As it turns out, things are not quite that simple says a Fast Company article: ”The social network filed an S-1 on Wednesday in advance of its IPO that presents a more complex and nuanced picture of the company’s business–one that highlights the tradeoffs Facebook has to make in order to create value for both users and advertisers, as well as of the creative challenges that lay ahead.”

Advertising is the mainstay of Facebook’s revenue model and that won’t change. The network’s challenge is to create ad content that is relevant and interesting to its users, as opposed to intrusive.

To accomplish this goal, Facebook’s emphasis has to shift from growing the number of users – currently estimated to be 845 million – to increasing the time each user spends on the site. That, according to Fast Company, is the only way the social network can credibly deserve its $100 billion valuation.

It’s a bit of a vicious cycle, really. In order to increase ad revenue, it has to increase ad relevance. In order to to that, users have to spend more time on the site and be willing to share more stuff. In order for that to happen Facebook has to increase its value to them.

Making Facebook a better place for its users has always been Mark Zuckerberg’s goal. In a letter that accompanied its S-1 filing, Zuck shared his personal philosophy, one that guides the company’s mission: “We don’t build services in order to make money. We make money in order to build better services.”

If creating more relevance is the key to Facebook’s financial future, the Open Graph, which allows third-party sites like Pinterest, Payvment, Fab.com and others to integrate with the network, is its path to get there.

Facebook’s use of a display advertising model has always seemed at odds with its mission. I mean, no one goes to Facebook in order to see ads. As a result, the click-through rate has historically been low – less than 1 percent on average. Even so, that business model is not going away, so it has to get better. “The more people appreciate the ads, the less risk of alienating them and reducing usage of the system. And the more people react to the ads, the more valuable they become to advertisers,” says Fast Company.

Iteration, innovation, experimentation…those are all keywords to consider in launching this social commerce revolution. That’s why, according to Fast Company, there are signs plastered on the walls of Facebook’s Menlo Park offices that say “this journey is 1% finished.”

The father of this heuristic thinking model is Dr. Robert B. Cialdini, an academician best known for his popular book on persuasion and marketing, Influence: The Psychology of Persuasion.

This speed summary outlines the content of an article published in Scientific American in February 2001, entitled “The Art of Persuasion,” where Dr. Cialdini addresses each of the six heuristics within the context of how these subtle psychological pressures can be used to get people to say yes to requests. These six tendencies are: reciprocation, consistency, social validation, liking, authority and scarcity.

1. Reciprocation

Rule: All societies subscribe to a norm that obligates individuals to repay in kind what they have received.

Example: Charitable organizations often use this heuristic approach to increase donations. A free gift, even one that is unsolicited, exerts a powerful influence on the amount and percentage of donations received.

Reciprocity includes more than gifts and favors. It also applies to concessions that people make to one another. Large requests that may tend to be rejected are replaced by smaller ones that are accepted.

2. Consistency

Rule: Public commitments, even seemingly minor ones, direct future action.

Example: Fundraisers in Israel nearly doubled monetary contributions for the handicapped in certain neighborhoods where donations were being solicited. Consistency played a role due to the fact that, two weeks prior, residents had been asked to sign a petition stating their support of the handicapped.

3. Social Validation

Rule: A fundamental way that we decide what to do in a situation is to look to what others are doing or have done.

Example: Stopping to gaze skyward, even for no apparent reason, will induce others to follow suit. The greater number of people engaged in the activity served to further validate the reasonableness of the action.

If many individuals have decided in favor of a particular idea, we are more likely to follow because we perceive it to be more correct.  Taking advantage of social validation, requesters can stimulate our compliance by demonstrating (or merely implying) that others just like us have already complied

Social validation can have an adverse, negative effect, however.  For instance, health educators who call attention to a problem – smoking or alcohol abuse – by depicting it as a regrettable, but frequent behavior can backfire to generate even more occurrences of the undesirable behavior.

4. Liking

Rule: “Liking” something, a behavior familiar to social networkers, builds on the influence of personal connections. People prefer to say yes to those they like.

Example: For years, Tupperware has relied on its “home party” program as a vehicle to increase sales. The in-home get togethers make potential customers feel as though they are buying from a friend, the host, rather than from an unknown salesperson.

Physical attractiveness can also be a element that contribute to liking. A 1993 study found that attractive fundraisers for the American Heart Association generated nearly twice as many donations (42 versus 23 percent) as did others who were not so good-looking.

