Facebook's Developer Hug

Social networking giant doles out more than $1 million to widget makers.

Expect to see more digital sweepstakes and virtual sheep on Facebook pages soon.

The Palo Alto, Calif.-based company, which is facing increasing competition from other social networks and the iPhone, is fueling Web-application development on its platform, doling out more than $1 million to entrepreneurs Tuesday night.

The funding is prize money for the company's second developer competition, which received 600 applications. Facebook's fbFund picked five grand prize winners who will receive $250,000 each and 20 runners-up who already received $25,000 apiece.

"We started fbFund to encourage innovation on Facebook platform and remove some of the challenges of starting a company," said Mark Zuckerberg, Facebook's founder and chief executive.

With the economy worsening, developers say they need all the help they can get. "One thing that is tough right now is funding, so this is a real boost for us," said Victoria Ransom, chief executive of Wildfire, one of the five grand prize winners. Wildfire's application helps businesses run interactive promotions, sweepstakes and coupon giveaways.

"For us, this money allows us to grow in an organic manner and not jump the gun on the venture model," said John Anderson, chief executive of GroupCard, another grand prize winner. GroupCard's app allows users to send around an e-card for all to sign and send to celebrate any occasion.

The other grand prize winners were Kontagent, HitGrab and WedSnap.