This can be seen in My Starbucks on Facebook. It is a very well done gifting application, so well done in fact, that most people probably think it is an official Starbucks application. The Starbucks logo and numerous graphical assets of Starbucks products have been incorporated into it. This association with Starbucks, which has many avid followers, is a major factor in its popularity. It has over half a million installs. If it were just “my coffee”, it would likely have gotten nowhere near that many users.

The two college students who created it are not trying to hide the fact that they did this without Starbucks’ permission and include a disclaimer on the app’s about page. They are making money from advertising incorporated into the app, none of which goes to Starbucks, but they probably feel they are actually doing Starbucks a huge favor by promoting their brand. Maybe they are. It is certainly the view shared by many as represented by Nick O’Neill of AllFacebook who wrote, “If I was a brand I would be extremely happy about this.”

Perhaps nothing serves as a better example of the issues involved than the saga of Scrabulous, an online version of the game Scrabble which has become a huge hit and makes $25,000 a month for its creators, two brothers in India. Hasbro, the owner of the brand which has licensed the online rights to two other companies, has threatened to sue to have it removed from Facebook. Needless to say, the fans of Scrabulous are upset and many bloggers seem to hold the opinion that Hasbro should buy out Scrabulous as exemplified by Josh Quittner of Fortune:

If I were an evil genius running a board games company whose product line spanned everything from Monopoly to Clue, I might do this: Wait until someone comes up with an excellent implementation of my games and does the hard work of coding and debugging the thing and signing up the masses. Then, once it got to scale, I’d sweep in and take it over. Let the best pirate site win!

Is this the new business model for aspiring entrepreneurs? Don’t bother to negotiate pricey licensing deals; just find a hugely popular brand and leverage that popularity to create successful unofficial products, and then wait for the big pay day from the brand that is either grateful for all the hard work or fearful of the backlash from fans.

It certainly puts brands like Hasbro in an awkward position. Who would bother to license rights anymore if the people who simply steal intellectual property are being rewarded? On the other hand, these unofficial products are helping to promote brands and fighting against them would result in negative publicity. But isn’t this “pay me off or face harmful consequences” attitude a little like extortion?

It will be interesting to see how it all plays out. In the long run, technological changes and evolving cultural attitudes will certainly transform business models and intellectual property laws.

We see the potential here as being enormous, and are already hard at work integrating social applications into our clients’ word of mouth/social media marketing mix. We’ve just released our first app, called Pass the Soccer Ball.

The premise is quite simple – you pass ‘balls’ to your friends who can in turn either pass it down the field to one of their friends or take a ‘shot’ at the goal (with each successive pass improving the odds of scoring a goal). The very nature of the game takes advantage of the “social graph” and spreads virally. In fact, we quietly released the first version of the application last week with no promotion and over 1000 people installed the app in just the first few days (it also boasts an “active user” base in the top 15% of all Facebook apps, according to Adonomics).

This is a sign of bigger things to come, as Myspace, Yahoo, and even Google are rumored to follow suit and release developer APIs that allow deep integration with their platforms. Social networks are becoming the new operating systems

Got a Facebook account? Why not check out the app and pass me a soccer ball?

Related Links:

Facebook Developers API
Pass the Soccer Ball Game (Facebook account required)