Widgets were all the rage last year. And the trend seems to be growing. Widgetbox, a widget creation and distribution platform, is reporting 500 million impressions worldwide in the past month, according to Quantcast. Widgetbox says that the vast majority of activity exists across hundreds of thousands of publishers who embed the widgets in blogs each month and through partners who integrate Widgetbox’s widget galleries.

That being said, Widgetbox is still behind other widget makers in the space, including competitor RockYou, which had 9.5 billion impressions in the past month, according to Quantcast. Clearspring also seems to have more of a reach than Widgetbox, but we don’t have the comparable Quantcast numbers. Clearspring’s widgets had 520 million unique visitors in April of 2009, according to comScore.

We also received these comScore numbers of uniques for April 2009 for most of the widget producing platforms:

Widgetbox, provides tools for both novice and advanced developers to create a variety of widgets, from simple embeddable RSS feed readers (called “blidgets”) to full social network applications for Facebook, Bebo, MySpace and others. Although Facebook represents only 1% of the widget maker’s traffic, Widgetbox says that they are specifically targeting Facebook as a growing priority, recently launching Facebook Connect integration for users and widgets (which can be published in the Facebook feed). Perhaps this is because of Facebook’s steady growth in the U.S. and its popularity abroad.

Last fall, Widgetbox launched a blog network. To be part of the network, a blog owner needs to embed one of the 29 channel-specific widgets created by Widgetbox. Each widget displays the same leaderboard content as the Widgetbox homepage, which allows users to browse through a network’s top blogs without having to frequently return to the Widgetbox site. The majority of Widgetbox’s impressions come from blogging platforms Blogger and Wordpress, with a fair amount of traffic also coming from Bebo and MySpace.

While Widgetbox is seeing success as a startup, it is competing in a crowded space of other more popular widget makers, including Rockyou, Clearspring, and Slide.

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Late in Q4 last year, we decided to reduce our workforce. Even though we had a great year with tremendous growth, the economic uncertainties caused us to lay off colleagues. I am sad to part with them

Worse, the company has to find a replacement for President and COO Jay Rappaport, who joined the company in April 2007 and brought a lot of experience in-house as the ex-President of Vonage and former COO of AOL. We’ve added Clearspring to our Layoff Tracker.

There’s no doubt that Clearspring is being hit hard by the financial crisis, and since its business model is based primarily on online advertising its prospects are probably going to get worse before they get better.

Don’t count out Clearspring just yet though. They might be trimming down for tough times ahead, but with total venture investment in the startup at $36 million, with $18 million raised in a series C last May, they may very well have enough cash to weather the storm and come out stronger on the other end.

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The company has raised $14.5 million from Hummer Winblad, Sequoia Capital and Northgate Capital. Hummer Winblad has been around since 1989 and has invested $620 million of so in startups. Price feels that Widgetbox is poised to take advantage of the huge surge in widget usage. And if the AOL acquisition of Goowy and the recent Slide valuation is any indication, there’s lots of room to grow for Widgetbox.

I asked Price to write a guest post telling us why he made the decision to leave a very safe and very lucrative job and enter the very unsafe and risky world of startups again. His post is below, although it can largely be summed up in this post, too. If you want to follow Price’s regular updates, his blog is here.

My name is Will Price and until yesterday I served as a General Partner at Hummer Winblad Venture Partners, an early stage venture capital firm that was founded in 1989 (investments include TheKnot, Napster, HubPages, Omniture, Powersoft, Hyperion and others). While passionate about the firm and the venture industry, I am leaving Hummer Winblad today to take the CEO role at one of the startups I invested in – Widgetbox.

Michael Arrington kindly offered me the chance to explain my decision to leave venture capital and to join Widgetbox as the CEO. While the detail follows, in summary the combination of my personal aspirations to return to an operating role and my passion for the widget market and the company (which I helped seed fund) made this a no-brainer move for me.

My logic:

The best markets and the best companies ride the tide of history. Widgets are such a market.

The Web’s tide is open, distributed, standard, user-defined, and, in many ways, the most powerful force of the modern era. Widgets are not a fad, or web 2.0-hype, but fundamentally they are the unit by which users are assembling and defining their web experience.

Widgets are portable applications that are user-defined, user-assembled, and consumed independent of the source of the underlying content, commerce, and application functionality. The combination of user-control and decentralized interaction to important services represents an important paradigm shift in how users discover, select, and consume the best of the web.

