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Earlier today Facebook released details on its new Verified App Program for third party developers.

Basically, application developers (there are 48,000 applications on Facebook today) can apply to become a Verified App. If they pass they get a badge and special placement in the Application directory, plus increased communication limits with users, increased visibility in the news feed and some free advertising credits. If they don’t pass, they get stuck into the unwashed masses of apps that aren’t verified because they aren’t “meaningful,” “trustworthy,” or “well designed.” The complete guidelines are here.

Basically, you don’t want to be in the loser group. Facebook users aren’t going to be quick to add an application that can’t meet basic competence or honesty standards. A developer trying to get users on an unverified app is sort of like someone trying to get a job as a doctor without a medical degree. It’s going to be hard.

So how do you get into the Verified App category? You pay. $375. Well, you have to pass those tests, but then you pay. You can be so Meaningful people make religious pilgrimages to your office. So Trustworthy that your Wikipedia edits are never questioned. And so Well Designed that the Apple guys call you up for tips. But unless you pay that $375, you ain’t getting the badge.

And then you pay again. Each year. The Verified designation is good for just twelve months.

There’s a word for this kind of system. I just can’t remember what it is. Oh yeah. Protection Racket.

It’s a beautiful model. And I have no problem with it, as long as we’re all willing to admit that it is what it is. I just wish Facebook put as much effort into launching their payments platform as they did on the new verification system. Because then app developers could start charging for apps like they do quite successfully on the iPhone, and make some of this money back.

And just one last thought - if an application isn’t meaningful, trustworthy and well designed, why is it in the app store at all?

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Facebook CEO Mark Zuckerberg takes the stage with John Battelle at the Web 2.0 Summit in San Francisco this afternoon, at about 2 pm.

Like Jerry Yang yesterday, Zuckerberg has a lot to talk about regarding the state of Facebook, and its future.

Our real time notes from the interview are below.

Battelle is talking about how much Facebook has changed over the years, joking that Zuckerberg now wears tennis shoes, not just sandals.

First question, Battelle asks Zuckerberg about new financing rumors and trips to Dubai. Zuckerberg remains silent. In response to the question “Do you need money?” Zuckerberg says “no.”

Battelle digs deeper, asking if Facebook might run out of money sooner than they thought a year ago. Mark says that the site has grown much faster than they anticipated, but that international growth via user-translated sites is an efficient way to go. Mark also says the company has two very strong revenue lines - direct sales and online sales. Battelle asks him to break down the two streams, Zuckerberg won’t comment. He also brings up Microsoft revenue, but only says it represents a decreasing percentage of overall revenue.

Zuckerberg commenting on the Microsoft investment: “A lot of people focus on the price Microsoft paid.” Battelle asks how Facebook can ever grow into that valuation. Zuckerberg says they took the best valuation they could get and it made sense for them to do the deal. They aren’t going public for a few years, he says. “We don’t feel any pressure to live up to the $15 billion [valuation],” he says.

Mark confirms that “something more than 700″ people work at Facebook, and says they continue to hire, particularly engineers. He also says they are building international sales offices. Mark says 7% of the population of France is now on Facebook, and that he wouldn’t be surprised if it was 30% next year. They may open a sales office there, he says.

Regarding Facebook Connect, Mark says that anyone can now apply to join.

In response to a question about how closed Facebook is, he says that over time they may open up, but that users prefer using Facebook’s interface for now. He says that systems tend to move towards openness over time, uses the PC industry as an example.

Mark says their goal today is to get people onto Facebook and get them comfortable putting their personal information online to share with friends.

The next iteration of platform, he says, is Facebook Connect, which gives people Facebook tools on third party websites. “As time goes on, we’ll see this very natural fanning out and decentralization,” he said.

Mark says a flaw in the early implementation of Facebook platform is that application developers focused way too much just on getting users to add it, which moved them up the top list. Now Facebook promotes applications that actually have user engagement. Four examples: Causes, which is growing by “hundreds of thousands of people per day.”

Facebook Connect is a further evolution, he says. He says they slowed down the launch of Facebook Connect to minimize the need for painful changes later.

Regarding Twitter, Battelle asks “Is Twitter just a feature of Facebook?”

