To a consumer, the process is essentially a quid pro quo. In exchange for using a widget, which might be a game or an interactive tool, a user must agree to allow the designer of the widget access to the information on their social-networking profiles. Ad companies can then mine personal data from the profiles and target their messages. So, for example, if someone says his or her favorite band is the Shins, that person is considered likely to buy a Shins T-shirt and music by similar bands.
“Advertising and sponsorship are clearly where the money’s coming from,” said Steve Anderson, founder of Baseline Ventures, which invests in tech start-ups, including widget developer Weebly. “Advertising on a widget allows you to pull together things like age, demographics, geographic information, and the new holy grail: who users’ friends are.”
(The entry title is a reference to Joseph Turow’s Niche Envy)