Wednesday, July 11, 2007

Facebook and the perils of free APIs

The hype over Facebook widgets has reached dot-com levels of frenzy. As Matt Marshall at VentureBeat reports:
Silicon Valley venture capital firm Bay Partners said it wants to write checks of between $25,000 and $250,000 to developers writing applications for Facebook's platform.
While the success of iLike using the Facebook API is impressive, they have not bet their business on the continued use of the Facebook API. Startups that do are completely dependent on the continued goodwill of Facebook.

A look at the terms of service for the Facebook API should make it very clear just how fragile this dependency is:
We reserve the right to charge a fee for using the Facebook Platform and/or any individual features thereof at any time in our sole discretion ... We reserve the right to specify the manner in which the fee will be calculated, the terms on which you will be invoiced and charged and the terms of payment.

Facebook may at any time in its sole discretion, without liability, with or without cause and with or without notice ... terminate or suspend your access to the Facebook Platform.
Perhaps a startup could attempt to negotiate different terms for a very popular widget, but Facebook holds all the cards in that negotiation and likely will extract most or all of any value generated by the widget.

Om Malik seems to agree:
Seemingly clever guardians of wealth are getting caught up in the euphoria and loosening their purse strings.

App Factory, is interesting, cringe-worthy reading filled with cliches like "application entrepreneurs' and "affect adoption, virality, and usage."

Putting my newly acquired Yiddish skills to use, I say, Oy-vey!

Facebook, despite the cleverness of its recent platform strategy, is still a start-up, and a funding vehicle focused entirely on its ecosystem seems a bit rash. There is still a fog around these Facebook apps-as-businesses.
See also my earlier post, "The truth about free APIs".

1 comment:

arjun said...

Hmmm. While I certainly understand your point that there is a "risk" in taking a dependence on a free API, I seriously doubt facebook will start start charging for its use. They're already "charging" in a sense by monetizing the left skyscraper banner placement. And if anything, they've hinted that they're even looking for ways to rev-share that with app developers.

Also, as any budding face-trepreneur will attest, the opportunity to hyper-virally distribute an application to 30+ million users eclipses all other considerations. (risk of charging; greed of wanting to "own" your users).

Maybe one day they will charge, but by they'll only be able to once app developers are making a ton of money.