Battelle turns the conversation to online ads. Mark says they have a second iteration of social ads, which let users pass along gifts or pieces of content along with the ad unit.

Battelle ask about Facebook being banned by companies, noting that the army sees Facebook as a problem. Mark says they’re seeing the opposite trend. He says companies that used to block Facebook are now letting them use it.

Mark stresses that its still very early on the platform side, and doesn’t rule out working with Google on OpenSocial.

Mark mentions that 50% of Facebook users are active every day on the site.

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Facebook has a history of somewhat erratic search results, particularly for searches on political candidates - a bug last year caused zero results to show up for searches on Ron Paul, for example.

Today a reader notices that searches for “Barack Obama” on Facebook gifts turns up just one result - a pig with lipstick. A similar search for John McCain shows a normal pro-McCain button.

This likely tracks back to Obama’s comments on Palin earlier this year, referring to her indirectly as a “pig with lipstick.”

A search for Sarah Palin shows only one result - a dog with a heart over its mouth.

You gotta love search.

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Facebook blew past MySpace in visitors from across the world back in April, but the global gap continues to widen. According to the latest figures from comScore, Facebook attracted 161.1 million unique visitors worldwide in September, compared 117.9 million for MySpace. For Facebook, that number was up from 4.7 percent from the 153.9 million people who visited the social network in August. Visitors to MySpace declined 1.6 percent globally from 119.8 million.

The global gap between the two is now 43.2 million visitors. To put that in perspective that is a tad more than the number of people who visit Facebook in the U.S. alone, which in September was 41.4 million. MySpace still dominates in the U.S., with 73.0 million visitors in September.

MySpace argues that it is more interested in winning globally in the top ad markets, and in general it is winning in countries such as the U.S., Germany, and Japan. But Facebook is leading in France and the UK. Those are the top five markets.

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An update to our recent post on Facebook Connect: Facebook is pushing partners hard to be prepared for an official November 30 launch.

24 of 26 announced launch partners have yet to integrate Facebook Connect. We’ve spoken with a number of them. All say they are still planning to integrate the product eventually, but complain of bugs and other issues and wasted development efforts to date. Some, afraid of policy changes that will make Facebook Connect less interesting, also say they’re waiting to see the final product before launching.

A number of new features are being added. One, called FriendLink, allows a site using Facebook Connect to pass email addresses to Facebook and get friend recommendations back. This allows sites to make connections between users that they may not know about yet (but that Facebook already knows about). It’s a key feature that is attracting a number of partners, we’ve heard.

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In August I speculated that music may be the single biggest factor helping MySpace keep its commanding lead over Facebook in the U.S. market.

It’s not that Facebook hasn’t experimented with music over the years. Artists can set up pages and promote themselves, for example, although few choose to do so. Facebook also awarded iLike (the only music service with real traction on the site) with the cherished “Great Apps” designation over the summer, which theoretically gives iLike a level playing field with Facebook’s own applications.

Every time I’ve spoken with Facebook execs, they’re stressed that they have no intention of building their own music service to compete with iLike and other applications.

But all that changed a week or so ago when Facebook began an earnest effort to build a Facebook Music application (Venturebeat has some of the details, although parts of their story conflict with information we’ve obtained). They didn’t announce this publicly. Instead, Vice President of Business Development Dan Rose and his team reached out to 8 or 9 Internet music services to discuss what the service might look like. Facebook execs also met with major music labels in New York this week to discusss the project, says one source.

We believe, based on discussions with a number of sources, that Buzznet, iLike, iMeem, LaLa, Last.fm, Rhapsody and other services were contacted and provided with a document (sometimes referred to by sources as a RFP (request for proposal), other times called a term sheet) that outlined certain goals of the new Facebook music service.

The RFP requires the third party service to build and power a new Facebook Music Service that offers free music streaming and playlists, music downloads for a fee, and other music merchandising services such as ringtones, concert ticket sales and physical goods like tshirts (if this sounds like MySpace Music, it’s because it is exactly their model). The service must not only handle front end user requirements but must also be able to handle the very tricky tracking issues required by the labels to monitor music streams and fees.

The RFP also includes onerous termination provisions that allow Facebook to take ownership and control of the service and the user data under certain circumstances. In return, say our sources, Facebook will offer the third party a split on revenues generated from the service.

