Pete at Mashable hits the nail on the head:
The widget startups are playing a high-risk, high reward game - ride the MySpace wave and you can have hundreds of thousands of users in a matter of months, but get blocked by MySpace and it all comes crashing down. That’s why these guys need to diversify: partnering with more networks (Bebo Widgets was a big boost for Slide, RockYou and Photobucket), having a broader range of offerings and even building “sticky” social networking features into the sites themselves.
I suspect, however, that the widget world will be similar to the YouTube story: the naysayers will say it’s not a real business and that it’s stupid for one company to rely so heavily on another, and yet a few of these widget companies will use their momentum as a springboard to massive success. If the naysayers had their way, everyone would be working for startups that bought sprockets for $1 and sold them for $1.20 - a solid business model, but boring as hell.
(New at RockYou: MySpace Countdowns, Corkboards, Musical Slide Shows.)
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