This guest post is written by Dave McClure: startup advisor, angel investor, PayPal alumnus, and Master of 500 Hats. Dave is organizing next week’s Graphing Social Patterns conference on Facebook, covering many of the topics and companies mentioned below. He’s also a rookie instructor for a new Stanford class on Facebook apps, and an unapologetic Facebook Fanboy and social networking addict. Sections on virtual currency and ad networks contributed by Susan Wu, Charles River Ventures and Sundeep Ahuja, AppFuel.
For nostalgic hippies in the SF bay area, this was the 40th anniversary of 1967’s famous Summer of Love. But for every Silicon Valley developer, entrepreneur, and VC who has a pulse it’s been the Summer of Facebook.
While it’s easy to put aside geeky exuberance over the latest insanely great technology, it’s impossible to ignore the growing size and scope of Facebook, and the impact it’s having on internet startups and traditional businesses alike. Over half of Facebook’s 43 million users visit every day, spend an average of 20 minutes on the site, and view over 54 billion total page views per month.
In a few short months Facebook has quickly become one of the most impressive user acquisition channels on the web, rivaling SEO & SEM strategies for priority with new startups. Over 60 Facebook applications have more than 1 million total users, and over 40 have at least 100,000 daily users.
With the groundbreaking launch of the Facebook Platform this past spring, and the subsequent runaway growth of Facebook Apps adopted by millions of users this summer, the question on everyone’s lips (including Google and Microsoft) has been: “So what’s your Facebook strategy?”. If you’re still scrambling to figure out yours, read on.
Seven Steps to Graphing Social Patterns on Facebook
Personally I’ve become addicted to Facebook, and in particular with the Facebook Platform and the News Feed. I’ve spent hours upon hours experimenting with new ways it provides to connect and communicate, and recently began teaching a class at Stanford with Professor BJ Fogg on how to build Facebook apps. In this article i’ll explain how to use Facebook to make a big impact on your business, and why it’s substantially different than any other social network that’s come before.
Here are seven major aspects of Facebook you can use to increase the visibility of your startup, business, product or service:
1. Set Up Your Graph: Profiles & Privacy
2. Make Connections: Networks, Groups & Events
3. The Need for Feed: Your [Shared] Social Activity Stream
4. Share Your Content: Share & People-Tag Your Stories & Media
5. App to the Future: The Facebook Platform, APIs, & Applications
6. Pay to Play: Ad Networks, Sponsored Stories, & Paid Distribution
7. Show Me The Bunny: Gifts, Points, & Virtual Currency
I’ll explore each of these items in more detail after the jump. For developers and marketers interested in learning more, we’ll be covering these topics in depth next week in San Jose at Graphing Social Patterns, a conference on the business and technology of Facebook and social networking.
I. Set Up Your Graph: Profiles & Privacy
It all begins with your Facebook profile, your privacy settings, and a few friends. Your profile is the virtual depiction of YOU on Facebook — depending on how you customize your Facebook privacy settings, you can display as much or as little of yourself as you care to the entire world, just to your friends, or to no one at all. This includes your notes, photos, videos, your one-liner profile status, your relationship status, your location & contact information, the messages left on your wall, etc. See an example below — currently I expose most info to everyone in my network, however I only share my phone and IM info with my friends:
II. Make Connections: Networks, Groups & Events
In addition to your personally-defined set of social graph connections, you also have a set of connections defined by your participation in Networks, Groups, and Events. A Network is a group of people that are part of a common workplace, geographical location, or a school. This is a formal affiliation as defined or approved by Facebook, and typically you need to have an email address to participate (except for geographical groups). A Group is a collection of people similar to a Network, except it’s user-defined and members can be selected, invited, or simply join to participate. An Event is a time- and or location-specific occurance, that also may have a collection of associated individuals who have RSVP’d to attend (or not). [note: there may also be a new 'Friend Groups' container coming soon from Facebook... watch this space].
