Widgets and Apps - A Strategic Meta Examination

Wikipedia users describe them simply as „components of a graphic window system‟, for many however, widgets have become much more. Made up of the terms „window‟ and „gadget‟, widget applications are embedded into websites where users can then interact with them. Widgets offer minifunctions and minicontents and their diverse field of applications range from the weather report and news report, to stock market quotes and time displays.

Widgets are fairly similar to apps, which are applications with a narrow range of functions, which in comparison with whole applications like Microsoft Office or Adobe Photoshop, offer partial functions. Apps can be found on Facebook or on the iPhone amongst others, and will be used almost as a synonym for widgets. Sometimes small market wars over the conceptual branding of widgets can be observed: MySpace and Vodafone for instance are trying to make the term „Widget„ theirs, Apple and Facebook are using „Apps‟, and Google is going their own way and calling them „Gadgets‟.

Widgets/Apps in the Context of Social Locality and Mobility The face of the internet has changed and in a broader version it makes sense to include apps the way they are used on iPhones or embedded in Facebook and Co. Social game makers alone, like the US companyZynga, are achieving investments in the nine-digit range by integrating small game applications on Facebook. According to AppData, Zynga reached 227 million (!) active users monthly in this way. In Germany, this market is developing noticeably as well and thus far companies like MegaZebra(www.megazebra.com), Wooga (www.wooga.net) or Plinga (www.plinga.com) have emerged. That Germany is only at the beginning of this emerging market segment worldwide and has a long way to catch up, shows insight into the entries by analytic services such as AppData or Appshopper. This app segment is similarly successful in the mobile realm where Apple set the standard and is permeating every-day life with the iPhone in ways which otherwise only big social networks could achieve. Whole industries have developed branches around the portable apple-religion; while the android-system is only slowly beginning to accelerate. The determining factor regarding these trends: internet services and especially widgets/apps are now in context of social proximity and physical mobility. Functions are categorized into small segments and are used either in one‟s own social network, in which the user is active and follows the happenings of their environment anyway, or on the go, making use of little breaks throughout the day. Social networks and to some degree, mobile phones offer a

consistently long and daily retention period - in the television sector it would be called „Air Time‟ - in this way, the user is confronted with new content in the very place he spends much of his time anyway. Looking at the information overload with which the user is confronted, the retention period of today is an attractive indicator. Although Google has a tremendous coverage, the retention period in social networks is quite a bit longer and therefore produces attractive content that can be enriched and spread with widgets/apps.

From Startups to Empires Facebook, MySpace and Apple are only a few names which constitute the trends of Web 2.0. With the magical keywords, „user generated content‟ (UGC) the user is now frequently proactively integrated in the creation process. Solely consuming is out, actively participating is in. The relevance of network communications goes hand in hand with the increased importance of locality, which can be observed with applications such as foursquare, Gowalla, Qype, Runkeeper or Brightkite. During the time of what is now known as the „web 1.0‟, "process plants" were able to reach the user with manageable effort. Process plants are web companies like eBay or Amazon that create processes for interactions with real products but don‟t generate real content. In the early days, these companies were showered with money just by providing clicks, subsequent transactions or subscriptions.

These were followed by "content plants" like Flickr, YouTube, or Slide.com, that encouraged the user to produce content. Content on these web portals was created and increased, while assuring its coverage by allowing the content to be virally dispersed through the ease of embedding it anywhere in the web. At the beginning of the web boom, when websites like Amazon still made about 70 percent of their profit onsite, meaning on the platform itself, a shift was already perceptible. And you can sense it: this principle of strewing breadcrumbs of actual content, which focused on integration instead of generating clicks, is also characteristic of the current widget/apps culture and that which will continue to shape it.

If we think of the user as the sun, who wants attention shone upon the already existing process and content plants, at the present time, a cloud cover has pushed itself between the various players. An intermediate level of empires has developed, that manages and completes a large part of the world‟s internet traffic. These empires - we could also call them ecosystems- include social networks like Facebook, MySpace, or LinkedIn, as well as search engines, OS desktop systems, and online games, etc. – all those that guide the user to other depth levels of the internet and that offer large coverage as well as long retention periods. Each of the empires address relatively specific target groups – LinkedIn is aimed at business contacts, MySpace addresses artists, Facebook focuses on the average citizen, etc. And to think about the effects triggered by Facebook when 350 million active users make up ten percent of the internet air time...

More and more people spend time on Facebook and YouTube, fewer and fewer on Yahoo, Google, and MSN (with generous support from Morgan Stanley). The corresponding shift is discernible in numbers: Fours years ago, Facebook and Co. were virtually nonexistent as market participants. Meanwhile the internet boasts its own web-states and ecosystems such as Facebook, that create boundaries and contacts. For market participants beyond those imperial states, it gets increasingly more complicated to reach the user. A meta-level develops between the user and the final provider. Amazon‟s onsite trade ratio of 70/30, as well as others, may yield a future 10/90 distribution, as already observed on Slide.com. In other words, 90 percent of trade doesn‟t even take place on the websites themselves but offsite (on Facebook, MySpace, etc.) if you think in internet-air-time terms. Small startups can handle such distributions already, industry giants like Amazon who have to deal with a much larger volume, may follow. Finally, there is now a level of empires that act as traffic gatekeepers between supply and demand – a construct that can be commercialized through widgets/ apps.

