Inside Facebook

Since Facebook announced its Demographic Restrictions feature in August, developers have been eager to take advantage of the new functionality (and simultaneous policy change) allowing them to target of-age users with advertising related to alcohol sales. However, since the new policy went into effect three weeks ago, some developers are experiencing challenges with Facebook’s implementation of Demographic Restrictions that are limiting their ability to derive revenues from the new feature.

Here’s how one top developer put it in a recent email to Inside Facebook:

<fb:restricted-to location=”us” type=”alcohol”> excludes users who have chosen to hide their year-of-birth from their friends even though Facebook knows the year-of-birth. According to our estimates, 28% users choose to hide year-of-birth from their friends. We are currently running a campaign for [---] but the number of impressions delivered are 28% less than what we would like.

While using <fb:restricted-to location=”us”> in an email campaign, Facebook does not deduce country from the IP address of the users but from what the user has specified in their profile. This is far worse - according to our estimates this excludes as high as 75% users. So if we wanted to do an advertisement in our reminder email targeting USA, we will leave out most of the users. The correct way would be to deduce the country from IP address when user signs up or uses Facebook and then use that information even while sending an email.

Top developers who are negotiating sales directly with alcohol brands or any other advertisers interested in reaching only a targeted portion of the Facebook audience need more robust tools from Facebook in order to be able to rely on Facebook’s Demographic Restrictions feature. Clearly, missing 30-70% of targeted users in a campaign is going to have a major impact on developers’ abilities to sell and perform successfully.

Check out the latest news & insights this week from Inside Social Games:

• How Social Games Need to Take Cues from MMOs and Offer a Compelling Finish to the Social Experience - ISG takes a look at the different ways social games can improve their end game experiences by learning from games of years past.
• Geo Challenge Cheats, Tips, & Tricks - Learn all the latest cheats, tips, and tricks for Geo Challenge, the popular geogrpahy-based game from Playfish.
• Xbox Live - The Shift to Social Networks - Microsoft wants to make Xbox Live a social networked experience. See how Xbox execs think about the future of social gaming on the Xbox platform.
• Aurora Feint II: The Arena - A New Social iPhone Game - This new social game bring asynchronous and synchronous game play dynamics to the iPhone.
• Social Arcade Puts Users in Control - Check out a new hub for user-generated social games on the web.
• Casual Collective: The Bane of Productivity - Jeremy Liew of Lightspeed Venture Partners has invested in a new game development shop called Casual Collective. Learn all about it here.

With the holiday shopping season gearing up, Dell, eBay, and Sephora are kicking off virtual gift campaigns on Facebook throughout the Thanksgiving weekend. 250,000 of each of the sponsored holiday shopping-themed virtual gifts will be available.

Dell’s virtual gift is a red laptop with a ribbon, and is part of a broader social media campaign on Facebook driving traffic to Dell’s Facebook Page. Dell’s Facebook Page also promotes a Dell application called Share (RED) by Dell that is part of a Product RED marketing campaign.

Sephora is alternating between two virtual gifts: its trademark makeup palette and its black and white shopping bag with red tissue paper. Sephora is also driving traffic to its Facebook Page, which is also promoting its Mistletoe Makeover campaign where users can send personalized greeting cards to their friends.

eBay’s virtual gift is a gift box with the eBay logo on it “as a way to get people talking about their online shopping and bidding for holiday gifts,” Facebook says. eBay is also running a series of Facebook Ads.

Basic applications based on “gifting” or “tossing” virtual items, such as food or pillows, were once a staple of the Facebook platform. As Facebook tightened their platform policies, however, a number of once hyper-viral gift apps quickly faded into obscurity. Nevertheless, NoLimit Solutions‘ recent toss-app successes show that this approach can still be effective.

In NoLimit’s Pass a Drink, users can send and receive a variety of virtual drinks, and the app follows the basic toss template that is common across the Facebook platform. Pass A Drink includes a scoring system that is based on both invitations sent and invitations accepted which may be contributing to the app’s success. Notably, the app currently has a daily invite allocation of 24 invites.