III. The Need for Feed: Your [Shared] Social Activity Stream
Of all the feature innovations Facebook has introduced, News Feed (& Mini-Feed) is for me perhaps the most impressive — because it’s a very simple yet elegant way to share information. A year ago when these features were first introduced, most of the noise that ensued was due to the initial user revolt that occurred with the display of what users presumed was (previously) private information. However, after the storm subsided and people began to learn to control their privacy settings, they’ve discovered News Feed is a pretty cool way to stay updated on what your friends are doing. It contains information on new photos, new videos, wall comments, events people are attending, links they’ve posted, gifts they’ve given… in short, it’s a personal newspaper on all the social activities you and your friends are part of. Simply put: it’s the collective stream of our shared social activity.
IV. Share Your Content: Share & People-Tag Your Stories & Media
Once the News Feed construct is established, it’s interesting to consider how you can use it to distribute stories and content and media. By using the Post a Link or Share button (either inside Facebook, or on the Facebook toolbar for Firefox, or from the Share button for Internet Explorer), it’s easy to post something either as a message to specific users, or to no one in particular via the Feed. Facebook then uses a proprietary News Feed Optimization (NFO) algorithm to determine when and to whom those news items are shown, similar in concept to how Google interprets and prioritizes Search Engine Optimization (SEO) for search content and links.One way in particular to make sure content is made visible to others is to ‘people-tag’ various types of content, by referencing individuals within your social network in notes, photos, and videos. This likely increases the prioritization of feed content for the individuals tagged, and also initiates a message to them that they’ve been tagged. Although these actions can certainly be abused in a spam-like way, it can also be a fun and interesting way to get people’s attention.
V. App to the Future: The Facebook Platform, APIs, & Applications
Certainly no Facebook conversation would be complete without a discussion of the Facebook Platform and the APIs & apps that bring them together. With the launch of Platform in May, Facebook has arguably delivered the most exciting and innovative application development environment on the web today. As mentioned above, there are already hundreds of startups building Facebook apps, and a few larger brand name companies as well, with thousands of apps shipped live in just a few short months. While not every app has been a home run, there are certainly several examples of early success from companies such as Slide.com, RockYou, SocialMedia, iLike, Flixster, HotOrNot, Renkoo, and others. These companies acquired millions of users by creating and marketing Facebook apps that spread virally through the Facebook user community via invites, notifications, the profile & the feed. And while some of these success stories took advantage of lenient initial standards for app invites and install requests, even after Facebook stiffened the rules new apps have continued to launch that demonstrate explosive growth and large user adoption.
Still most app developers seem to believe the opportunities outweigh the risks, and while it appears new social platforms and social APIs are coming soon from Google, LinkedIn, MySpace, & others, Facebook continues to dominate the focus and conversation of most developers and their efforts. At the moment it is Facebook’s game to lose. This is quite an astonishing accomplishment given the relative newcomer status of Facebook compared to other internet titans Google, Microsoft, and Yahoo, all of whom have large developer followings and platform offerings. At the moment, none except Facebook have captured lightning in a bottle by combining a rich web development environment with a social networking platform to produce socially-aware apps and objects. But you can bet the entire IntraWeb now recognizes the potential of social applications and the social graph, and they are all gunning for Facebook with competitive platforms and APIs as fast as they can.
VI. Pay to Play: Ad Networks, Sponsored Stories, & Paid Distribution
(this section contributed by Sundeep Ahuja, AppFuel)
As developers compete to access the social graph via apps, advertising networks compete to access the pocketbooks of those same developers. At the moment most of these ad networks’ initial adoption appears to be coming primarily from new apps who want distribution and are willing to pay for it, rather than traditional ‘off-Facebook’ brand businesses. That said, the promise of larger advertising dollars on Facebook remains a huge brass ring for both emerging ad networks on Facebook as well as Facebook itself.
There are three main categories of ad networks operating on Facebook:
* app factories that cross-promote applications
* cross-promotion networks allowing publishers to pay to promote apps (or get paid to promote other apps)
* companies enabling off-Facebook advertisers to reach Facebook users
The first category of networks are the application factories that cross-promote their own apps, with RockYou, Slide, and Social Media being the biggest. The second category are cross-promotion networks giving publishers a way to promote their applications while getting paid to promote other applications; these include Cubics, fbExchange, and (again) Social Media. Yet a third category of networks is offering an alternative to off-Facebook advertisers that want access to Facebook users, but don’t want to use Facebook’s own advertising solutions. A few of the cross-promotion networks do this, as do Lookery and VideoEgg (primarily a video network).
