A meta view, how Social Networks will change the game of internet within the next years.

1. 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

2. 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.

3. 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.

4. 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).

5. 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.

6. 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 (w
ww.widgetlabs.eu).