For NoLimit, Pass a Drink has thus far been an overwhelming success, as the app has rapidly ascended into the 17th position on the AppData application leader board. In the past 30 days the app has gained over 2 million MAU (up 110%). Building off of their success with Pass a Drink, NoLimit recently pushed out Pass A Gift using the same template. Pass a Gift has already experienced spectacular early growth, and has risen to over 380k MAUs.

Clearly, the Facebook platform still offers unparalleled opportunities for viral growth. Whether or not these applications can continue their run remains to be seen.

The day after the US elections, the New York Times ran an aggressive campaign on Facebook that included Facebook’s new social video and virtual gifts ad products.

Today, the Nieman Journalism Lab at Harvard has some stats from a recent internal NY Times memo describing the success of the campaign:

• The home page video was seen by 68.3 million people, and 34,000 comments were shared
• The virtual gift was sent by Facebook users to their friends over 400,000 times
• The number of fans of the NY Times page increased from 49,000 to 164,000 in 24 hours, “far exceeding our 2008 goal of 100,000 fans”

Some notable quotes from NY Times President Scott Heekin-Canedy:

• The goals of the campaign were to increase our number of Facebook fans; raise awareness of NYTimes.com as an interactive news center; and engage the Facebook community in a conversation about the election outcome.
• Possibly the greatest success of this campaign, however, is that our fans continue to rapidly grow (181,000+ fans as of November 19 ) into a powerful, free word-of-mouth network that we will leverage for future marketing messages.
• From our perspective, the home page roadblock campaign was a great success, garnering us 4.3 times the value of our spend.

Most marketers are not able to afford the big spend that the NY Times made for a “home page roadblock campaign” on a highly trafficked day, but the Times is apparently satisfied with the investment!

Last month, Inside Facebook wrote that developers are still clamoring for improved application discovery in the new design, particularly in the Applications menu. Tonight, Facebook told us that it is currently running several A/B tests designed to improve the “discoverability and the usage of bookmarks.”

While Facebook didn’t say exactly what design improvements it is testing, it did say some ideas are minor tweaks while others are more “radical.” Developers will be very interested to see how Facebook improves application discoverability, as many have reported significant decreases in retention due to problematic application navigation in the current version of the site.

Also, in an effort to make it easier for users to edit their settings for recently used applications, Facebook tonight updated the Application Settings page to only show apps used in the last 30 days by default.

“We believe these changes will increase user control over how they interact with apps, and we hope greater control contributes to user willingness to try out application integration points such as auto-publishing stories or adding bookmarks,” Facebook said.

We’ll continue to track all of Facebook’s changes that impact developers and advertisers.

All application developers should be aware that Facebook today pushed live changes to the session key formats. This could require developers to update their applications to continue functioning correctly.

Facebook’s Platform team writes:

Please note that the session keys are longer than before, and the set of possible characters in the session keys include all alphanumeric characters (case-sensitive), along with ‘-’, ‘_’ and ‘.’.

If you notice any problems with session keys or signatures, please check first that your code accommodates the changes above. Bugs can be filed at http://bugs.developers.facebook.com/enter_bug.cgi.

This is a guest post by Anu Shukla, CEO of Offerpal Media. Offerpal Media is a leading “managed offer platform” for social applications, virtual worlds, games, and community-oriented websites.

The Opportunity

A new boon is taking place on the Internet. For community-oriented web publishers like social networks, social applications, virtual worlds, MMOGs and other social properties on which traditional advertising has produced such little revenue per user relative to other sites, a new market, led by the proliferation of virtual currency and virtual goods, is rapidly expanding.

No one knows yet the exact size or potential of the market, though even conservative estimates put it at well over $2 billion.

