Slide, RockYou = Live By The Hit, Die By The Hit

A couple of recent posts discuss the new world of Web widgets, which are small programs which can be installed on a web page, and run independent of that web page. Jeremiah Owyang writes about The Many Challenges of Widgets, while GigaOm believes that Companies Can Make Money with Widgets.

The two best known widget companies are Slide and RockYou. Both have grown exponentially via the social networks, Facebook and MySpace in particular. Their bread-and-butter offerings let users post pictures in slide show formats. They’ve expanded beyond that for other hits, like SuperWall and FunWall.

There’s a quality to their business models that seems to require a regular stream of hits. For the sake of argument, let’s say there are two business models. One is to create products that are enduring, and have an established place in the market. Microsoft Office. Tide detergent. USA Today. Margins (non-software) may be lower, but the stability represents good cash flow.

The second model is to create a regular string of hits. Disney Studios, EA computer games, Donna Versace. Margins are higher, and when you’re on a roll, the money pours in. But it is hard to always have a hit.

Slide and RockYou do have some established hits. They have great install numbers for several of their widgets. But to truly be huge, they’ll need more. I see them as more similar to movie studios than anything else:

• They need releases that people will want (mega-hits, niche successes)
• They need distribution of their product (like movies need theaters, DVD distros)
• They need to monetize (OK, this is where they fall down a bit. People aren’t paying $9.00 to use the widgets).

Slide and RockYou need to be tech savvy. Jeremiah’s post lists issues they have to deal with: multiple APIs (Facebook, MySpace, etc.); changing APIs. They need to have a flair for creating great interactive experiences. And they need creativity to come up with new ideas.

This isn’t to say that they won’t build up a list of hits that transcend the up-and-downs that mark creativity-driven enterprises. EA has a great set of franchises in its sports video game collections. But the pressure to create new stuff is always there.

Slide recently raised $50 million, on a valuation of $500 million. Nice valuation, but the company has some challenges ahead of it. There’s that annoying need to monetize its widgets. Also, unlike reliable movie theaters that need releases, Slide and RockYou are depending on consumers to install their widgets. I imagine they’ll target websites as well – a bit easier and more stable than those fickle consumers.

And just as important, both Slide and RockYou need to set up their creative shops and processes such that a regular stream of potential hits are rolled out. They’ll make their lives easier by partnering with other companies that have “widget-izable” content. Touring through the Slide site, I see TechCrunch, Engadget and HotOrNot with widgets there.

There’s a real opportunity in widgets, but it takes more than throwing sheep at people.