Other factors that increase liking activity include similarity, compliments and cooperation.

5. Authority

Rule: Experience, expertise or scientific credentials harness the power of authority.

Example: “Four out of five doctors agreed…”

The authority heuristic can have an adverse effect when consumers are subjected to phony claims presented by so-called authority figures (celebrities, for example) who merely represent a product and who are not, in fact, experts on the topic.

6. Scarcity

Rule: Items and opportunities become more desirable as they become less available.

Example: Marketers use of one-of-a kind or limited-time offers.

Scarcity affects the value not only of commodities but of information as well.

Cultural Differences Play a Role

Even though the six heuristics operate similarly across national boundaries, which one plays the most significant role in influencing decision-making differs by culture. Citing a Stanford University study that measured employees’ willingness to voluntarily comply with a request for assistance from a co-worker, Dr. Cialdini found that US employees took a reciprocation approach whereas Chinese employees responded primarily to authority.

Conclusion

Dr. Cialdini remarked that it makes sense to repay favors, behave consistently, follow the lead of similar others, favor the requests of those we like, heed legitimate authorities and value scarce resources. By understanding the various dynamics present in these persuasion techniques, marketers can begin to recognize strategies and truly analyze requests and offerings.

He adds that persuasion professionals must be held accountable for the use of the six motivators so as not to manipulate consumers in a manner that is unethical or untruthful.

But how should you optimise your popup shop  in social media?  There are no best-practise rules (yet), but here’s a natty little R.E.A.D.Y acronym (and white paper) from our Boca neighbours ion interactive that might help (they’re written with a view to optimising landing pages, rather than popup shops, but applicable nonetheless).  And in a share-gate, and you’ll be head and shoulders above the rest…

Your popup shop should be

• Relevant - Give them what they want
• Engaging - Win Their Hearts and Minds
• Authoritative - Earn their confidence
• Directional - Move them forward
• Yield Optimal – Delivers results

• What potential does Facebook commerce hold?
• Who do online shoppers engage with brands on Facebook?
• How can retailers and brands leverage Facebook commerce?

eMarketer responds to those questions by espousing its own point of view.

• Facebook commerce is about more than just sales conversions.
• F-commerce is more about discovery and sharing than duplicating an exhaustive catalog online.
• Millennials are the prime audience for Facebook commerce.
• Brands need to understand why they are “liked” and what to do with that information.
• New advertising-friendly developments hold promise for Facebook commerce.
• Privacy concerns will have to be addressed before Facebook commerce can see mainstream adoption.

Retailers are all over the map when it comes to using Facebook for commerce. Options range from product links being posted on the retailer’s Facebook page Wall to the inclusion of interactive catalogs or storefronts. On their own websites retailers are integrating Facebook’s Open Graph and social plug-ins to allow customers to login using Facebook to shop with friends, receive product recommendations or read reviews.

Though most major retailers have some type of presence on Facebook, a consensus has yet to be reached as to the social network’s viability as a sales channel.

The Potential of Facebook Commerce

The report states plainly that Facebook has yet to factor significantly into product sales and cites a Coremetrics survey of retailers that said only 1.6% of sales were driven by social media. However, it also suggests that F-commerce is in a nascent stage and that it is “too soon to predict” any outcomes at this juncture.

As can be seen from the following graph, the report does suggest that people are warming up to the idea of using Facebook for more than just social networking, especially where commerce is concerned. Finding special offers and discounts is the clear leader, followed by sharing experiences with products, seeking product advice and sharing product knowledge.

Facebook and Shopping Behavior

When it comes to Facebook users and shopping behavior eMarketer found this to be true:

• Fans “like” brands primarily for one reason – special discounts and sales promotions.
• Likes influence purchase likelihood among friends of fans.
• Liking a brand’s page or product is often a post-purchase activity.
• Demographic differences play a role, with Millennials being the generation most open to shopping on Facebook.

How Retailers and Brands Can Use Facebook

Facebook commerce takes two forms: on Facebook and off Facebook (i.e.. the retailer’s own website).  Specific approaches by brands include:

• Fan Exclusives – Deals offered only on Facebook and nowhere else; examples of companies that tried this tactic include Diane von Furstenberg and Oscar de la Renta.
• Sampling – “Tryvertising” of CGP products offered on Facebook pages; Burberry and Aveda are examples of retailers who experimented with this approach.
• Gift Recommendations – Wal-Mart’s new Facebook app Shopycat shows products friends have purchased and makes recommendations based on interests.
• Events – Pinning a campaign around an event, celebrity appearance or holiday works well on Facebook to quickly build excitement states the report.
• Shopping with Friends – Levi’s and makeup brand MAC used the social graph as a way to encourage friend-with-friend shopping activity.

