About This Case


21 Dec 2007, 11:59PM PT

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7 Dec 2007, 12:00AM PT


  • Advertising / Marketing / Sales
  • Consumer Services / Retail Industry
  • Enterprise Software & Services
  • IT / IT Security
  • Internet / Online Services / Consumer Software
  • Legal / Intellectual Property
  • Media / Entertainment
  • Start-Ups / Small Businesses / Franchises
  • Telecom / Broadband / Wireless

To Beacon Or Not To Beacon


Closed: 21 Dec 2007, 11:59PM PT

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There's been plenty of attention paid to Facebook's new Beacon advertising system -- much of it negative. People became reasonably upset over what they saw as intrusive and unwanted sharing of information concerning things such as purchases. Many brands have since backed away from Beacon. However, Facebook has made a number of changes to the program, making it possible to opt-out entirely and making sure that people clearly had control over what information is posted and what is not.

Now that those changes are in place, does it make sense for a consumer-facing company to sign on to Beacon -- or has the program forever been tarnished? How should we approach using Beacon? In an ideal world, we would like for it to be a way for fans of our products to pass on effective "endorsements" of the product, but we do not want to be seen as doing something intrusive or upsetting. If not Beacon, is there a better way to do this either within Facebook or through a different platform?

8 Insights



The single most important marketing a consumer-facing company can get is honest, positive word of mouth from satisfied customers. Any situation where you have a chance to foster and provide such communication among consumers should be encouraged.

Beacon has been tarnished somewhat but I still think it will be effective at some level. The main thrust of the outcry against it was that Beacon did not give consumers choice and control. That's what consumers really want when it comes to relationships with brands and companies. Yes, by implementing those features there will be less people participating in the program. But the upside is that those that do participate will be doing so willingly and thus more likely to be spreading a positive message about your company through other forums.


For implementation on your own site I would take extra measures to make sure that customers are notified at some point in the purchasing process that their information is about to be transmitted to their friends/contacts. Possible a checkbox in a graphic on the second to last checkout page. A graphic or form control that is not likely to be missed and yet unobtrusive (no pop-ups) that clearly explains what will happen may be the best option. An example of one method is this:

Title: "Tell your friends about this purchase!"

Subheading: "If you enjoyed your shopping experience at ______ and want to pass along the good word or get your friends involved, check the following box. A message will be inserted in your Facebook feed letting your friends know about this purchase."

It would also be a good idea to have information on your website describing what Beacon is, how it works, how consumers can participate and opt out.

Other Methods

Creating pages for your company and/or brand within communities such as Facebook can be another effective method for encouraging positive word of mouth advertising. Again, the implementation should be focused on giving the consumer choice and control. Secondary benefits from associating with your brand such as promotional giveaways and discounts can be effective but will only go so far. You cannot create honest customer word of mouth by buying their loyalty because as soon as someone else comes along offering more those customers will flock to the new offer. And as soon as your promotionals go away the word of mouth will go away.

These promotionals can be more effective as feedback tools. For example, take a product with sluggish sales. When a limited time discount is offered sales jump temporarily but then return to their previous state once it is complete. This could indicate that it is a good product that consumers would purchase but it is not priced properly for the market or for its features. If the sales did not jump during the discount period that could indicate that the problem lies with the product itself and how it compares to the competition on features and usability.

Finally, one of the most important is listening to customer feedback. If you make it simple, easy and unobtrusive, customers will provide feedback on your brand and products. Listen to them. One of the most damaging choices a brand can make is to not respond to negative feedback from its customers. Lack of a response or forcibly trying to squash such feedback will only encourage more negative feedback and more attention. By listening to consumers, giving them a forum to voice their suggestions and feedback you get them actively involved in your brand/product which helps to foster attachment and loyalty.

This is a very challenging situation.  On the one hand Facebook has given people more control over Beacon by facilitating  the opting-in or opting-out of having their selections seen, but on the other it appears that the architecture of the service is still pushing all of the tracked information to Facebook but they only display it for those who have opted in.  Therein lies the problem, opting out doesn't guarantee the user that their information isn't shared with Facebook, it just doesn't show up in the News Feed.  With that said, for those users who have been following the news enough to understand that nuance, and are letting their friends know about it, it remains a bit of a risk for any brand or retailer to associate itself with this service.  The issue in question is one of trust, and while Facebook has taken the approach of this being an innocent mistake, the fact remains that the architecture that they've used here will be difficult to reverse and hence mistake or not, they will be difficult to trust.

