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Here's the full report linked to in this article.

http://20bits.com/2008/05/06/the-state-of-the-facebook-platf...

I'm a bit surprised that neither this article nor the two currently on News.YC which reference it mention these reasons:

- revenue from in-app advertising has been steadily falling

- users have lost interest in apps and app invites, partly because the novelty has worn off, partly because they're sick of the spam.

Neither reason is surprising. Most Facebook ad networks run ads for other apps... it was an obvious mini-bubble. I believe CPMs were around $1 in November, and are now closer to $0.10.

As for invites, the effect of spammy apps on Facebook users is also not surprising. Combine desensitized users with belated and arbitrary measures to combat app spam (which the article did mention), and the end result is that the first big apps are left with their millions of users and the ability to promote new apps to their existing users, while developers new to the game have a much smaller chance to get explosive growth.