What an Open Stream API Means for Facebook

Lovers of the open Web rejoiced yesterday when Facebook rolled out its Open Stream API, giving developers the opportunity to create third-party applications that tap into the Facebook "activity stream" of user updates. But whether this is just another step into the abyss for Facebook remains to be seen.

Thanks to the Open Stream API, Facebook users will be able to use third-party clients to access and post Facebook updates -- including new photos, videos, pertinent changes to one's status, etc. -- all without ever having to go to Facebook.com.

Opening up its activity stream is another move by Facebook that mimics the look and feel of its younger, hipper cousin, Twitter Inc. , whose API has been open from day one, leading to innumerable third-party clients for mobile (TwitterBerry), desktop (TweetDeck), and niche (StockTwits) interests. One analysis shows that 55 percent of Twitter's traffic comes from third-party applications.

Twitter application TweetDeck recently updated its client to include Facebook status updates, allowing TweetDeck users to stay abreast of short, mundane updates from their Facebook Friends alongside those same sorts of brain burps from their Twitter Followers. But now, with the Open Stream API, developers will be able to take the process a step further, allowing Facebook users to also update their Facebook accounts from the comfort of an external application. (Woo! Stop me now before I get too excited!)

Third-party applications for Twitter have largely contributed to its newfound growth and popularity -- but they've also contributed to its regular downtime. While Facebook doesn't appear to have the scalability problems Twitter has, Facebook's still struggling with monetization.

For a company that's looking for a business model that works, deflecting traffic from its home page -- where advertisers buy retail space -- seems counter-intuitive. Attracting fewer eyeballs could be detrimental to both Facebook and to the advertisers that invest time and money in marketing to an audience that may not be there anymore.

This shift could make for a bad experience for users as well. As Facebook diverts attention away from its homepage, it may have to compensate by figuring out new revenue models, such as in-stream advertisements.

Some have tossed around the idea of in-stream ads for Twitter as well, but Twitter adamantly opposes the idea, thinking ads detrimental to the user experience and potentially ineffective.

Twitter's Alex Payne told Internet Evolution this month that simply committing to the "tried and true" advertising model on Twitter, which is sure to upset users, doesn't seem like the right move, particularly considering the lack of success other social media sites are having in that vein. "We have five to 10 things we could do," he said. "We just don't want to alienate our users."

In an editor's blog yesterday, we discussed the potential for the free Web 2.0 model to survive and thrive in the future. As the Web opens up, with highly trafficked sites like Facebook diverting eyeballs away from their home pages, the monetization problem is only bound to get more complicated. It may not be long before we see Facebook and others recognize the need to explore revenue models beyond advertising in order to survive.

? Nicole Ferraro, Site Editor, Internet Evolution