What’s unique is their easy drag and drop user interface.  You no longer need a programmer to build your widget.  It’s easy to set up and format a widget that incorporates text, feeds or video (although I wasn’t quite able to figure out how to make a polling widget in the limited time I had to play around with it).  Some of the samples the company has on its site are pretty cool.  I especially liked the YouTube widget and the package tracking widget.

iWidget also stands out in how easy they make it for people to publish their widgets to different platforms – Facebook, MySpace or iGoogle – without a lot of complicated engineering to adapt it to each platform.

The vision, as described by iWidgets founder Peter Yared, is to let brands follow their customers to where the customers are and become part of the content that people are curating for themselves on various portals.  From the iWidgets site:

Widget ads are just the first step. Instead of simply trying to build brand awareness, marketers now have the ability to reach out to customers with useful features to enhance their personalized pages on social networks. An athletic gear company could offer an application that lets a group of running buddies track how their times and distances compare. An airline could offer a “come visit me” application that displays the latest fares for a trip between the hometowns of viewers and Web page owners. Even better, an airline might offer a widget that lets users track their frequent-flier miles and search for award trips right from their iGoogle pages. These types of applications can be useful, engaging, and viral—when you see one on your friend’s profile, you are likely to install it as well.

Here’s the rub:  short-term, the company is stuck with the ad model.  The site describes a revenue-sharing approach: if you include ad content in your widget, they will take a 15% cut; if you don’t include advertising they reserve the right to load ads and give you a 15% cut.  A) what advertisers and who will sell them?  B) will individuals want widgets on their page that are loaded with ads?  C) a brand won’t want ads on their widget … so there’s a tease for a ‘private label’ model to come.   This approach begs the question:  what value is iWidgets adding to the advertiser in an ad-supported model?  Advertisers buy audience, and they can already reach the same audience through Facebook or Google or MySpace directly.

Long-term, iWidgets will try and teach brands how to use widgets to create useful apps that engage customers.  That’s very cool, but it will take some doing to figure out the appropriate business model there, too.

Clearly, iWidgets has some ideas on how to monetize all this, or they wouldn’t be getting funding in this environment.  We wish them luck, and we’ll be keeping an eye on them.  If we come up with any cool widgets we’ll let you know!

What’s an advertiser to do?  Behavioral targeting is one trend that’s being explored, though privacy and permission issues are legion.

IDC throws out another idea, buried at the bottom of the release:  ads will not be effective “unless publishers get users to do something beyond just communicating with others. If the major services succeed in doing so, they will become more like portals, such as Yahoo! or MSN, and they will come closer to the audience reach of the top services. If that happened, publishers would be better able to monetize their [Social Networking Service].”

This is an odd statement.  There are lots of things that users already do on social networks beyond just communicating with each other.  Five minutes browsing through the Facebook library of more than 33,000 applications reveals many popular activities that are not directly related to communicating with friends.

Complete missing from the analysis is any notion that perhaps the most successful social networking business model won’t be based on traditional forms of advertising involving impressions and click rates.  Social networks are all about engagement.  Once the networks figure out how to package and monetize ways for their advertisers to engage with users – strike that – ways for their users to choose to engage with brands – we’ll be seeing a very different set of metrics emerge.

Meanwhile, smart brands already know that the most effective way to leverage all the traffic on social networking sites is not by talking to the audience, but by listening and engaging with them.