Today Facebook, tomorrow the World Wide Web

We have been talking to a few small startups about the "Art of the Start", and one of the things that is emerging is that the economics of starting a company are even lower on Facebook than on the general web. This is because:

(i) The environment is more defined - the API's etc are already there, and you know the technology on the receiving desktop

(ii) The market, although smaller, is probably fairly early adopter so is more likely the early target market for Consumer apps at any rate.

(iii) It is harder to be outspent in marketing $ - Facebook is increasingly defining the route to market in its environment.

Most of the early applications were pretty naff - not so much applications as virtual toys- but increasingly the applications emerging now are actual business models in their own right, such as BlogFriends which aggregates the blogs of your Facebook social network - and the blogs they read etc. The benefits of this means that once the application is proven on Facebook, it has a platform to move onto the wider Web.

(Add on note - and vice versa - this is an interesting post on financial services in Facebook)

There is an interesting article in the Wall Street Journal today which adds some thoughts to this observation.

new entrepreneurs entering the arena are bringing with them applications that are more sophisticated and can engage users more often and for longer periods of time. To do so, they try to harness the connections that link its members, or what has become known as Facebook's "social graph."

Take "Neighbors," an application launched four weeks ago by Point2 Technologies Inc., a Vancouver-based company that operates a Web-based real-estate listing service called Point2 NLS. The application uses the company's broker-defined neighborhood system to help Facebook members meet other people who live near them and share local information and photos. It also shows properties for sale in the neighborhood from any of Point2's broker and agent members, which the company says number about 140,000 in 86 countries.

So...what is a VC to do if that cost of a startup, already low, is getting even lower? A few weeks back Bay Partners announced it had raised $300 million for AppFactory, a venture specifically for companies developing Facebook applications and is making $25,000 to $250,000 (What!!!) investments per application.

Will we see a similar initiative in the UK I wonder? Seedcamp (In process this week) seems like it is aimed more at the traditional route of obtaining funding, but one assumes that a facebook startup would still be acceptable?

(The Seedcamp winners allegedly may have to spend 3 months in London tramping round various VC houses pitching - one assumes that this is for extra funding, and that the prize money is be allocated at the time as with the similar BBC Innovation Labs? ),

This Bay Partner approach looks like just the sort of thing London should be doing though - after all, we are the largest single network on Facebook.....any takers?

Postscript - it looks like Google is also being its own VC too:

Google has begun making VC-style investments to the tune of about $500,000 or less in promising startups, often buying those companies afterward, according to partners at Silicon Valley VC firms who spoke on condition of anonymity. In an effort to keep spotting promising deals, Google has been hiring a stable of finance pros.

Interesting times.....