We’ve heard conflicting accounts of who will pay for the big up front fees labels require to get a music service up and running. Some estimates of prepaid royalty requirements are as high as $100 million, which Facebook is looking to avoid paying themselves. Other sources say that Facebook may be willing to pay these fees if they can’t force the third party to take them on.

It’s clear from our discussions that the third party music services are impressed by how one-sided the Facebook terms are. To do the deal Facebook requests, one source said, is “suicide.” But it’s also clear that no one wants to be left out of Facebook music, either. “It’s a no-win situation,” said one source.

The Facebook Platform Religious War

Facebook faces a problem - they can’t ignore music and expect to compete effectively with MySpace. But they’ve also promised their application developers, particularly iLike, a level playing field. Those developers have spent significant resources building on Facebook based on those promises. If Facebook now carves music out of that promise, developers won’t be able to trust them in any other area (rumor is Facebook has a similar RFP out for classifieds). The message will be clear: you guys can have all the niche stuff, but if something grows too big, we’ll come in and take it over.

There are three ways Facebook can go forward: (1) build their own music service like MySpace did and lose the trust of their application developers forever (plus it will take them a year or more to build the service and secure deals with labels and other rights holders), (2) partner with a third party to build out Facebook Music, and then compete on a somewhat level playing field with other third party developers, or (3) just acquire iLike (or another service) flat out, since they’re already a “Great App,” and show developers that if they really excel in their niche, they have a path to liquidity.

iLike isn’t the ideal partner for the service because they don’t have music label relationships (they stream music through Rhapsody). But they do already dominate the music scene on Facebook. And Facebook may be forced to forge those label relationships directly anyway, making iLike a good fit.

It’s far from clear which direction Facebook will go. Our understanding is that CEO Mark Zuckerberg doesn’t want to upset developers any more than they already have. Rose is supposedly championing a direct approach that leaves developers out in the cold.

The outcome of the battle will affect far more than Facebook’s music strategy - it will also signal if the company is at all serious about being a platform/operating system for the social graph, or if they just want to own everything of value on the Facebook platform.

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Facebook has just announced 25 winners of cash grants from the fbFund. These grants are given to the Facebook developers that are creating some of the most promising apps on Facebook. The fbFund is a $10 million fund announced a year ago by Facebook, Accel Partners, and the Founders Fund.

Below is a list of the 25 winners, out of 600 applicants. They each received about $25,000 and will be eligible for five top prices of $225,000 (about $2 million, when all is said and done). To help determine the final five, Facebook will have a page where members can vote on their favorite apps. The cash is a free-and-clear grant, but Accel and Founders Fund get first right of refusal if they decide to invest in any of the finalists.

Some of the apps are already quite popular, like Weddingbook, a social network for brides-to-be with 336,000 active monthly users.  The game Mousehunt, has 147,000 monthly active users. GroupCard, which lets dozens or thousands of people collaboratively create and send a card to one recipient, has 87,000 active monthly users. Others have not launched other than in alpha. A PDF provided by Facebook with a description of each finalist is embedded at the bottom of this post.

Which ones have you tried? Which ones will make it to the final five and why?

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Rumors started to leak earlier today that Facebook co-founder Dustin Moskovitz (right) and colleague Justin Rosenstein were leaving to start their own company.

Facebook has since confirmed the rumor to us with a simple quote from Mark Zuckerberg: “Dustin has always had Facebook’s best interests at heart and will always be someone I turn to for advice.”

Fortunately, Rosenstein (who formerly worked at Google as product manager of Google Page Creator) has posted more information about their reasons for departure in a Facebook note to friends, which we have reproduced with his permission below.

In it, he describes briefly how Moskovitz and he plan to build to an “extensible enterprise productivity suite” that uses Facebook Connect as its user authentication system and borrows many of Facebook’s own design conventions. The two of them thought about building this suite from within Facebook but eventually decided that it would make more sense to build it within their own company. The choice quote: “We hope our products will become to your work life what Facebook.com is to your social life.”