Now in all fairness, the average end-user does not understand these issues, and with Facebook's PR machine yelling the "opt-in/opt-out" mantra, they may indeed rise above the din and convince the average user that they mean no harm and can be trusted.  As it stands, Facebook is an extremely useful platform that many people have come to depend on for their entertainment, communications, and just to keep up with friends.  People want to believe in Facebook and think the best, and the association with them has a certain appeal.  It's a bit like Apple.  While Apple was the leader of the "evil" DRM (digital rights management) movement for locking up music and while they've had culture of poor upgrade compatibility and a history of being a closed system, people still love them and want to like them even when they get upset with the latest anti-user move.  Other brands aspire to Apple's brand and want any association possible with them.

With all of this said, the choice is one of whether you think that users will remain somewhat empathetic to Facebook and put up with their privacy being violated.  If past history in this area is any sort of indicator, I'd say that associating one's brand with Facebook is probably a good thing regardless of the blemishes on their record.  The fact is, the issues are complex and  the average user's perception is that the benefits outweigh the harm.

I think the standard usage scenario, in which a user's friends get a popup that says "Joe purchased an Acme Widget from Amazon," is going to be a tough sell in the near future. Users don't necessarily want their friends to know what products they're buying, and a purchase isn't necessarily an endorsement anyway. However, I think that with some creativity you can find ways to harness the potential of Beacon without upsetting users. I think there are two key points to keep in mind: first, make sure it's information the user actually wants to sell, and second, make sure you're absolutely clear that the information will be shared with Facebook.

For example, instead of automatically sending out a Beacon message at purchase time, one approach might be to wait until the customer has tried the product and then ask the customer to come back to fill out a short survey. For those customers who give the product a non-terrible rating, have a final screen that says "would you like to share your rating with your Facebook friends?" If they click "Yes," an item would be sent to Facebook that said "Joe bought Acme Widgets and gave them 4 out of 5 stars." Obviously, you'll get a lot fewer Beacon messages this way than if you automatically sent out a message at purchase time, but the endorsement will carry a lot more weight, and you'll be far less likely to upset anyone.

Depending on the company's web presence, it might also be possible to do beacon messages that are totally non-product-related. For example, if the company in question happened to be Dove, Beacon would be a great way to spread the word about a marketing campaign like <a href="http://www.campaignforrealbeauty.com/">Real Beauty.</a> Similarly, Doritos could have used Beacon to great effect as a way for users to tell their friends about their favorite video in the <a href="http://promotions.yahoo.com/doritos/">Crash the Super Bowl</a> contest. A Beacon message that says "Jane is learning about real beauty at realbeauty.com" or "Joe thought 'live the flavor' was hilarious" will be a lot more effective than one that says "Jane bought 6 bars of Dove soap" or "Joe bought a bag of Doritos."


Timothy Lee
Sun Dec 9 10:01pm
Of course in the first paragraph I meant to say "make sure it's information the user actually wants to share." Sorry about that.

One other thing to keep in mind: privacy uproars are extremely common online. If the underlying feature is well-designed, the controversy will die down within a few weeks. A couple of examples: When Google introduced GMail, there was a brief controversy because Google (i.e. their algorithms) was "reading" users emails in order to place contextual ads. There were even a proposal in California to restrict the practice, which thankfully went nowhere. After a few months, people got used to the idea and now no one thinks it's at all strange that contextual ads pop up next to their email messages.

Second example: Facebook's news feed. This was the subject of a huge uproar about a year ago. Until September 2006, users didn't have an easy way to keep track of what their friends were doing on Facebook. So when Facebook introduced the Newsfeed, a lot of users felt it was an invasion of privacy. But in that case, the company stood firm, and now not only is the newsfeed not considered controversial, but it's widely considered one of the most interesting things about the site.

