Widgets Become Coins of the Social Realm

Some companies use the widgets themselves as vehicles for advertisements. One such company is Gydget, which creates applications that look like interactive postcards for artists and sports teams. Fans of a team or artist can post a widgets, which in turn flashes updated ticket information, retail offers, photos and other tidbits. Gwen Stefani fans, for example, can watch her music videos in Gydget's program.

"It's a word-of-mouth type vehicle," said Gerardo Capiel, founder and chief executive of San Francisco-based Gydget. "It's about using your loyal customers or fans to essentially market you on social networks."

Not many traditional advertisers have turned to this form of advertising. Some industry experts say this is in part because they don't have the same control over what shows up on the sites they advertise on.

"Advertisers want their ads to show up on pages that are clean and brand-consistent, but they might show up on a page that's not," Anderson said.

There is also some skepticism about how to judge the effectiveness of the ads, and the wide variety of pricing models in this sector reflects that, some analysts said.

Some ad networks still use traditional pay-per-view models. VideoEgg, for example, has advertisers pay $7 per thousand impressions, then shares 60 percent of that revenue with the Web sites that publish the ads. SocialMedia receives 10 cents for each click on an ad and 50 cents for each time a user installs a widget; most of the revenue goes to Web site publishers. AdBrite allows advertisers to choose whether to price by impressions or clicks.

These companies have yet to figure out how to mine the massive amount of information they collect, then deliver ads that speak to their users, analysts and developers say.

"We have done some limited targeting, but there's so much data that we're still trying to figure out what to do beyond the obvious," said Narendra Rocherolle, co-founder of San Francisco-based fbExchange, an online ad company. Advertising also needs to tread delicately on users' privacy and the sensitivities of those who may not want to thing that their profiles are being watched by corporate America.

Ad networks "have to walk that tight walk where they can make great services for members without making them feel like they're selling them out," said Tracy Ryan, associate professor of advertising research at Virginia Commonwealth University.

RockYou's Shen said the greater challenge, however, is designing the programs people want to use so much that they'll accept the advertising that goes with it.

"What we can do with the data is pretty clearly communicated," he said. "The honest answer is that users that use social networks pretty much don't care about that stuff. Privacy is not nearly as much as a concern as being able to use a cool application."