In Nov 2007, Comscore reported that 650m global uniques, or 65% of the web universe, interacted with a widget. The growth in widget adoption and social media speaks to users’ unmet needs and frustrations with traditional web models. Today, brands, developers, media companies, and established Internet players are racing to understand the forces driving user behavior and the power of a more componentized and distributed web. While widget penetration is at 65% of Internet users and growing, spend in the widget category in 2007 was less than $20m, or 0.1% of the total online ad spend
market.

The 650x differential between spend and the record growth in user adoption is very powerful to consider. Users are always ahead of the market, as evidenced by the systemic under-allocation of ad dollars on-line; 21% of media consumption is on-line vs. 7% of ad spend. However, this 3:1 imbalance is steadily eroding and the widget market will prove to be no different and no less transformative. Traditional portal models that aggregate users and resell that aggregation are fundamentally at odds with the emerging paradigm of user and community defined experience and distributed consumption.

Marketers need to fish where the fish are, however, in an early market there are often more questions than answers. While widgets are enjoying end-user success, the commercial relevance of widgets remains unclear to many. Are widgets a new marketing channel? If so, are they effective? How do you build them, buy them, track them? What is the unit of value; an impression, an install, an engagement…? What type of ecosystem will form around the phenomena? In order to move beyond fad status, an economic model for the widget ecosystem needs to be better developed and measurable value delivered to both end-users and marketers.

Widgetbox, along with Slide, Rockyou, Goowy, Clearspring, Gigya, and others, is working to enable users, developers, brands, media houses, and incumbents to ride the tidal wave of web componentization.

Widgetbox, backed by Hummer Winblad, Sequoia Capital, Northgate Capital, and Michael Dearing, is the web’s largest gallery of widgets. Widgetbox’s growth in the past year has been extraordinary, with a current monthly audience of 30m uniques, 400m monthly widgetviews, and widgets installed across 230,000 domains.

For those of you who read my blog, you know that I am passionate about the venture capital industry and its importance in supporting innovation and entrepreneurship. As a General Partner at Hummer Winblad, I enjoyed the exposure and access to some of the key innovators and drivers of the new economy; company’s like Omniture, Move Networks, Mulesource, Widgetbox, and many others. At 36, however, I felt a persisting and important pull to embark on a new journey of growth, discovery, and learning.

In my career to date, I have found that if you follow your heart, work tirelessly, and fish in good waters, good things will happen. For Widgetbox and our colleagues in the space, good things will continue to happen if we stay true to the web’s architecture of openness, distribution, and standardization and to users’ passion for empowerment, expression, and need for community.

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Their first product was a Flash-based webtop or alternative operating system. But later they went into the widget space with their YourMinis product, and that is the reason AOL has acquired them.

AOL SVP of Social Media, Messaging and Homepages David Liu said this was a deal they’ve been considering for the last nine months, and that they plan to integrate Goowy’s technology into both user-facing AOL products (to widgetize them) as well as their Platform A advertising network. Expect Platform A to launch significant new advertising products in the widget space soon, Liu says.

This is a significant win for Goowy founder and CEO Alex Bard, who has run a tight operation over the years. The company has just six employees and raised a single round of financing from Mark Cuban in April 2006 (the size of that round remains undisclosed, but it was almost certainly under $1 million). He says the Goowy team will remain in San Diego for at least the short term.

Goowy competes with a number of startups in the widget advertising space, including Widgetbox, ClearSpring and Gigya. VideoEgg, Slide and RockYou also compete in this area.

AOL has been busy acquiring promising young startups – they bought Israel-based Yedda last November as well.

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We’re not exactly sure how long it’s been around (it appears to have launched late this Fall), but we recently came across a simple widget service with no press coverage to date called Hyplet that helps you create digital business cards and flyers. You can spread them around the web by embedding in blogs, social networks, websites, and emails.

Hyplet’s end product is nothing fancy, just a simple HTML snippet that references an image hosted on the company’s servers. Most of the service’s value comes from its user-friendly image creation tool that lets you arrange text and images, pick styles, and add links from within the browser. It’s obviously targeted at people with little or no knowledge of Photoshop or similar graphics programs. While Hyplet has templates for both business cards and flyers, you can modify them and add your own images to create widgets for any purpose.

