The Bubble Bursts for Facebook Applications

Since Facebook rolled out their new design over a month ago now, many application developers have seen a disappointing drop-off in user engagement. Despite the latest improvements in the developer platform itself, apps no longer have real estate (for the most part) on the front of their users’ profiles, and many viral actions are no longer allowed to be incentivized. The landscape has changed significantly, and at first glance it seems that apps simply are no longer as relevant to users.

Justin Smith over on Inside Facebook wrote this morning about the surprising recent growth of the “Causes” application in the past 30 days, and it got me thinking about the growing opportunities for strategic partnerships among Facebook applications. In the case of Causes, I would argue that a significant portion of its sustained growth over this period has to do with the relationships it has with other applications. “(Lil) Green Patch,” the largest “environmental” app on Facebook, uses Causes to record donations it makes to The Nature Conservancy. This of course drives traffic to Causes; but in turn, people using Causes can see (Lil) Green Patch as the top donor to The Nature Conservancy, driving more traffic back. This is of course is an unofficial partnership resulting from the relationship established by the use of one app to serve the other, but formal cross-promotion between applications is becoming more popular as well.

Back in early September, when the move to New Facebook was just getting under way, I wrote a white paper about the challenges posed to app developers by the transition. My conclusion was this:

New Facebook has been looming for months, always on the horizon but always an uncertain distance away. Now that the “Y2K” of application development is finally upon us, it’s hard to say where Facebook will be after the … dust finally settles. For sure, there will be a certain amount of perceived injustice and disappointment along the way…. In the long run, however, Facebook users will be left with a potentially higher caliber set of applications to choose from, and ultimately a better set of tools to engage with them.

The bubble has burst on Facebook apps, just as it has on overvalued companies from Wall Street to Silicon Valley. I argue this is a good thing — the Facebook apps that will survive are the ones that provided value all along; the rest, apps that were merely trendy or gimmicky, have become utterly irrelevant.

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