So don't let the current privacy flap get out of perspective. It's worth waiting a couple of months before announcing any Beacon-related initiative, but the current controversy is almost certain to blow over, and when it does it would be worthwhile to have a plan in place to take advantage of the very real benefits of Beacon.
The program is tarnished.  In order to endorse products, you have to pay people for their endorsement.  Ultimately, the failure of facebook to realize that they cannot hire thousands of "product spokespeople" for free is a huge mistake.  What would be the incentive for me to give free advertising for a product on my webpage, so that facebook only can profit?  If I could make money from it, then it might be interesting.
Devin Moore
Wed Dec 19 5:27am
To back up my shorter insight here on how Facebook is screwed, let me present my case with references:

Facebook settles text messaging lawsuit, wherein someone "received text messages with explicit comments and other upsetting content — and had to pay 10 cents each time. Facebook received a share of the fee, according to the complaint."
http://ap.google.com/article/ALeqM5gtLAd4-SMMfNKbyniHkWG9uJjyzgD8TK 2OSO4

Facebook sues porn company for stealing info -- This isn't about "hacking"; in fact, Facebook publishes so much info that they become a data farm for anyone looking to send spam:
http://www.technewsworld.com/story/Facebook-Puts-a-Face-on-Defendants-in- Hacker-Suit-60837.html?welcome=1198070584

Blockbuster and Facebook may (probably did) break privacy law with Beacon:

Facebook helps scammers steal people's identities:
http://canadianpress.google.com/article/ALeqM5h71cRxAnxnbKZuhQg93QY gBzwOog

"Facebook quiz trivializes mental health problems":

I hope this is enough to show that just because they survive this latest fiasco, that doesn't mean that the next one won't totally destroy them, and I firmly believe there will be a "next one".
Devin Moore
Thu Feb 7 11:45am
Another update confirming that Facebook continues to shoot itself in the foot: "Facebook sharing too much data with app developers"

I think the only two games in town that are worth exploring are Facebook and Google.  MySpace is too raw for most consumer goods companies and the demographic doesn't compare to Facebook's and Google's.

 So, let's look how Facebook's efforts stack up vs. Google's:

Traffic: Facebook is on fire. Traffic and usage stats are sky high
Monetization: monetization is just getting better. Most of the current ad sales are sponsorship-related.  With Beacon, lead generation becomes viral.  Huge potential here.
Reach: Facebook just announced that they are licensing their infrastructure.  This moves Facebook even closer to the Google/Open Social platform in terms of reach.
Privacy is certainly an issue.  Check out the traffic to Facebook's privacy page.  Opening up profiles caused a bigger blip in users' minds than did the hullabaloo surrounding Beacon.

The Pro-Beacon camp basically espouses the idea that (see Dave McClure's article on the matter)
1) Facebook has introduced a universal opt-out which should satisfy the privacy police.
2) The biggest mistake was a PR one -- one that positioned Beacon as opt-in when it wasn't.  Facebook is addressing this issue.
3) people who are going bananas over Beacon should understand that most people on Facebook are used to the default being opt-out (ie, lifestyle transparency), not opt-in (selective sharing).

I see parallels with what's occurring surrounding Beacon to the snafus made during the introduction of In-Text Advertising.  There was tremendous, immediate push-back when in-text advertising was introduced.  Although privacy wasn't the primary concern, users and customer advocates didn't like the intrusion of advertising.  Today, the ads (run by such networks as Vibrant Media and Kontera).  Companies like Forbes were forced to remove the advertising originally and now, (almost) no one bats an eye.  Editorial and advertising converge -- I think the same evolution is going to occur with Beacon.  My extra-Facebook activity is going to join my Facebook activity to be published to my friends network via my News Feed.  That's what I wanted when I joined Facebook, wasn't it?

Traffic: No one puts up search numbers like Google.  Even at this stage, Google continues to gain market share
Monetization:  Google runs it's own network of publishers and has the ability to juice its numbers by adjusting its variable payouts to its partners and by adjusting how much traffic it shares out to the network vs. internalizing/monetizing it itself.
Reach Keeps growing.
Privacy: Google offers Web History internally to users.  Now that Open Social and Google Profiles have launched (see my article about this soft launch and what it means for Google's moves into social networking), Google is going to have to deal with privacy issues as well.  Google has tons of personalized information about users (from Gmail, Search History, Blogger, Docs) and continues to accumulate this info.  Google has to be careful how it shares out this info and should learn from Facebook's mistakes. 