I can see individual MySpace users taking advantage of Hyplet to put flyers on each other’s profiles, but I can’t see the service being used for serious viral campaigns. The themes are too limited and the publishing options require you to manually add your widgets in one place at a time (there’s no help from widget distribution services like Gigya or ClearSpring here). There’s also the issue of monetization; Hyplet doesn’t appear to have any source of revenue yet so I’d be concerned that my hosted images wouldn’t be around in the future.

It’s also really easy to take out the part of the HTML that promotes Hyplet itself, which I did to the business card above so it could be floated to the left (and no, that’s not my real contact information).

Get your own Hyplet!

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While you can get all the technical improvements from Yahoo’s own upcoming announcement. The highlights are support for Flash and HTML and the addition of some new partners. Flash and HTML support mean that widget development won’t only be more familiar to web developers, but also more easily support new applications such as video.

Yahoo is also following through on some previous partnership announcements, making Netvibes UWA available as desktop widgets as well as adding the widgets from widget analytics services Clearspring and MuseStorm.

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Clearspring is announcing today at ad:tech in New York a new service called “Clearspring for Advertisers” that will deliver advertisements in the form of interactive widgets.

The announcement does not bring anything particular new to the web, since companies such as Sony Pictures Entertainment, The CW Television Network, Comedy Central, DreamWorks Animation, and Warner Brothers have already distributed ad widgets through the service. We’ve embedded a widget below that was used to advertise the movie Superbad.

The arguments in favor of widgets over regular banner ads depend on the increased engagement levels they provide and their viral nature (fans of a product can embed the widgets in their blogs and social network pages).

More information about the service can be found here on Clearspring’s website.

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The new offering which MuseStorm is officially dubbing a “content engagement platform” provides four widget syndication aspects: Authoring, Distribution, Analytics & Monetization.

The highlight of the platform is the authoring functionality. First, it provides non-programmers the ability to develop rich media (audio, video, photo, text) widgets. Second, MuseStorm’s platform instantly exports the “source” into a variety of Web formats, including MySpace, Facebook, iGoogle, Netvibes, PageFlakes, etc. Desktop widget export currently features Windows executable, but support for Google, Yahoo, and Mac will be added in the near future. Updated are propagated seamlessly to the universe of deployed widgets, regardless of format.

The distribution aspect of the platform includes Web and Desktop widgets as noted above and will be expanded to IM and mobile. From the analytics standpoint, the MuseStorm platform provides distribution and user interaction analytics which should help publishers optimize their offerings. Publishers can monetize their widgets by integrating ads using advanced features such as event triggers, location of the ad within the widget, and more.

MuseStorm is targeting its offering toward high-end publishers requiring a complete widget strategy. This is in contrast to offerings by Widgetbox and Clearspring which are geared at publishers that are in need specifically of distribution power.

Several publishers have already given the nod to MuseStorm’s new platform. These include Simon & Schuster (BookVideos), CBS (The ShowBuzz), and even MicroSoft which launched a Halo 3 FaceBook app powered by MuseStorm.

Founded in 2005, MuseStorm is based in Sunnyvale with R&D in Or-Yehuda, Israel. Dr. Yossi Vardi provided seed funding in the low six digits. In July 2007 $1M in Series A was provided by Elron (NASDAQ: ELRN). This is Elron’s first Internet investment.

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Clearspring’s platform lets developers code a widget once and dynamically serve it an embed on any websites, Google Gadgets, Netvibes, Pageflakes, and Live.com within their wrapper. All a developer needs to do is point Clearspring to their widget’s source code.

Clearspring’s wrapper tracks analytics for your widget and dynamically sets parameters for your widget. It also includes a customizable “grab it” button that lets you get the embed code or import it into a variety of social sites. All the analytics data is available through a dashboard. The dashboard breaks the data down by type (visits/uniques), source domain, and geography of the visitor. Within the dashboard you can also analyze how your widget is spreading and identify the “viral hubs” helping your widget take off the ground.

Since Clearspring can set your widget’s parameters, it not only means users can edit the widgets settings, but that you can create widgets on the fly through their API. One example of a dynamic widget is the NBA player card below, which can generate a card for any NBA player based on the parameters fed to Clearspring.

Clearspring is funded by $8 million from Novak Biddle, ZG Ventures, along with various angels. Check out more in Clearspring’s profile.

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