What Mark Zuckerberg giveth, he taketh away. When Facebook launched F8, its developer platform in May 2007, the announcement met with near universal praise. Facebook was the then number two player in the social networking space, and for a first among the leading players at the time, was opening its doors to third party developers. F8 spawned its own sphere of widget and application developers, complete with serious VC backing in the following months, as everyone wanted a piece of the action. Looking back, the move is credited with driving the popularity of Facebook globally, and while competitors followed with similar offerings, Facebook kept its first mover advantage, and it kept on delivering.

Fast forward to July 2008, and Facebook starts a gradual role out of a new design (today the standard on the site) that while offering some positive changes, users aren’t so thrilled about. I noted the first time I saw the new Facebook:

Third party app providers are going to be furious, as apps are now hidden under a tab labeled boxes, the last of four on any profile, although it would appear as though some apps are visible via the sidebar on each profile.

There have been some improvements since I wrote those words, for example Applications can now be accessed by a bottom navigation bar. However, the rot is starting to set in. Shifting applications and widgets away from the main screen on Facebook, and instead delivering them through sub-tabs and via menus is causing a rapid decline in use rates.

Widgets have been the hardest hit so far. Nick O’Neill on allfacebook noted Tuesday that a widget he created has seen a traffic drop of 60%, and makes the following observation:

It’s clear though that widgets have not survived the shift over and my guess is that within a matter of weeks we will see most top-performing widget applications practically disappear.

Applications do have one benefit over widgets: they have a practical use case over a widget that is often more decoration than something a user interacts with regularly. And yet, many of these applications benefited virally from the display of a front end widget or display point on Facebook profiles, a feature that is now mostly buried on a rarely visited tab. We may argue about the size of the hit applications are taking with the changes, but consider it a given that there is a traffic hit.

The widget and application space on Facebook may include amateurs, but at the top are serious companies with serious money, and they’ve woken up one morning to find that at least in part, many of their businesses are now in decline, or worst again may die, due to Facebook’s new site design.

It’s not a stretch therefore to ask: who will be the first to sue Facebook over the site redesign?

Facebook may be justified in doing as they please with the site per its own terms and conditions, but creating a buoyant marketplace of third party development, to only later cripple that marketplace, has an economic consequence. Where you find people losing money, lawyers are regularly brought into the mix.

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The ConnectU/ Facebook case circus first came to prominence last year (the case is now 4 years old) when the founders of ConnectU publicly claimed that Mark Zuckerberg stole the idea and code of ConnectU to start Facebook.

According to a report from SiliconValley.com, the new “smoking-gun” evidence was found by a forensic expert on Facebook’s computers. ConnectU’s attorney told the US District Court Tuesday that if ConnectU were forced into a settlement, they would subsequently lodge a fraud claim.

The judge however isn’t being friendly to ConnectU so far, noting that both parties signed the settlement based on “imperfect knowledge” of all relevant facts, and went on to suggest that ConnectU is suffering a case of buyers remorse.

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Gawker got copies of documents supposedly by “Bringing Down The House” author Ben Mezrich that detail plans for a memoir about Facebook’s founders. The clips say Mark Zuckerberg and his friends wanted to “have access to the social secrets that would finally get them laid,” so they decided to “do something special … to set them apart from the dozens of other super-smart, awkward kids.”

The text goes on to discuss the apparent Facebook predecessor FaceSmash as well as a few other interesting stories, including Zuckerberg’s supposed experience accidentally hacking into an FBI site while he was in high school.

Gawker’s source says Zuckerberg himself is not involved in the proposal.

Image: Gawker

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1. Facebook Hits 300 Million Users
2. Facebook CFO Gideon Yu Out
3. Trouble at Facebook? CTO/ Co-Founder Leaving