What’s behind the boon? A confluence of factors. Social publishers, forced by necessity to find creative ways of monetizing their traffic, discovered that virtual currency and virtual goods are the most effective way to monetize traffic on their properties. At the same time, infrastructures for virtual currency were becoming more common, and consumers were becoming more comfortable with the whole concept of a virtual economy.

Today, there’s little doubt that virtual currency is the most effective way for social web publishers to monetize their traffic. Drawing from case studies, I have highlighted 10 tips to show how you can successfully integrate virtual goods and services into the overall user experience.

10 Tips for Monetizing Social Traffic through Virtual Currency

1. Understand Your Users’ Motivations

A virtual economy is much like a real economy in that it is driven by human psychology and human motivations including greed, ambition, curiosity, power, a sense of belonging, and others. When creating a virtual economy, it is important to understand which motivation or motivations your economy is addressing. Does it help users satisfy their destructive urges, the way “killing” games like Vampires or its sister-apps Zombies and Werewolves do? Does it give users a sense of belonging and connection, the way Friends For Sale! does? Knowledge of who your audience is from a demographic, psychographic and behavioristic viewpoint is essential for building a vibrant virtual economy.

2. Create Multiple Methods for Users to Earn Virtual Currency

Before your users can spend any virtual currency, they’ll first need to earn it. Some users are willing to simply pull out their credit card and pay real dollars in exchange for virtual ones. For those users you’ll want to offer PayPal or similar credit card options (just be sure to be prepared to also offer customer service, fraud prevention, chargeback handling, technical integration and other supporting efforts if you’re going to integrate with these service providers directly. Platforms like Offerpal Media remove all of these headaches for you). But a majority of users will want other options as well. The method that generates the highest revenue is allowing users to complete targeted, relevant advertising offers in exchange for virtual currency.

3. Sell “Decorative” Virtual Goods

Decorative virtual goods allow users to express their individual personalities. WeeWorld.com, where users get to dress up their avatars to reflect their online personas, is a perfect example of users spending their virtual currency on decorative items geared towards self-expression. Just as clothes, accessories, gadgets and other personal belongings are symbols of self expression in the real world, so too are their virtual counterparts, and people are just as inclined – if not more so – to decorate their avatars, profiles and backgrounds with personalized items as they are to dress themselves up in items that express their individuality.

4. Sell “Functional” Virtual Goods

A second type of virtual good is known as “functional” goods, or those that have an impact on the user experience. These goods are most prevalent in MMOGs such as Mobsters, in which users redeem virtual currency for goods or services that confer some kind of advantage, in this case more territory or more mob members. They are “functional” in the sense that they help advance the game or user experience.

5. Sell Virtual Gifts

A third type of virtual good includes virtual gifts, in which one user sends a graphical icon to another user as a social gesture. This type of good might be the most common on the major social networks today, since they so intimately tap into our need to connect with other human beings. (Lil) Green Patch, with its inherent gifting apparatus, is the perfect example. Its success indicates that a small gesture goes a long way, both online and off, and that people are willing to spend currency, virtual or real, to let others know how they feel.

6. Keep it Fresh

Chances are the users who return fairly regularly conduct the majority of the transactions within your virtual economy. You need to constantly refresh your selection of virtual goods in order to keep those users hooked. The stickiest publishers with the most thriving virtual economies deliver new goods into their marketplace practically every week, if not more frequently.

7. Make it Fun

Like everything on social web sites, taking part in your virtual economy should be fun above all else. Consider giving your currency a humorous name and representing it graphically with an image that contains some kind of pun or inside joke. The virtual goods themselves should in some way delight or amuse your audience, giving them reason to get involved. Social web sites are entertainment, after all, and if you’re not entertaining your audience then they’ll spend their time elsewhere.

