Friday, September 5, 2008

Developers aiming apps at Facebook find mixed results for their efforts

By Rodney Brown

Developing for Facebook.com has been both a test bed for technology and a source of customers and revenue for local companies. But for newer companies looking to pin growth hopes on the online social network, it may be too late, according to those same companies.

One of the local winners in the Facebook lottery is Stylefeeder Inc., which launched an application that plugged into Facebook.com within weeks of California-based Facebook Inc. opening up its development platform in June 2007, according to Stylefeeder’s CEO, Philip Jacob. In a little over one year, the Stylefeeder app is now one of Facebook’s most popular.

“We have the largest shopping application on Facebook by such a large margin it’s kind of silly,” Jacob said.

Jacob said the Cambridge company’s success at turning its online shopping and recommendation site, Stylefeeder.com, into a hit Facebook app was based primarily on two things — early market entry and functionality. “Getting out the door early was key here, and having something useful was also key,” Jacob noted.

According to Jacob, 80 percent to 90 percent of the features available on Stylefeeder.com site are also available on its Facebook application, meaning users never have to leave the social networking site to shop for items or recommend them to friends. Even still, Facebook is the second-largest source of new visitors to Stylefeeder.com, Jacob said, behind word-of-mouth. And Facebook visitors often convert to users, he added.

Monetizing Facebook
Gathering Facebook users for an outside service is the primary way one wins at Facebook, according to Harvard Law School professor John Palfrey. He should know — Palfrey is both a director of Harvard’s Berkman Center for Internet and Society and a venture executive at Highland Capital Partners LLC, which is an investor in Stylefeeder. “It is not implausible that someone could make money in the Facebook environment with a fully functional app,” Palfrey said. “I think today the primary function of Facebook apps is to draw users out of Facebook and to monetize them there.”

The problem for any company trying to get those users is the changes Facebook has put into place that restrict how a developer can market its application to Facebook users. While the restrictions were needed because of the volume of messages viewed by users as spam, it will mean that the speed of application adoption seen shortly after Facebook opened up its API to developers is a thing of the past.

“I think there is absolutely an early-mover advantage for those that have built an application for Facebook,” Palfrey said. “That’s a pole position that is much easier to defend at this point.”

Still looking to get onto the revenue-generating aspect of Facebook is CoreBlox Inc. of Framingham. CoreBlox has succeeded in the first rule of making money from Facebook — gathering users. The company makes the application “I Have Kids,” which enables parents to create mini-profiles for their children to share with friends and family news about and images of the children as they grow up. The application has a five-star rating among Facebook users and has amassed 60,000 regular users, according to Todd Clayton, president, CEO and co-founder of CoreBlox.

But the changes at Facebook, including an upcoming redesign, have hurt developers, Clayton said.

“Some of the applications that helped grow the (Facebook) user base are being minimized,” he said.

Not all early entrants into the Facebook game are winners, however. Geezeo Inc., also of Framingham, runs a website that offers financial-planning advice and services to the younger, web-savvy crowd. The company launched a Facebook app based on the goal-setting function of its website, called IWant, according to company spokesman David Carlson.

Geezeo eventually discovered that presenting just one function of its site’s offerings wasn’t enough. That was one reason the Facebook app didn’t bring in the new users Geezeo hoped it might, Carlson said. “It was very good to get a presence on Facebook, but in terms of monetization and the user acquisition model, it wasn’t a big success,” he said.

Geezeo stopped supporting its Facebook app in April and is concentrating on other user sources, including TheStreet.com, which in April purchased a stake in Geezeo for $1.2 million.

The issue facing CoreBlox now is how to monetize its “I Have Kids” app, Clayton said. “We are planning on partnering with companies that could provide printing of baby books, and database companies of what was happening at certain times that correlate with events in the kids lives,” he said.

While Stylefeeder’s Jacob wouldn’t disclose revenue figures, he said the company is ahead of projections and should reach profitability by the middle of 2009. The company has only taken one round of funding:
$3 million. In fact, Stylefeeder also concentrated initially on gathering users and didn’t consider how to make money from it until January 2008, Jacob said. “There is no point in monetizing a small audience.”