In bringing off-Facebook dollars to the platform these networks are up against a rather formidable competitor: Facebook itself. It’s no secret that Facebook intends to iterate its advertising offering in a big way, and MySpace recently made headlines for doing the same. It’s anyone’s guess how Facebook will choose to deal with third-party ad networks, though most of them say they’re willing to risk the competition due to the size of the opportunity in front of them.
As a second approach to Facebook, some notable brands are building their own apps hoping to use the platform for engagement rather than impressions. Though success to date has been varied, the premise is powerful; just as big brands have spent the last decade catching up with startups by building their own websites and e-commerce services, and more recently working on SEM & SEO techniques, they are now investigating how to develop Facebook applications to reach their target customers. It’s still early, but by combining rich user profiles and a social application platform, Facebook is setting up an incredible advertising opportunity.
VII. Show Me The Bunny: Gifts, Points, & Virtual Currency
(this section contributed by Susan Wu, Charles River Ventures)
Not too long ago, I wrote a TechCrunch article on virtual goods and their potential to become the next big business model. Since then, there have been innumerable experiments with virtual currency apps on Facebook, but most of them are still missing the big picture: used effectively, virtual currency can greatly enhance user engagement.
A robust virtual economy is a good sign that you have a highly engaged user base. Virtual goods are pretty much meaningless without context; there is direct correlation between the engagement level a user feels with your product and their willingness to purchase virtual goods. Thus, if you help your users feel more like citizens rather than just bystanders, they are much more likely to participate in your virtual economy.
Yet the converse is also true: a well implemented virtual currency system can greatly increase user engagement and foster valuable types of social interaction. By “valuable” I mean social interaction that catalyzes network effects and results in residual value from your user base. Virtual currency isn’t just a zero-marginal-cost way of extracting more money from your users — it’s also a primary means of exposing your community’s core values and encouraging behavioral patterns that increase the value of your app. Much the same way that a leaderboard has a way of focusing users attention towards certain metrics (ex: Digg below left is essentially a community driven by leaderboards), virtual currency can be used as an efficient way of signaling a community’s implicit and explicit shared values. Then you, as the community traffic cop, can put down the right Yield, One Way, and Exit signs in the right places to generate the most optimal community traffic flow.
Two of the top 10 Facebook apps, X Me and SuperPoke!, are essentially just interaction tools. In the X Me screenshot above right, each of the icons – whether it be Love, Punch, or Kiss – is an encapsulation of a specific social interaction. Though it may not be purposeful, these types of casual apps are training users to understand how to interact with virtual goods. I can easily see how these apps become platforms that launch broader virtual currency systems. For example, expanding this app to allow users to attach custom graphics to their custom actions would create a new, rare class of virtual objects.
TechCrunch readers interested in learning more about Facebook should check out Dave’s upcoming Graphing Social Patterns conference. If you’ve read this far, you deserve a treat — TechCrunch readers can receive a 25% discount by registering by midnight Wednesday Oct. 3 using this link: http://graphingsocial.eventbrite.com/?discount=crunch
Biggest waste of 7 minutes? The answer is “Yes”
WTF is this? I don’t have the patience or interest to read whatever it is.
What is facebook?
waste of time….may be good for noobs.
http://vidsonly.blogspot.com
“what’s your facebook strategy?” sounds a lot like “what’s your china strategy?”
funny first 3 comments!
c’mon you haters… gimme something meaty i can sink my teeth into.
“mcclure’s an obvious facebook shill & wannabe… he’s just looking for any opportunity to crawl up Zuck’s shorts”
“what a tool. i could name 3 methods of SEO that would make more of a difference than wasting time on facebook”
“can’t believe this FB primer drivel gets on TechCrunch, and my fantastic new blog bookmark social networking startup for mobile users in bulgaria can’t get the time of day”
all i can say is you guys are weaker than snot on a googleplex solar panel roof… at least owen thomas can rip me a new one with some attitude.
bring it.