8. Promote Your Currency

Once you have your virtual currency in place, be sure to promote it wherever it makes sense. For starters, think about your user experience and be sure to insert messages or notifications in contextually relevant locations. When they first register, for instance, you might show them how to open a “bank” account. Or if their balance is running low, you might message them the next time they log-in that it’s time to earn more currency. In a gaming environment, you’d want to give them notice if they’re just a relatively few points away from advancing to the next level. We also recommend using banners and other types of display formats to run ads for specific offers that will earn your user a set amount of virtual currency. Currency-driven banners have been shown to generate 10 times the click-through rate of non-incentivized banners.

9. Study Traditional Game Mechanics

Long before social applications or social networks or even the Web itself was around, the people who developed arcade games, home video games and, later, MUDs were perfecting ways to engage their users through the mechanics or inherent architecture of their games. People play games for the challenge they represent and the psychological lift they get for achieving results within the game. By tapping into that desire to demonstrate one’s skill, game developers have created user experiences that are fun, compelling and sometimes downright addictive. Five main mechanics that game developers have used to successfully engage their users are:

1. Points
2. Collecting
3. Feedback
4. Exchanges
5. Customization

10. Measure, Analyze and Optimize

As with any web property, for maximum results it’s important to continually analyze your usage patterns to understand what’s working well and what areas need improvement. Are you losing users at any certain point? Do they spend a surprising amount of time in any one area? What click-paths are they taking? When are they most likely to engage with your virtual currency? Develop hypotheses and test for viability. If they work, great. If not, try something else. Continually adjust your economy depending on how your community evolves and the types of currency it seems interested in using. Pay close attention to the whims and behaviors of your user base and optimize your economy accordingly.

Conclusion

While many social web properties have had a difficult time monetizing their traffic, those that have been successful have largely done so by creating virtual economies. Users have clearly demonstrated a willingness to take part in these economies, and the more comfortable consumers become with the concept of virtual economies, the more ubiquitous they will become.

The list of tips provided here is by no means exhaustive, and as the market evolves, so too will the rules. If you have feedback on these tips or wish to add to the list, we encourage you to do so. Future updates and ongoing conversation on the subject matter, will be available on our blog.

While users of Facebook apps built in FBML have been able to post content to friends’ feeds for quite a while, Facebook hasn’t supported the same functionality for iframe apps or Facebook Connect-enabled websites.

However, that’s changing today. Now, iframe apps and Connect websites will be able to use showFeedDialog to publish content to one friend’s wall. However, to publish content to multiple friends’ walls, developers will still need to use the FBML multiFeedForm.

Allowing users to post content (like gifts) to friends’ walls can be a powerful way for applications to grow virally. Profile pages are highly trafficked by friends and stalkers, and feed stories get syndicated to the News Feed for further distribution.

For those not following our advice on how to effectively and authentically market inside Facebook, beware: a US District Court has awarded Facebook a $873 million judgment in its suit against marketers aggressively spamming Facebook users.

Judge Jeremy Fogel made the ruling on Friday in San Jose District Court in Facebook’s case against Adam Guerbuez and Atlantis Blue Capital under the CAN-SPAM Act of 2004. In addition, the ruling prohibits the defendants from “using or accessing, whether directly or indirectly, Facebook’s data, information, computers, computer systems, computer networks, or Facebook user’s accounts, information or profiles for any reason whatsoever.”

While it’s unlikely that Facebook will ever collect the vast majority of this judgment, it does send a loud message to Facebook spammers: Facebook is willing to pursue those abusing its service.

Update: From Facebook:

Does Facebook expect to quickly collect $873 million and share the proceeds in some way with our users? Alas, no. It’s unlikely that Geurbez and Atlantis Blue Capital could ever honor the judgment rendered against them (though we will certainly collect everything we can). But we are confident that this award represents a powerful deterrent to anyone and everyone who would seek to abuse Facebook and its users.

This judgment is the result of the tireless effort of our security experts, legal team and the other significant resources we’ve devoted to finding, exposing and prosecuting the sources of spam attacks. These efforts complement the sophisticated technical systems we continue to develop to limit the impact of these attacks or to block them altogether.