United Media Partners

Why So Many Want to Create Facebook Applications

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.

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.