I liked the long form post.
Sorry. Simply not impressed with facebook.
Carmelo Lisciotto
Dave,
This is a blog you douche nozzle. People don’t have the time to read a novel. Shorten this crap up. Sink your teeth into my juicy turd.
P.S. - Nice box glasses and dirty sanchez poop mustache you tool.
Hi Dave,
Can you summarize the value in developing a Facebook-specific application, versus a more open web app that anyone can use?
The problem I have is I have a ton of ideas, but just can’t work up any excitement in rolling them directly into Facebook. I can see providing integration down the road for Facebook, but I don’t get these startups that are developing Facebook-only apps.
Also, how will Facebook compete with Google, once Google rolls out its plans to provide (as I understand it) APIs into “everything”? If I’m trying to develop for the widest possible audience, Google’s plans seem more intriguing to me, especially as they’ve got the most eyeballs.
MGZ
Google may have the most search eyeballs, but until they collect social profile data from Gmail, Orkut, YouTube and other services that have deeper profile data, their ability to implement a socially-aware data platform is more limited. iGoogle is an interesting property for them, but still growing not so well-adopted among overall Google userbase.
not saying they won’t be a formidable competitive alternative — i’m sure they’ll have an interesting offering — but right now Gmail is arguably 4th in market share after Yahoo, Hotmail, & AOL. Orkut is big in Brazil & India, but not in the US.
Not clear if Google will be able to access social profile data from YouTube or other partner properties like MySpace or AOL, but if so then they’d be an interesting alternative.
otherwise, Google has LOTS more eyeballs, but not as qualified in social profile data as Facebook or MySpace or other services with deep profiles.
that said, Google users do exhibit search intent, whereas social network users exhibit browse intent typically… so possible a Google user is more valuable based on behavior… but a Facebook or MySpace user is more deeply profiled.
in any case, the big opportunity on Google is SEO & SEM.
the big opportunity on Facebook & other social networking sites is deep demographic profiling, and lots of repeat visit behavior / sticky usage.
Facebook and Myspace, are for the kiddies now. Wheres real networking that helps with older genrerations. Thoughts?
I’m inclined to delete comment #9, but then again, you did tell them to bring it, Dave. =)
Interesitng, how for ‘proper’ businesses, the emphasis is on ‘customers’ or more specifically, ‘Paying customers’, and now for these social networking (so called businesses), the emphasis is on ‘Users’. Have you heard anyone say to a bakery owner, ‘How cool would it be if I could eat a slice of peperoni while simultaneously grabbing a cup of coke. for free.. How COOL would be!!’. Imagine the response of bakery owner!
Each time I read a post about Fbook on TC it looks like a pure SEO exercise.
Everything is here: occurrences, context, title, H1, links,…
Facebook 101. Better man than I, I don’t have time to teach people how to use Facebook — I’m busy coding for it
Dave - although the blog may be a bit long I agree with several points you make here, but how long do you think the Facebook hay-day will last? At what point do so many apps seem to dwarf the social experience?
Also, with the virtual currency section…do you think or foresee Facebook implementing their own virtual currency?
Thanks
~Tyler
Dji, I think you just criticized us for blogging and using HTML. Kudos to that.
@tyler: i’d say there’s plenty of hay to go around for quite awhile. and the apps *are* the experience… see my point #3 on the Feed.
re: virtual currency, i’ll defer to Susan Wu. altho FB Gifts is kind of there already.
but i’d say it won’t be ‘virtual’ currency… it will be *real* currency.
@brfe: that’s more like it. and i resemble that dirty sanchez remark. ew.
@mark: i got both barrels. i’m covered.
I understand the concept of the social graph. As such I feel like Item #5 is really the only important thing in here. Aside from that this is a guide on how to set up your Facebook profile.
Not that it’s a bad thing to publish a guide on setting up your Facebook profile. Why is editing your privacy settings called “Setting up your graph?” I understand how setting up your graph will be useful once facebook launches their group features but in the meantime I don’t think privacy settings qualifies as “graph configuration.”
