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Facebook Apps: Where are the picks and shovels?

Posted on September 17, 2007

You guys probably thought I was abstaining from writing about Facebook apps but you would be wrong. I had a post brewing the whole time. What can I say? It is a big trend and I was practically compelled to start thinking about it and you know what happens when I start thinking. No, my head doesn’t explode… A blog post comes out of that thinking of course.

Anyhow, it seems that everyone I know has started thinking about Facebook apps and they are all wondering how you turn them into a business (some have ever turned them into a business already). Of course the two simple models that emerge immediately are:

Those models are definitely good ones although I have issues with both.

The consulting/development firm angle is more of a short term play. Those types of companies could be likened to the web development firms back in the Web 1.0 era. The first players will generate a lot of cash because they were first to market and beause there are a lot of companies who want Facebook aps but have no idea how to go about creating them.

After a while others will see how much cash these firms are generating and enter the market themselves causing slimmer margins up to the point where a lot of folks start taking their Facebook app development internal. This is the point where the consulting/development firms will need to start thinking about other offerings (one successful example of this in the web development space is 37 signals - they turned their business into a picks and shovels business actually - oooooo… foreshadowing).

Creating Facebook apps that will generate cash is a whole other ballgame. There is a lot of risk in this approach since the volume of Facebook apps is simply massive (i.e. barriers to entry are low) and you’re essentially trying to develop something that will go viral. If you are able to get something to go viral then you are looking for attention to your app and, as that attention eventually fades, you will need to develop new “sticky” apps that will keep your company in business.

In many ways creating Facebook apps to generate cash is a lot like a content business. Pure content plays make me nervous because you constantly need to bring eyeballs in. That said, there are a lot of people that have built amazing and very successful content businesses so there is certainly a lot of money to be made and many sustainable businesses that will be created (in fact, I have friends that are successful in this area - they are great at creating content). Basically, I am just not sure I would be good at creating a pure content play.

Again, the issues above are just personal issues as many people have been and will be successful with both approaches. The approaches just don’t suit my personal style.

My style business is typically a scalable platform of some sort. I am more of a picks and shovels type guy. I like creating tools that will underpin revolutionary ideas and allow those ideas to spread (and also to allow people to make money from their work).

Creating a platform is exciting to me because you can leverage it across many clients quickly and efficiently which also means you can keep your company very lean and nimble (one of my reasons for joining FeedBurner a couple years back should be pretty obvious now).

That said, I began thinking about a picks and shovels related business for Facebook apps and the first idea that came to mind was a platform that anyone could use to quickly and easily create a Facebook app (think Yahoo! pipes).

This platform would eliminate the use of code so that anyone could create a Facebook app quickly and easily but it would also allow advanced users to create more advanced apps by diving into the code a bit.

It would essentially be the geocities of Facebook apps.

Of course to make the platform really useful you would need to allow someone to create a Facebook app and a host of other widgets (because after all a Facebook app is really just a widget specific to Facebook) for things like iGoogle and Netvibes all at once.

I know what you’re going to say now. But, Eric, isn’t there already is a company that does that for widgets called Clearspring? Well, yes, but I don’t think that Clearsping currently creates Facebook apps although I am sure they are probably working on it.

So, why did I write this post if the idea was essentially already out there? I figured it was a good exercise in terms of thinking from a picks and shovels perspective. The next time you see a big trend bubbling up I challenge you to think past the obvious and try to figure out what type of picks and shovels type solutions might make sense to serve the growing need.

Always remember what the gold rush taught us. It is a very valuable lesson and one that, if taken to heart, can help you create a company that has a good shot at being profitable (of course success/profitability is all in the execution but that’s a whole other post).

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1 Comment so far
  1. Ward-o-blog September 20, 2007 7:11 am

    Would You Like a Mint?…

    My buddy Eric came in yesterday morning and pointed me over to the latest TechCrunch headline declaring that — surprise, surprise — there’s a new company on the web that seems to have nailed something that traditional software companies are……