The widget economy 24 May 2007

Venture capitalist David Hornik writes:

"[These] companies are going to face a serious challenge when it comes to monetizing their traffic. That challenge is a byproduct of their precarious relationship with the 'host' services to which they attach. To the extent those relationships are symbiotic, the combined organism will thrive. However, to the extent those relationships are, in fact, parasitic, the host will need to shed the parasite in the name of survival.

"When determining if a widget relationship is symbiotic or parasitic, it makes sense to look at a few different factors. The most widely acknowledged, of course, is monetization. If a widget is doing nothing to monetize its host's traffic (e.g., when Flickr photos are served into MySpace), it might be viewed as neutral or perhaps symbiotic for freely increasing the functionality of the hosts site. If a widget is seeking to monetize the host's viewers (e.g., ads or branding on a voicemail widget), the host may view that widget as parasitic. This relationship, of course, assuming there is a zero sum game of monetizable attention on any given host service, therefore the fact that a widget is monetizing some of that attention means the host has lost that revenue opportunity in return."

Hornik's thoughts reminded us of the types of issues we've discussed in previous posts on the logic behind building businesses around mashups.

[via Emergic]