Either way, I hope to see you at the conference next week!
fb… is it possible not to cover fb for a week? how much do they pay you to make these viral marketing sh.
We did it again everyone
We mad another headline in techcrunch- F you Steve Ballmer!
@nick: i was trying to start with fundamentals in step #1, and explain how profile privacy (or openness) defines your visibility into your network, and thereby your feed as well.
while i agree with you #5 is the biggest piece, i think there are many elements of good app features that mimic the user experience of manual actions in steps #1-4… thus i was trying to explain how users interact first, and then set that as the framework for app interactions.
for example: the people-tagging & sharing in #4 is an example of the kind of behavior that apps can exhibit in the feed, and they work similarly.
anyway, it may be that for some folks this is obvious… but i think understanding feed behavior from manual user actions provides a lot of insight into how good app design & behavior can work as well.
and in any case, see you at the conf next week
What I keep hearing in discussions on Facebook is how to twist it to your own ends financially. I have yet to hear anyone say, “Facebook has enabled me to hook up with people in a way I couldn’t before.” Isn’t Facebook a Social site? Why is that the component that no one seems to care about? If the only reason to be on Facebook is to make money off the other chumps on Facebook who are only there to make money themselves, well that’s not going to last long.
All Facebook has done for me lately is gotten me bitten by both a zombie and a vampire.
Does anyone have statistics about the success rate of ads placed on Facebook? I recall reading an article a few months ago stating the click-through rate was extremely low. If that is the case how can advertisers continue to justify spending money placing Facebook ads regardless of whether they are tailored to an individual’s content?
Like Adi alluded to above, is advertisting enough to render these social networks profitable for years to come?
With regards to selling virtual gives at a zero bottom line–well, that blows my mind someone would spend their hard-earned money on “merchandise” like that.
As Steve Jobs says, “People want to be shaped, molded—-but if you ask any one of them, they’ll deny it.”
Ok Dave, can you now write a post on all this $100mm techcrunch talk around the web?
i believe i just added at least $3M to Blodget’s valuation.
mike: where’s my check?
I think this is one of the better posts on Techcrunch! Informative and detailed unlike many other posts I seen here. Btw, I found the Notes feature in Facebook pretty buggy!
Quite a comprehensive lesson on how to formulate a Facebook strategy. The more I read about social media and networking website the more I feel I’m missing something big by not leveraging them. But I guess I’m too lazy and anti-social :-).
Mark, i wasn’t criticizing believe me. I’m a daily reader.
Just read again the last posts about Fbook: TC is really pushing it.
Nice long post Dave - interesting that both long posts have to do with Charles River Ventures (which is also a sponsor of tc40 and this graphic conference) and Susan Wu - seems that one received the same level of feedback as this one.
Dave - you learn well with all those hot crunkbase links - good job.
Wow… biggest load of tripe ever posted on TC. It reads like it was posted by insane PR person from FB. Sad. Congrats!
good ideas
Hey those of you who don’t want meaty articles of substance can jack over to truemors or suchlike. There you can get the “gist” without having to stretch the old brain muscle. Actually Google serves this purpose well, you can just read their page description for any topic, who needs TC anyway?
Dave - you wrote - “re: virtual currency, i’ll defer to Susan Wu. altho FB Gifts is kind of there already.”
Susan Wu wrote - “innumerable experiments with virtual currency apps on Facebook, but most of them are still missing the big picture: used effectively, virtual currency can greatly enhance user engagement.”
The big picture is bigger than she sees. Used effectively virtual currency IS money - but not as we know it, Jim.
Dave sez “but i’d say it won’t be ‘virtual’ currency… it will be *real* currency.”
Good start Dave, but we need to think beyond the “it” box. There will be thousands of virtual cc (community currencies) on Facebook alone.
Dave rocks! Great idea to have him post on TC. To SEOers: search is not the only app worth on the net. Time to open your minds a bit, consider additional strategies. More search strategy dollars are going to be spent on app/social network strategies. I hope you learn to adapt and are there to get a piece.