I was a nerdy little boy. (Not much has changed.) Starting at age ten, I would spend hours a day holed up in my room, alone or with friends, programming til I collapsed. When I grew up, I wanted to be a software entrepreneur. I knew this with as much conviction, and about as much knowledge of what the role actually entailed, as other kids might have wanted to be an astronaut or President. In high school, I even started “Smiley Technologies, Inc.” and bamboozled some friends one summer into working on a Java-based productivity suite for group collaboration… but by September we learned the hard lesson that it takes more than three months to take on Microsoft Office.

By college, I felt pretty confident I was never gonna work for anyone other than myself. That is, until I heard about Google’s associate product management program. I have an enormous amount of respect and admiration for Google, and the opportunity to be on the inside, working as a mini-entrepreneur, was just too sweet to pass up. So I promised myself I’d stay at Google for just a few years, and then head out on my own.

That is, until a few years later when I got a friend-request from Dustin Moskovitz, who had co-founded Facebook with his college roommates around the time I’d joined Google. I told him I wasn’t interested in another job, but we met up for lunch anyway, and I’m glad we did. The more I learned about Facebook, the more inspired I was by its mission and team, and eventually decided this too was just too important an opportunity to say No to.

I’m really happy I took the job. I’m thrilled with the time I’ve had at the company, and with the incredible peers I’ve gotten to know and work with. But something else exciting happened in the year and a half since I joined Facebook. I started spending a lot of time after work talking to Dustin. Efficiency-through-software was dear to his heart as well, and we would stay up til 3am raving about how shortcut keys and high-level abstractions would Change The World. We shared a passion for technology, for entrepreneurship, and for using them to solve the same set of problems.

As our visions for how productivity software could work came into alignment, we thought about building it inside of Facebook. It was an attractive option in many ways, and neither of us was eager to exit a company that was in such an exciting phase of its development. But at some point it became clear that doing so wouldn’t be good for Facebook or for us. Facebook needs to continue its mission of making the world more open through social software, without distraction, and the new project requires a company built around it from the ground up, with the goals of efficiency and group collaboration embedded deeply into its DNA from day 1.

So we’ve decided to leave Facebook (in about a month) and start a new company, to build an extensible enterprise productivity suite, along with a high-level open-source software development toolkit, built for the Web from the ground up.

We see this new venture as very complimentary to Facebook. We hope our products will become to your work life what Facebook.com is to your social life. Our software will use Facebook Connect as the default option for identity and authentication. Our user interface will adopt many of Facebook’s conventions, creating a seamless and familiar experience for current Facebook users. And if our new development tools turn out to be useful, we hope the Facebook engineering team will come to adopt them.

Leaving Facebook makes me sad, but I feel I have to follow my passion on this. I can’t say enough about Facebook and the friends I’ve made here, and I am enormously excited for the company’s further success, a destiny I’m confident it will reach regardless of my participation in it. Finally, I’m really grateful to Mark, Chris Cox, Sheryl, Yishan, Chamath, Elliot, and others, who’ve been helping us make this a smooth transition, and to my family for guidance and support. Thank you; it’s meant a lot to me.

And the email from Moskovitz:

At various times in our progress, people have come up to me to deliver a now familiar question: “did you ever imagine Facebook would be this big?” And I give a familiar answer: “well… yea, actually”. Frankly, Mark and I knew even at the beginning this was something the world needed. We went into the college market as a stepping stone - identifying dense nests in the graph that would lead us to the rest of the world. We could see far enough in the future to know there would be an impact, we just didn’t know exactly what it would be. Now I can look back on our progress and see the ways the world has changed, the ways we have changed it. We’ve altered the future in a score of ways, from making it easier to look up phone numbers and email addresses to making it more difficult for terrorists to isolate impressionistic youth in the middle east. At the same time we’ve built a competent and vibrant organization, driven by a passion to push the world more open.