Facebook Commerce and Privacy

Privacy concerns related to shopping, particularly when it comes to a brand using personal information, is still on the minds of Facebook users. Yet not all shoppers are resistant to sharing personal information. The report cites an eight-month survey of 42 apps by Sociable Labs, which found that on average a majority (56%) of social media users granted permission when asked to connect to online retailers using their Facebook ID.

Facebook Commerce Best Practices

Based on its research, eMarketer shares what it finds to be Facebook commerce best practices.

• Reproducing an ecommerce site on Facebook is not inherently engaging.
• Igniting passions fosters community naturally.
• Retailers should consider their style of communication.
• Listening is important and brands are encouraged to hear what fans have to say rather than pushing an agenda.
• Brands should match their strategy to the end goal.
• Multi-channel marketing is still essential even with Facebook at the center of the campaign.

The report concludes with these predictions and recommendations.

• Facebook commerce will not see mass adoption overnight.
• Brands of all size can employ select social commerce techniques.
• Give fans what they want, but do not lose sight of strategy.
• Privacy concerns are valid and need to be addressed.

(Note: SCT’s executive editor Dr. Paul Marsden was interviewed for this report.)

But not everyone agrees that f-commerce is a good idea.  Put your profanity filters on and head over to the smart and articulate ecompunk blog to see a demolition job, with attitude, on f-commerce from Magento guru Dr Roman Zenner (BTW it’s worth subscribing to the ecompunk blog; along with exciting commerce and get elastic, it’s the best source of e-commerce insight and inspiration out there).

The anti f-commerce argument goes something like this;

• Facebook is an application, and applications are purposive, they are for something – the Facebook app is for exchanging with friends
• You can use apps to do other things than for what they’re for (say write a letter using Microsoft Excel, or set up a shop with Facebook), but the result is likely to be sup-optimal for two reasons
• 1) that’s not what the app was designed for
• 2) people will ignore the extra functionality, because that’s not what they’re using the app for (exchanging with friends).  To pursue the analogy, setting up shop on Facebook is like adding a letter template to Excel – pointless.

Roman adds that of course there’s more to f-commerce than setting up shop in Facebook (you can integrate your e-commerce site with Facebook, or simply use Facebook as a blog to drive e-commerce traffic).  But integrating your external e-commerce site with Facebook to enable automatic sharing of what customers do on your site or elective sharing of stuff they like is crass; it creates social spam and is only likely to attract the desperate, lonely and compulsive. No future in it.

Well, we agree wholeheartedly with Roman – but with three caveats (two of which Roman makes himself)

This new customer rewards program is the brainchild of startup company Plink, which, according to the website, is the “first-ever Facebook Credits-based loyalty program that rewards members with Facebook Credits for dining and shopping at their favorite restaurants and offline retailers.”

Risk: Credit Card Data Required

To use the program, new members create an account, then register a credit or debit card of their choice. Plink members then earn Facebook Credits by using their registered card when dining-out or shopping at participating restaurants and offline retailers.

Registering a credit or debit card requires that Plink be given access to sensitive bank account information. For users who are squeamish about risking such data, Plink ensures its security protocols are locked down tight. The site is verified by VeriSign and Truste and uses bank-level data encryption.

Reward: Convenience, Instant Credits, and Low-Cost

Once users register, any time they make a purchase at any of the participating retailers they earn instant Facebook Credits, which can be used to buy premium stuff on social games like Farmville, Cityville, TheSims, or any other game that accepts them.

An additional benefit, one that applies both to retailers and customers, is convenience. Customers no longer have to carry cards or keychain fobs, print out coupons, or use a code to get rewards. For retailers, the program requires no POS (Point-of-Sale) integration, paper coupons don’t have to be collected, or staff trained. There are no set-up fees, print costs or merchandise to purchase either. Participating retailers simply pay Plink a percentage of each sale that occurs from registered members.

Another benefit, especially to retailers, is the low-cost involved with using virtual currency. “The reason virtual currency microincentives work is because they are so cheap to distribute, and users perceive their value as higher than their cost,” said Techcrunch, which added, “Since it essentially costs nothing to drop Credits into someone’s Facebook account, businesses can cost-effectively reward users with just a few Credits, which typically cost $0.10 each.”

