
One application helps people plan real getaways.
SideStep Inc., a Santa Clara, Calif., travel search-engine provider,
launched its "Trips" application eight weeks ago to help friends and
families organize vacations. The application, which SideStep says has
about a quarter million users and cost $10,000 or $20,000 to build,
provides a place where groups can set travel dates, create itineraries
and post messages to each other.
Less than two weeks ago, SideStep added a search box
to its application, which, the company says, now drives 2,000 visits to
its site each day -- where people can search for airplane tickets,
hotels and rental cars. SideStep plans to enhance the application and,
eventually, show some targeted ads.
Another popular application, "Visual Bookshelf," helps
Facebook members find new books to read by getting recommendations and
reading reviews written by their friends. The application, which is
adding 10,000 new users a day, was created by Web-development firm
Hungry Machine LLC of Washington, D.C., which operates several Facebook
applications and creates others for clients. The application shows ads
to Visual Bookshelf users. Also, Hungry Machine has a link to
Amazon.com on the application and gets a commission for each book sold
through the link.
Tim O'Shaughnessy, head of business development at
Hungry Machine, says applications that help people express who they are
and connect with friends over the things that matter to them will
spread person to person and become big successes.