In the process of helping to build a company, I found I had another passion: making companies themselves run better. It’s easy to confuse this with a desire to manage, but even when I tried to do that I found myself drawn back to code for the solutions to my problems; I didn’t want to construct efficiencies, I wanted to engineer them. Communication is the key to scale in any size organization and technology is the key to communication. I’ve seen us unblock ourselves time and again with new tools to increase transparency and passive information flow and many times it was the fruit of my own labors. While working on improving Facebook’s tools, however, I came to a very difficult conclusion: doing this for all the companies of the world was not the same project as doing it for one of them. This idea is one that needs an organization that was built to do it, with every fiber of its DNA engineered in a way that producing an extensible enterprise platform becomes little more than the logical consequence of an organism executing its own nature. Further, the things we’ve scoped for Facebook’s product team to do are the right things to be doing and I wouldn’t have agreed with asking the company to divert significant resources to approach a project so different and so boundless in scope. Every time we introduce something new, we do it at an opportunity cost and this is too large a detour to take when we are already moving swiftly in the right direction.

And Facebook is moving in the right direction. When Facebook has a billion members (and 800 employees? maybe 900?) and someone leans over to ask me if I ever imagined it would get that big, my answer is going to be “you’re damn right I did. how come it only has 20% of the market?”. To know that this is Facebook’s future and decide not be a part of it is the hardest thing I’ve ever had to do, but it’s allowed me to have a broader perspective for the future. Like you, I’ve worried about the people leaving the company but it took becoming one of them to understand that this is just another part of the ecosystem (you should just take my word for it though). I’m not leaving the movement - I’m becoming a new part of it. The inevitable flux of the men and women behind these organizations is what moves the industry forward in the same direction in a way that cross-company collaboration alone never will. As the world moves to modular stacks and applications built up from a smorgasbord of platforms instead of single toolkits, then the companies that build the parts will need to act more and more like cooperative teams in a single larger organization. As Justin would undoubtedly say, I am simply viewing the industry from a different level of abstraction. These changes are difficult and sad, and that’s certainly an understatement for me… but change brings new things and this particular change will bring a new ally to our mission - I think we can all be pretty pumped about that.

Whether I work here or not, I’ll forever bleed Facebook blue. Facebook has been my passion and my purpose for the past 5 years. Our new project is not a replacement for what we build here, but instead both a complement and a compliment, and we have every intention of making it feel like a natural extension of Facebook’s product and purpose. Similarly, my timing in leaving is not an indication that I have lost faith in our ability to succeed, but an affirmation in my confidence in the company’s enduring success irrespective of changing faces.

Justin and I going to be around for at least another month and I am really looking forward to going deeper on this idea with everyone and how we can continue to work closely with Facebook. I’ll always be really proud of the work we’ve done and grateful for the opportunity to work with such a uniquely remarkable team. We’ll also be at the Q&A later to help continue the conversation right away.

Dustin

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After Facebook released v1.1 of their iPhone application, they promised that a bigger, badder v2.0 was in the works for September. They cut it pretty close, but they’ve kept their word. Just a few hours ago, the second major release of the Facebook application hit the App Store, bearing a whole new user interface and a slew of fresh features. With this latest release, they’ve managed to pack just about everything Facebook has to offer into a neat and native mobile interface.

While previous releases of the Facebook application supported the News Feed feature, only mobile photo uploads and status updates were displayed. In version 2.0, the News Feed has been completely overhauled to match item-for-item with that of the site itself, throwing news posts, relationship and interest updates, and all photo uploads into the mix. Furthermore, users are now able to comment on any given bit of news, or limit the feed to only the categories they wish to peruse.

Notably limited in the original release, much of the photo-oriented functionality of the site has made the jump over. Where as previous versions were confined to the most basic of upload options, v2 supports captioning, tagging, and the posting of photos to the Walls of your cohorts.

Moreover, digging through for that specific person or top secret love letter has been made far less taxing, thanks to the addition of people and inbox searching. Once you’ve found the person you’re looking for, you’re now (finally!) able to send them a friend request. Last to be mentioned but perhaps the most important for some, the application has been polished up on the stability and efficiency fronts, which they claim will be especially obvious if you run with a massive e-crew.

Even as a fairly regular user of the initial release, I’ve yet to find anything to complain about in this newest one. The interface is clean and buttery, and all of the functionality I’d found myself trekking over to the nearest standard browser for has made its way in. It doesn’t have support for Facebook apps, which I view as a good thing; even be it that the number of existing limitations that would prevent or dampen that could be circumvented, a significant portion of applications would be little but annoyances when on the go.

Coming in at the always welcome price of free, Facebook v2 is more than worth the few seconds required to upgrade. Grab it over here. [iTunes Link]

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