Facebook is the new internet, or so the social utility's fans insist on telling us all the time. Their enthusiasm is understandable. The old internet — dominated by one search engine, three portals, and two social networks — no longer looks like virgin territory. In Facebook, which recently allowed users to install third-party applications such as music recommendation systems, an entrepreneur can begin again — in theory. Except it hasn't really worked out that way. After the jump, four reasons why Mark Zuckerberg's new platform for social utilities isn't a panacea for growth; and an explanation for why, as the chart shows, the signup rates have declined by between a quarter and a half in the last week. Facebook is the most interesting site on the internet right now, and the excitement about its potential is genuine, but it's time someone pricked the bubble.

1. Unimpressive apps. For users, the novelty has worn off. The conventional wisdom, among early adopters at least, is that nothing compelling has emerged from the first generation of Facebook applications, most of which are little more than basic widgets, no better than their equivalents on Facebook's despised competitor, Myspace.

2. Illusory popularity. A few apps, such as iLike, have attracted millions of new users on Mark Zuckerberg's social utility. It claims only 3% or so have subsequently deleted the application, but many more simply neglect the service. Apart from requiring a major investment in servers, it's really not clear how many of iLike's users will stick, or try out iLike's main service, which is an add-on to Apple's iTunes music player.

3. Disappointing numbers. This is the most significant downer, for most developers: server overload, or poor conversion rates, are the least of their problems. Having dropped other projects in the hope of instant success on this, the brand-new internet, they're discovering that popularity on Facebook, which is the default for college students and Silicon Valley execs, is far from automatic. Most of the attention is hogged by the most popular apps — and those tend to the ones present at launch, such as Slide's Top Friends, run by people who got a head start on no-name developers, because they came to Silicon Valley in the Mayflower.

4. Change in the rules. And a recent change by Facebook, to the way that users invite their friends to install apps, has made it harder for interlopers to break in. The social utility used to allow friends to be invited to join a service like Horoscopes in batches of ten; now it allows only ten additions each day. A subtle change, designed to stop developers setting up Facebook accounts and spamming users with invitations. But it's crippled new entrants, who are now crying foul. 98% of the last 500 apps to join the system have fewer than 10,000 users. And, as you can see from the chart, the daily rate of signups has declined, over the last week, by over 20% for Flixter, Top Friends, Social Moth, Magic 8 Ball, Hot or Not, and Fortune Cookie, among others. [Original data from Appsaholic.]

[Data from Appsaholic. Signups taken at midnight, and compared with 24 hours earlier.]

The disappointment of smaller developers is a testament more to their naivete than to Facebook's malice, or some Silicon Valley conspiracy to shut out outsiders. Of course companies such as iLike quickly began boasting of the millions of users they added, in order to get a share of the press interest in Mark Zuckerberg's new initiative. The Silicon Valley establishment hadn't something to get excited about for a while, so it played along. But it wasn't as if anybody promised that a slick Facebook app was a short-cut to popularity, funding, and success.

As for Facebook itself, it can hardly be blamed for wanting to whip up enthusiasm for a platform which depended on third-party developers. In evangelizing any new system there's an element of salesmanship, even deception, involved. Facebook may yet prove itself to be the new internet. While we wait, however, it should expect more complaints like this: "Dozens if not hundreds of startups in the Valley who made a strategic decision to divert valuable resources over the past month to develop a Facebook app did so with the understanding that we would have access to the same viral tools that all the initial applications had access to. But we do not, and Facebook has taken these tools from under our feet without any announcement or recourse."