Nice post.. relevant to current times. We’ve posted our learnings from paid distribution and fine tuning the conversion rates — love it or hate it, FB platform is definitely shaking things up.
i tried facebook and it’s a myspace ripoff with little real value. what zuckerberg has done is convince developers to do facebook work for free by building applications for facebook… what a bunch of suckers! facebook is this year’s friendster… gone in 12 months due to the weak functions it has and zuckerberg’s huge ego — he will wish he took yahoo’s $1 billion very soon
Techcrunch’s gigantic crush on facebook is almost sickening.
I hate to break it to you TC, but now that Facebook has finally opened itself up to ‘everyone’ its only a matter of time before the hackers start invading and start ruining the site like Myspace. When this happens, the flow of tears from Techcrunch employees will be a bigger risk to our oceans rising than the melting glaciers
What the $%^& is this? This does not belong on Techcrunch.
YES, i`ll doit!
Terry Semmisk: I think you are missing what makes opening up the platform work. Zuckerberg wants Facebook to be the next Windows - a social operating system with programs you can install and a user base large enough that the activity adds value and sucks in more users - maybe we can call it gravity or the snowball effect or whatever. So yes, it’s adding value to Facebook, just the way writing programs for Windows only goes to add value to Windows - but think of all the developers who have been made rich because of it. That’s the attraction - the question is not if it’s a lot of smoke and mirrors, but rather will they drop the ball?
As a primer this was a good article, though I can’t help but wonder why actions one can perform as a user have been lumped together with actions for developers. And I won’t accept ‘the line is blurred’ as an answer, because that’s like saying that ‘anyone who can play Doom can make levels for Doom,’ which is not true.
For more in depth analysis of what developers can do, I will now plug two articles by a friend and one by myself. The two are by the author of the facebook Mafia game, which has been very successful.
http://startupism.com/2007/07/.....t-matters/
http://startupism.com/2007/08/.....hat-works/
http://startupism.com/2007/08/.....ood-thing/
Weak shit.
No internet entrepreneur with this sort of thinking about Facebook will ever succeed. It’s just to nerdy.
Nobody over the age of 23 will ever create a successful Facebook Application because they just don’t know how it affects peoples lives. If you just watch any high schooler use Facebook (and note just how long and “important” it is to stay up to date with their Facebooking) you’ll see what sort of things need to be created for Facebook.
The core of Facebook Applications need to focused on the high school crowd as opposed to the college and adult demographics. That’s just how it is and they’ll always log in because it’s become that much of a habit. All of there high school memories are focused right there on one page, and if you add another layer to their memories through a Facebook application they’ll eat it up like cake.
I guarantee it.
…utter bullsh*t.
Why do you publish this kind of crap on TechCrunch.
i wouldn’t delete a comment…i’d delete the entire post. what useless information.
though d. mcclure may call himself “master of 500 hats,” he obscures the fact that each of them has “DUNCE” spelled out oh-so-clearly on the front. (see here, or here, or really anywhere.)
but seriously, folks, just looking at this article made me vomit in my mouth a little bit.
Interesting article, Dave. Informative and very spot on!
I’ve often wondered how much further along human civilization would be if television would never have been invented.
Likewise, I wonder how many collective hours are wasted everyday on Facebook.
Facebook is useful in that it allows me to stay in touch with friends, view their pictures, and invite them to events. Beyond this it’s just fluff used to waste time by undriven people who have too much time on their hands.
I wonder how many hours a day successful people like Steve Jobs, Warren Buffet, Tom Brady, Mark Cuban, Bill Gates, Michael Jordan, Justin Timberlake, various business-persons, physicians, etc. are on Facebook?
Great post Dave… do you think Myspace or LinkedIn’s future platform can compete?
Myspace seems too anonymous and chaotic for apps to leverage their social data meaningfully. LinkedIn doesn’t have an anonymity issue, but its culture doesn’t seem to be one of engagement and regular participation.
Google, as you noted in your comment, lacks the deep profiling. So is Facebook untouchable at this point?
Zuckerberg, so hot right now. Facebook does matter. Lots of people, like me, use it at all waking hours. w00t!