Social Games a Growth Industry

While I’ve never been a fan of social games, it is an industry that is experiencing phenomenal growth. A recent study from Juniper Research said that the amount of money being spent on virtual currency via in-game mobile apps will jump from $2.1 billion in 2011 to $4.8 billion by 2016.

This appears to be a win-win-win for all concerned. Customers are rewarded with Facebook Credits they can use on social games. In return, retailers are rewarded with greater loyalty from those customers. And, finally, Plink is rewarded with a portion of each transaction that results from this fast food meets Farmville love fest.

“Facebook Credits is the missing ingredient that’s been needed to connect social media to offline sales,” said Plink founder Pete Vogel. “Now with the ‘glue’ of Facebook Credits our national restaurant and offline retailer partners have a way to tap into the nearly 800 million users on Facebook, motivate them to become loyal customers, and reward them.”

• Capture your audience’s attention. What device will you use to grab attention — humor, aesthetics, emotions, surprise, or something else?
• Convey a clear message. What’s the key message your target audience needs to understand?
• Focus on differentiation. What distinctive quality do you have that differentiates you from the rest?

Simple, but smart.

1. WHAT?
2. SO WHAT?
3. WHAT NOW?

Here they are in brief;

• Visibility use social media to extend the reach of your offers (Blendtec and Old Spice)
• Reputation use social media enhance brand image (Saddleback Leather and Domino’s Pizza)
• Proximity use social media to get personal with customers (“no Photoshop, no BS”) (Beauty Swatch)
• Contextualization use social media to connect with customers in their world (Canon on Flickr)
• Recommendation use social media to drive product recommendations WhereToGetIt, Etsy Gifts, Hunch)
• Customer care use social media as a customer service channel

Forbes’ six ‘pillars’ are useful insofar as they remind us that social commerce as more than just adding a shop tab to your Facebook page.

Social commerce is about harnessing social media as a sales tool – whether that means attracting customers, selling to them or servicing them.

Social commerce is not a retail revolution, it is simply making retail better with social technology (and as the article correctly points, social commerce not only not a ‘revolution’, it’s not new either – online social commerce is a very 20th Century affair, pioneered by Amazon and eBay).

We like this – although it does blur the boundaries (perhaps properly) between marketing (attracting customers), sales (driving revenue), and service (customer support).  We’d prefer to use the term “social business” as an envelope term for this general business use of social media – and keep ‘social commerce’ with a shopping focus.

Sure, social commerce is more than shop tabs in social media, but surely where there’s no shopping there’s no commerce.

The command center is staffed by a team of 50 people who are monitoring more than 300 keywords. According to Taulbee Jackson, president and CEO of Indianapolis-based digital media agency Raidious, which is overseeing the command center operation, they are already managing more than 1,500 published responses to fan comments per day – a number expected to grow dramatically as the game approaches.

The team responds to fan comments in real-time, provides directions and venue information, as well as gathers and shares information to ensure fans don’t miss any of the action. The staff also provides fan-powered tips on what’s happening via four social media channels – Facebook,Twitter, YouTube, and Flickr. Security is a major issue and the command center will help with emergency management and as-needed crisis assistance.

Here is a list of details regarding the social media command center.

Facility:

• 50 staff and volunteers working over the course of two weeks, in two shifts
• 2,800 sq ft. facility seats up to 35
• Upgraded to redundant fibre internet access (20 up / 20 down)
• iPad controlled integrated A/V system
• 9-screen monitor wall (over 100 sq feet)
• (12) 27” iMac Touch Down stations
• (6) Producer stations
• Conference Room, Reception Area, Coffee + Drinks
• Game-Planning Station overlooking Meridian Street
• Approx. 300 sq ft of whiteboard space
• Located at corner of Meridian and Maryland above the Hard Rock Cafe

Priorities:

1. Safety – respond first to any safety-oriented issue / crisis
2. Super Service – respond to any negative dialog related to the city or event, & help people have a great experience!
3. Coverage – know what’s happening when and where, capture it and publish it
4. Amplification – find positive dialog, or positive consumer content, and amplify it

As an online retailer, social commerce offers you three options – adding e-commerce apps to social media, adding social apps to e-commerce, or driving e-commerce traffic through ‘social infomediaries’ like Pinterest that add a social layer to the e-commerce experience indirectly via a third-party site, without all the hassle of app integration.

Are social infomediaries like Pinterest the future of smart and simple social commerce?