The Web today is increasingly becoming more decentralized. More and more online information is being tailored to fit or accomodate individual needs expressed through blogs, social networks and personalized pages. The user-generated economy has certainly empowered consumers to become creators of content, thus having more control of what information they want and how they want it. This has given rise to small applications called widgets; widgets provide content ranging from photos, videos, and music to miniture shopping carts and city guides and can be embedded on an individual’s Web page. Due to their interactive and viral nature as well as traffic-driving ability, widgets are being posed as a new creative marketing vehicle for advertisers.

As traditional online advertising like banner ads or pop-ups become more annoying, widget providers and Internet giants like Google and Facebook are considering how best to monetize the growing population of widgets. One distinctive factor that sets widgets apart from their sister 'traditional online advertising options' is that they act more like content rather than a direct sell ploy. According to a study by Grunwald Associates in June 2007, kids and teenagers don’t like banner ads or other forms of interruptions from marketers but are likely to interact with ad-related features of widgets on social-networking sites. The study found that 20% of teens added content from a marketer onto their personal site. Several marketers like Honda, Reebok and HP have already created their own custom-made branded widgets as a way to engage with their customers - acting more-like a mini-CRM application. At a loss for ideas?  Think widgets for games, videos, animated characters, promotional coupons etc.

Widgets also empower the user to choose the content/ads that they want to engage with. Slide, the most popular photo-sharing widget on the Web, has recently launched advertising in its widgets where users can choose ads and feature them in their widgets. For instance, Discovery’s new survival show allows fans to add a sword with the show’s logo to his/her photos. Discovery pays only if the Slide user opts to use the bling. Currently, widget developers keeps all advertising revenue earned on social networking site like Facebook. More recently, Google has announced the Google Gadgets Ads program that provides tool for advertisers to run widget ads in Google’s Adsense network. By using Google’s extensive knowledge of user demographics, online usage habits and site visitation patterns advertisers will be able to deliver highly personalized marketing messages for each user.

It’s clear that widgets are shifting the dynamics of the social Web. Nevertheless, it remains to be seen how developers and creatives will best monetize the widget space and what impact it will have on the $20 billion online advertising industry.

Resources: Wall Street Journal, Washington Post, New York Times