Google's advantage vis-a-vis Facebook is that even with Beacon, Facebook is pretty much a closed network.  You won't have 100% participation and users still spend a lot of time and activity outside the Facebook network.  Google has replaced the portal of the 1990s to become essentially the Internet for many users.  From search, to email, from Adwords to Analytics to Checkout, Google has closed the loop in terms of activity.

I think Google is also more advanced in terms of providing partners with analytics -- the absolute KEY to web advertising.  It's not enough to provide partners with an interface for social networking.  Partners should demand ROI.  Facebook is just in the early days of providing metrics for its Apps.  Google has made an entire business out of metrics.  As markets look to expand their influence in social networks, they will need the tools to address this.

At this point, an organization's default position has to be to avoid Beacon. The negative press surrounding the initiative has begun to snowball, and it's likely to be used as a hook by many media outlets intent on writing the wave of "Is Facebook Over?" stories that I anticipate seeing in the first half of 2008. More importantly, the defection of key partners like Overstock and (pre-launch) Coca-Cola sets Beacon partners up for criticism: if you participate, the implication will be that you care less about your customers' privacy than those firms that have jumped ship.

You should carefully consider how much of a boon Beacon could provide. Given the likelihood of an increasingly negative predisposition among FB users toward Beacon messages, how is the gain in revenue from Beacon participation likely to compare with the loss of prestige you experience among your more Beacon-averse users? Without knowing the specifics of your business it's impossible to guess at the answer to this question, but the overall downward trend of Beacon should at least make you wary.

There may be ways to minimize the negative connotations of participation in the program. Beacon is powered by a Javascript file included in your site. Requiring an additional user opt-in during the checkout process (or equivalent) prior to inclusion of that Javascript, over and above Facebook's (rather anemic) default user protections, could help reinforce the sense that your business is concerned about user privacy despite its participation in Beacon. Providing a simple selection list — "Share this purchase with my Facebook friends" / "Don't share this purchase with my Facebook friends, but ask me next time" / "Always share my purchases with my Facebook friends" / "Never send my purchase information to Facebook" — that defaults to non-participation would likely assuage your users' concerns. This may run afoul of Facebook's terms and conditions for Beacon participation, however, which are likely to remain in flux while the wave of criticism peaks. You'll have to be sure to review them carefully prior to implementing any extra security for your users.

You may want to consider leveraging the Facebook platform in other ways. You should establish a brand presence on the site if you have not already. Commissioning the development of a custom Facebook application instead of using Beacon may also be a worthwhile strategy. This depends, of course, on how compelling you can make the experience for users: what are they getting out of it? You should not expect users to participate in your online initiative unless you provide a reason for them to do so. Earned premiums or value-adding features like a game may compel users to express enthusiasm about your business.

But in the absence of a good reason for their attention, users will be indifferent to your brand-building efforts. And this, ultimately, is the crux of the problem with Beacon: it attempts to make participation in companies' marketing efforts non-voluntary, without offering any offsetting compensation. There are a vanishingly small number of brands for which consumers' voluntary expressions of affection can be expected -- Apple Computers is the canonical online example -- but it's unrealistic to expect to enjoy a similar position purely via the employment of new technologies.

Consumers possess an intuitive understanding of their role in the advertising economy, and should be counted to express resistance to attempts to shift the balance of the system in favor of the advertisers. If advertising is viewed as a compensatory arrangement in which consumers receive entertainment or premiums in exchange for their attention and endorsement, Beacon amounts to a pay cut. For this reason the default attitude toward Beacon among Facebook users is likely to remain somewhat hostile. In the absence of compelling counterarguments specific to your brand or industry, I would advise you to avoid Beacon.

My recommendation is basically NOT to beacon for the two reasons outlined below.  As with any major media campaign consider proceeding with limited Beacon experiments so that you can measure effectiveness compared to the "grow your own" social media strategy briefly outlined below and compared to your existing pay per click advertising efforts, both of which I predict will strongly outperform Beacon in your testing.

Several of Beacon's original deceptions and deficiencies, widely reported and sometimes misreported in the press and in technology blogs, have now been addressed by Facebook.  Here is their press release about their changes to the program: http://www.facebook.com/press/releases.php?p=11174

However I think Beacon has two underlying flaws that really can't be addressed even with extensive changes to the program.  

