When social network app-maker Slide took $50 million in funding to set its value at $500 million in January 2008, the only way to almost justify the outrageous figure was to say Slide wasn’t really a widget-maker, but a huge ad network in the making. Since then, the ad market has cratered even while inventory continues to expand.

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Slide, the company that makes Facebook’s most popular apps, says it’s done making new ones for the social network. Keith Rabois, VP of strategy and business development, told us this week that the company wants to concentrate on making the existing apps like FunWall and Top Friends better–and ultimately figure out how to generate real money from them.

To us, this sounded like Toyota announcing that it’s keeping its current lineup stable, so it can make better Corollas. But we double-checked with Keith, to make sure we hadn’t misunderstood him: Yup, he said–we’re going to work on improving our existing Facebook products, not making new ones.

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When it comes to the widget ecosystem, lavishly funded companies like Slide, Clearspring and RockYou hog the limelight. But it is Userplane, now a subsidiary of AOL, that seems to be revving up the money engine without much fanfare. The company that started out offering a Web-based chat system has now morphed into a many-faceted business, including owning what might just be one of the largest widget ad networks out there.

At the D6 Conference this week in Carlsbad, Calif., I ran into Userplane founder Mike Jones, who sold his company to AOL in 2006 and now works for AOL. During our conversation, I marveled at the amount of money being pumped into the widget ecosystem while at the same time fretting about the paucity of revenue opportunities. My skepticism about the sector was outlined in an earlier post that focused on Clearspring’s latest round of funding.

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If you read this blog, you might think that Kara Swisher isn’t a big fan of fun. Or at least of silly, fun apps like SuperPoke! and what we call “social entertainment.” Call me silly, but I’d take entertainment over utility any time, and you know what? I bet you would too.

Case in point: the week of April 21 and the Pennsylvania Democratic Primary. That Tuesday marked a very important day for our country. A major competition between visible and opposing candidates was decided. It was a vote that is sure to generate publicity and campaigning over the coming months, and it will no doubt continue to occupy center stage of our national attention. Of course, I’m talking about “American Idol.”

That week, the two most popular television broadcasts were “American Idol” and “American Idol” (Tuesday and Wednesday, respectively). The third and fourth were both “Dancing with the Stars.” Check out the table below (from Nielsen Media Research; click on all tables and charts to make them bigger) and perhaps you’ll arrive at the same conclusion I did: When it comes to consumption, we prefer entertaining fare.

Likewise on the Web, Google News’s (GOOG) most popular searches in 2007 are by and large entertainment related (from Google Zeitgeist 2007):

Here’s a graph from Alexa.com of traffic to the three most popular non-search-engine Web sites and the most popular news Web site.

And here’s a graph from a Morgan Stanley (MS) “Internet Trends” report from 2008 of two of those same Web sites and the two most popular search-engines:

That last graph made a pretty big splash when it debuted at the Web 2.0 Expo conference; its title was “YouTube + Facebook Views > Yahoo! or Google…” Or to put it another way: today, fun is more powerful than utility.

Consider the value of other companies that deliver entertainment: Disney (DIS), Time Warner (TWX) and Sony (SNE) have a combined market cap of over $168 billion. Gross revenue for the NFL and MLB last year exceeded $12 billion. Apple (AAPL) made nearly $2 billion through iTunes music sales alone. Social networks benefit from increased activity, advertisers benefit from an exuberant audience, and widget users can, well, share favorite “American Idol” moments, send virtual margaritas or trout slap each other.

So seriously Kara, you have to try throwing a sheep or two. As Dr. Seuss said: “If you never have, you should. These things are fun and fun is good.”

Keith Rabois is vice president of strategy and business development at Slide, which makes widgets and applications such as SuperPoke!