NEW YORK Since Facebook opened its site to developers in May, it has been flooded with mini-programs that let users throw virtual food at one another, post movie reviews and share YouTube videos.
The influx of applications, now up to over 2,800, is leading to the creation of ad networks designed to let developers profit from their work and help advertisers reach Facebook's growing user base.
Social media network Videoegg is the latest to jump into the fray, starting up an ad network two weeks ago that is running video banner ads on the landing pages for over half of the top 10 most popular applications. The ads are getting $10 CPMs, and Videoegg is taking 40 percent of the revenue generated by the ads.
"If you were to break the Web down into phases, the first was a top-down directory approach like Yahoo!, the second was Google's natural language search and the third is organizing the Web around the profile," said Troy Young, chief marketing officer at Videoegg.
The company is not alone in trying to capitalize on the popularity of Facebook applications. Startups like Lookery and 30boxes are building networks to help application developers gain user bases. Widget maker RockYou has started an ad network that is designed to capitalize on its popular applications like SuperWall, which lets users put multimedia messages on friends' profiles.
RockYou's network will rely on a co-registration approach that will offer consumers downloading its programs selections from others that haven't gained momentum. RockYou will charge per download, CEO Lance Tokuda said, and might at some point even create applications for brands.
"There are a lot of billion dollar corporations that only have 1,000 users" of their Facebook applications, he said.
Facebook has taken a hands-off approach to developers, allowing them to show ads on the application landing pages (though not in the user profile itself) in a bid to encourage developers to create for the site. In this approach, the company hopes to become the "social operating system" for the Web.
"A lot of companies built businesses around Microsoft," Young said. "If Facebook succeeds at what they're trying to do, there's an opportunity for
dozens of businesses to add functionality around the social platform and build their own businesses."
So far, Videoegg has run Facebook placements for several advertisers as part of larger campaigns on its video ad network that runs on several top social
networking sites. NBC Universal, Fox, Paramount, Discovery Networks and Apple have all run campaigns, Young said.
While for now the ads Videoegg places on Facebook are very similar to banners seen around the Web, Young said the company would soon add new features to appeal to the Facebook environment, such as letting users send "gifts" to others, a popular feature of the social network.
While Young allowed that Facebook would probably eventually put up "toll booths" for ad networks to mine profile data, he believes it will continue to be open to outside developers building businesses on the site, which will set it apart from the ad-driven approach taken by larger rival MySpace.
"MySpace isn't able to compete with them," he said. "They have the weight of a media company. The fundamental dimension to the Facebook strategy is to
let others monetize. For MySpace to do that would be a significant strategic change."
