All of the sudden, there's growing consternation about investing in Facebook apps. Could it be that there's too much money going into unproductive apps, with tenuous business models, in a suffocatingly crowded space that's controlled by one self-interested player? One issue that's been getting attention: the ability for Facebook to develop apps that obviate the need for something from a third party. Valleywag mentioned earlier this week that an upcoming feature basically apes the popular "Top Friends" app. It also happened when Facebook introduced chat feature a little while back. Besides making a third-party app redundant, Facebook can and does make changes to the way apps are promoted, displayed, or anything else that could affect a third party developer. Shasta Ventures VC Jason Pressman told peHUB that Facebook's moves could cause the space to cool down: "Facebook just underscored the risk you have of being disintermediated from its platform. It reminded people that it can build apps that look really similar and it can relegate developers' applications to second position. And I think that's going to have a meaningful impact on how the venture investor community views Facebook applications and applications built generally for social networks."
So far all of this seems pretty theoretical. If there is a chill, there could be any number of reasons for it (notably any growing caution to startups without businesses). But in the meantime, we still report on fundings on a seemingly daily basis for this or that startup planning to do something or other tying into Facebook. This week the big one was SGN getting money from Jeff Bezos, but there are frequently fundings or deals at the smaller end as well. Ultimately the two sides need each other: since Facebook doesn't want developers cooling on its platform, players in the space might as well use that threat to tell the company to back off. Meanwhile, next week is Facebook's annual developer conference: expect all kinds of related issues to get lots of play.
By Joseph Weisenthal