Buddy Media in the NY Times

Mike Lazerow, founder and CEO of one of my portfolio companies, Buddy Media, was just featured in an story in today's New York Times. The topic: the bust of interest in developing applications for Facebook, and the opportunities and challenges in monetizing these applications.

Michael Lazerow, the co-founder of Buddy Media, based in New York, thinks the pattern of Facebook applications relying on advertising from other Facebook applications is unsustainable. Buddy Media, his five-employee start-up, is developing a virtual currency for the service, called AceBucks, which can be won by playing games and exchanged for virtual goods and services on the site. The company is betting that traditional advertisers will ultimately flock to Facebook, attracted by the personal information members reveal to applications. Such data will allow advertisers to narrowly direct their messages.

 “That is where it turns from a pyramid scheme to a major business,” Mr. Lazerow said. “Would you rather market to people who you have no idea who they are, or reach the exact people you want to reach?”

There are those who are cynical that Facebook will be generate the ad dollars necessary to warrant the scale of investment in these new applications. And I can understand their concern. But I think that Facebook-app business models can exist that harness the value of the community and turn it into monetizable data and transaction flow, and that this is squarely where Buddy Media is positioned. Needless to say, these business models will be tested over the next 18-24 months and the winners and losers will become clear. Stay tuned.