Everyone seems to be building applications for Facebook. Yesterday, I mentioned that Seattle's 3Guppies is working on an application for the social networking site that will allow people to move personal photos and videos from Facebook to their mobile phones. Today, Shelfari -- the Seattle online social network for book lovers -- announced a new application that will allow people to share ratings and reviews of books with other members of the Facebook community.

In fact, the Facebook application craze has accelerated to the point where Silicon Valley venture capital firm Bay Partners today announced a new program called AppFactory in order to fund projects specifically for the Facebook environment. Bay, which has more than $1 billion under management and also just invested in Seattle online travel startup Yapta, said it plans to write checks for $25,000 to $250,000 in order to encourage entrepreneurs to build new applications for Facebook.

Salil Deshpande, a partner at Bay Partners, explains it this way:

"Facebook, in essence, has become the social operating system. Historically, the creation of an operating system, or a platform, has always led to a new economy which includes a marketplace of applications that are optimally designed for that platform and its user base. Bay wants to find the killer apps, whatever they may be, for this new social OS; and with the AppFactory, we will help entrepreneurs discover, build, and monetize them."

Seattle entrepreneurs are already attempting to take advantage of Facebook's new open platform, namely music recommendation service iLike, whose rapid rise (now at 4.49 million users) on the social networking site I featured last month.

The introduction of Bay's new AppFactory also speaks to the changing dynamic in the Internet startup world, where small bets -- rather than the $10 million or $20 million venture rounds we saw during the last dot-com boom -- are taking root.