On the heels of the still-unconfirmed deal to buy Photobucket, Fox Interactive Media's MySpace is apparently making another widget move-acquiring slide show widget maker Flecktor for as much as $20 million, according to Techcrunch, although FIM has declined to confirm or deny the deal.
Michael Arrington neatly lays out the logic of the deal:
It's an odd acquisition...since Photobucket also has a slide creation product that competes with Flektor.
But Flektor has a killer team of founders.... Also, Flektor is custom code built on Flex, whereas Photobucket's competing offering is built with Adobe's tools. If Adobe decided to compete directly in this space, MySpace will be in a better position owning their own code.
The acquisition also makes sense from a strategic standpoint. MySpace has massive distribution as the largest site on the Internet. Photobucket brings storage to the table, and the Flektor team looks to be able to create awesome tools for users to create content.
But what might the deal mean for the rest of the world of widget start-ups? At VentureBeat Dan Kaplan looks at the impact on the leading slide show specialists, Slide and RockYou:
While both Slide and RockYou have huge user-bases, they also depend heavily on social networking giant MySpace and other sites. MySpace has made it abundantly clear that it is happy to pull the plug on widgets that lose its favor. If a Slide or RockYou try to push more advertising, and compete head-on with one of MySpace's new properties (Photobucket, and potentially Flektor), MySpace may try to snuff them. How valuable are these immensely popular widgets when a small competitor can innovate quickly, get scooped up at a much lower price by MySpace and have a giant platform (like MySpace) to gain distribution?
Good question, one David Hornik's VentureBlog post earlier this week offered a possible answer to. I recommend reading the whole piece, which is a nice wrap up of the state of the widget economy. But most interesting are his observations on the relationship between start-up widget makers and the big boys of social networking:
If a widget is doing nothing to monetize its host's traffic..., it might be viewed as neutral or perhaps symbiotic for freely increasing the functionality of the host's 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, assumes 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. ....my view is that if a service's functionality is significantly enhanced as a result of the various widgets that attach to it (e.g., the MySpace experience was massively enhanced early on by the work of both Photobucket and YouTube), one might argue that the widget experience is always symbiotic â€" enhanced functionality in exchange for traffic, monetized or not.
But it's interesting to see how quickly the the attitude among the digerati has changed towards widget start ups-from cheerleading for a new world order, to fatalistic resignation about the power of MySpace and Facebook. Om Malik, has a non-interview interview with FIM's Peter Levinsohn, which is not nearly as bullish on widgets as Hornik's piece:
The acquisition, if true, is yet another proof that widget (and other start-ups) need to diversify their user bases, because sooner or later MySpace is going to end-up compete with them. This is the way of the large companies, and it is not unusual. What is strange is that start-ups ignore this fact of life - putting their destiny in other people's hands.
Think this way - if a company trying to do an IPO gets 50% of its revenues from one customers, even the bravest investor runs away from that deal. Why should it be any different for start-ups who are basically hawking traffic and eyeball stats? Funnily enough people have been ignoring what Fox executives have been saying for a while now.
But the Internet media business has always been like squeezing toothpaste, and its hard to imagine that MySpace and Facebook represent the last large audiences to be amassed in the social networking business.
link to original post