Google is a big believer in widgets, or what it calls gadgets, those little applications and pieces of other Websites you can embed on your Google personal homepage or on your desktop. In an effort to encourage outsiders to develop even more widgets, it is now offering $5,000 no-strings-attached grants to software developers who want to improve their already-popular widgets. And it is starting an investment fund called Google Gadget Ventures to sprinkle $100,000 seed money into the very best of these ideas.
What we are seeing is a variety of platforms—Google, MySpace, Facebook, Pageflakes, Netvibes—competing to attract the best widgets, which in turn will keep people on their sites longer. The problem is that a widget that works on Google will work pretty much everywhere else. So it's not clear that Google (GOOG) is creating any competitive advantage here, unless there are some Google-exclusive hooks that would prevent the widget makers from distributing their Google-funded apps elsewhere.
Maybe that seed money, though, will move the widget industry forward from making cool features to creating real widget-based businesses. The business models here, though, are far from clear.