Little Widgets, Big Ad Dollars?

Spend Any Time online these days and you'll sec and hear a lot about widgets. On the web. these are liny free software programs that can be dragged, dropped, and embedded into web pages, offering everything from weather reports to sports scores. Call them bling for your blog. They're all over the Internet some 220million people used widgets in May alone, according to ComScore and their viral like success has set off a frenzy over how to make money from them.

Max Levchin. who at 23 co founded online pay processing firm PayPal, which was sold to eBay in 2002 for $1.5 billion. thinks he's found away. Now 32. Levchin has a new startup. Slide. com. a site that lets users post snapshots of friends, say, or vaca tions in slide show format. Slide hasfast become the most trafficked widgel maker on the web; Levchin's plan to embed advertising around slide shows could help transform widgets from a web gimmick into a profitable business.

What's so special about these software sn ippets? Consider basketball fans, who spend game time toggling between the NBA website and their work, Thev can now embed the scoreboard in their Google home page. It's a page within a page. a small piece of the NBA site that lives inside a larger site. The tools are particularly popular with bloggersand MySpace users,but as Facebook and other social networks open their plat forms to developers. their popularity is mushrooming.

More important, widgets are shifting the dynamics of the web. Once, people surfed from site to site to do virtual errands. With widgets, they can bring those sites to one central landing page, exercising more control.

This has grand implications for the $20 billion online advertising industry, which doesn't work very well. Web surfers don't really pay much attention to banner ads from. say, car brands or liquor companies. and they block disruptive pop tips. Levchin's pitch? Do it yourself product placement let users embed ads inside their widgets. Slide users have always been able to jazz up their slide shows with flowers. stars, and the like. But Levchin's newly signed deals with several big companies including Paramount Pictures. AT&T Wireless, and Discovery Channel let Slide users decorate their slide shows with logos, props, and other branded ele ments. A fan of Discovery's new survival show, for example, could add a sword with the show's logo to his photos. Discovery pays only il the Slide user opts to use the bling.

Will the strategy work? There's no proof Slide users will choose to brand their photos, though Levchin insists they will. "There are definitely brands that have proven to be extremely successful at connecting with their users." he says. Another challenge: The biggerwebsites that host widgets will probably demand a cut of advertising revenue. Right now Facebook lets widget developers keep any revenue they generate. At some point, however, it is likely to request a percentage of the take. Then there's competition, Levchin has the biggest widget site,but close on his heels is RockYou. com, a startup testing its own ad strategy.

But Levchin has massive aspirations. He thinks Slide's model could ultimately be as significant as PayPal's. "Our valuation will be comparable to hosts [like Facebook] themselves." he says. One way or an-other. all thai bling has to be worth some cash
August 20.2007 - FORTUNE