The trend toward decentralization already discussed above, which connects with the empire creation, draws all the more attention to itself, and is amplified by the equipment being used as well: from the iPhone, and the desktop computer, to the home media center, the usage is also spatially fragmented. Through a trend that promotes the meaningful development of widgets/apps, attractive business models will increasingly be turned into foreign empires. Empires that currently are based less on media advertising and PR organizations can grow cost-effectively and exponentially through this viral dispersion. The reverse conclusion denotes to the German and international investor community, that those investments that are aiming for organic growth, have chosen a grueling model. Investments that rely on their own onsite coverage will find it increasingly difficult since a widget/app case works much more efficiently when they compete against empires with a ten percent share of the global retention period (Facebook). Pure destination sites, that offer content onsite only and therefore are heavily dependent on their coverage, will be swallowed up by the big empires. Widget/app cases use the ecosystem's own coverage. Among the top 8 internet companies, in 2008 only 3 of them were Web 1.0 companies (see below slide six) and for good reason: in November 2005 alone, 150 new apps were created on MySpace per day, that fought over the portals 200 million users – apps made by companies, none of which are on the payroll of MySpace, but simply fight for attention. Why then even try to generate coverage and air time when they are already made available by the existing empires?

Conclusion: Widgets/Apps as the Successor to Browsers in the Social-Media-Era Widgets and apps cope with the decentralized and fragmented state of Web 2.0 very well, and with their cross-platform properties also serve the development of fragmenting devices and usage scenarios. Widgets/apps evolve in the social media context to what the browser was in Web 1.0: They shatter the imperial cloud cover that has been separating the user from content and will henceforth be the essential communication gateway for the end user. Widgets/apps will be carriers, connectors and interfaces. A collection of mass-widgets like YouTube or Flickr will probably come about that will be supplemented by a multitude of widgets/apps for fragmented target groups (for example the stock market app by Bloomberg).

In the B2B arena, widgets/apps can facilitate processes and due to the specific target groups address individual users. The communication with the user becomes more fragmented, simultaneously however, it becomes more specific and focused because it is aimed at a selected target group – perhaps at business people on LinkedIn, artists on MySpace, or academics on Facebook. Companies also rely on external widget offerings such as wikis, Google Docs, Slide Share, etc. in the workplace. Software as a service and cloud computing are buzzwords that are becoming increasingly relevant. The result: Even company intranets and home desktops will be turned into ecosystems in the sense of the previously mentioned empires – precisely all those entities that can act as a gatekeeper to new content. Devices are cross connected and operating systems function henceforth as an ecosystem by opening up the desktop to the “webtop” (such as the Sidebar in Windows 7 or the Mac Dashboard). Along with that, there are also blogs and mobile devices that contain widgets/apps, in which the following always applies: do not generate your own coverage, but benefit from the work of others. When we think of the metaphor of empires, where companies such as Facebook or MySpace represent their own virtual states with specific target groups, then widgets/apps would be businesses that, to their mutual advantage, contribute and distribute content. A small unit docks onto a large one and a win-win situation develops. A corresponding trend has solidified. Now it will be exciting to see which widget provider can offer attractive business models, especially since marketing is changing quite drastically. Only the ones that have appropriate content-utilization models and white-labeling for companies as well as widgets/apps that syndicate and network, will have a future. Nearly all business models that were found within web browsers will in some form be able to be reproduced as a widget. Alongside that there will be additional models that result from this interaction – particularly the ecosystems in this hierarchy won‟t want to pass up a tax for channeling traffic.

Other presentations by Mehrdad Piroozram.

About the authors: Joel Kaczmarek is editor-in-chief at gruenderszene.de and studied media science. Gruenderszene is a German online magazine that deals with the needs of young entrepreneurs and has become one of the most influential channels of the German internet industry. Especially the Gruenderszene database which Joel concepted has become pretty popular as it features all relevant German internet companies, including their shareholder listings. Mehrdad Piroozram was born on 21. March 1971 in Teheran. Since 1990 he has been in the IT industry and since 1994 in the internet industry and began his career as a programmer and networker. In 1995 he founded Pironet and accompanied the IPO in 2000. In 2003 he sold the company. Since late 2005, he has been acting as a Business Angel and pushes the idea of iSteps: to nurture social application start-up entrepreneurs and their promising business concepts to economic success. From the beginning, iSteps counts as one of Europe's „first movers‟ in the social media industry - the focus is mainly on widgets/apps for the iPhone and Facebook among others. The essential component and unique characteristic of iSteps is the principle of synergy already contained in the company‟s portfolio of subsidiaries, including FeedZilla, imageloop (www.imageloop.com),thanksforaddingme and Widgetlabs (www.widgetlabs.eu).