First, it's becoming clear that social network advertising generally underperforms targeted search engine advertising.   There are certainly exceptions to this, but I think they are not common, especially as social media buzz has elevated the cost of social media advertising.  Beacon was specifically designed to address this problem but after the firestorm of controversy I don't think one could parse out Beacon advertising problems vs Social media problems. 

The second Beacon problem is the natural aversion people have to being manipulated into promoting advertisers.   Beacon, to me, is pushing the limits of what most social media enthusiasts consider good policy, and seems to have a similar ring to the  "conversational marketing" pitch recently championed by Federated Media.    In Conversational Marketing the idea is to bring advertisers into the "conversation" about their products using special features at the publisher's websites.  The first part of this idea is good - as an advertiser it is critical to be part of the discussion.   However the second part, which some would say involves manipulating content in ways that may not be clear to the readers, is a questionable idea and can even backfire.  Much of the concern with Beacon was the idea that people were participating without knowing or understanding the "game".   Wal Mart and Edelman, their agency, learned a hard lesson with their "canned" RV Traveler blogging campaign which in fact had many true elements and good quality travel content, but too little disclosure to keep from becoming a minor PR nightmare when bloggers learned that Wal-Mart was subsidizing the participants.    

As an advertiser you must be cautious about paying third parties like Facebook to help you convince people that your product is worthy of social media buzz.  Better to use your own products, people, and social media elements to make this case *directly* to the customer.   Advertising, now almost by definition, lacks credibility.   Does this mean you should not advertise?   Of course not - people accept ads, and tolerate ads, but I'd suggest they'll never really be comfortable getting co-opted into being an endorser of a product.  The social process needs to happen naturally both to be effective with the endorser and effective to consumers.

Luckily for you as advertiser there are *many, many* new avenues for inexpensively integrating a social media mix into your marketing plans.  The most important of these is targeted blogging to bring product information, personalize your product, and allow targeted search optimizing for other parts of your website.   Blogs for *every major product you have* are a good investment of time, and can serve as a superior customer aquisition, retention, and troubleshooting tool.

Other social media  would include normal social networking on Facebook, but not necessarily the Beacon program.  A clever and enthusiastic (but also professional and disciplined) company intern is much more likely to put a good face on the company in the social networking space than an advertising representative.    Simply make sure your "Social Media Public Relations Posse" understands the company's sensibilities, mission statement, and other nuances of your product.  Cut this team loose at Twitter, Facebook, Myspace, Stumbleupon, Flickr, Google Groups, Yahoo Groups.  The currency for building these social marketing avenues rapidly could be tasteful contests, free coupons and other non-intrusive types of offer that can be casually offered to the social media environment without any obligations or pressure.

It is important to treat social network participants with care and respect, but honest indications of your intention to participate on behalf of yourself and your product should go a lot further with social networkers than a flimsy Facebook pitches.   As a major brand you'll stand out even more with a *real person* who is authorized to solve customer problems, disperse coupons, and participate as a person with real people.   This approach is far more scalable than it would appear at first glance, and likely to cost less than pure advertising in terms of customer aquisitions and branding effects.

Summary:  Before buying a lot of Beacons try shining the social media light yourself.

For what it's worth, the publicity has guaranteed that all participants will be enthusiastic and willing. Facebook has insisted itsa users affirm multiple times that they really do want to share their purchasing information. Any users that have issues with the Beacon program have already opted out. Whatever bad feelings they feel would be directed at Facebook, and not to any consumer-facing companies that are participating.

The reason Facebook insisted on salvaging the Beacon program is because it's an excellent sales strategy. A friend's recommendation is one of the strongest incentives to purchase anything — and friends are likely to share common interests. While many recommendations may be ignored — the ones that aren't will effectively constitute new sales that simply wouldn't happen before.

Facebook has 58 million users, and even the smaller sub-set participating in the Beacon program will represent a sizeable potential audience. (At this moment Facebook lists over 50,000 items for sale, along with another 11,739 items being given away for free.) It's the #1 web site in America for the attractive 17-to-25 demographic. It would be foolish to write that off because of a controversy that's been resolved.

There are other ways that Facebook could tweak their program. (Imagine a checkbox on each purchasing page offering to "Send your friends an email recommending this item.") But in essence, that's what Beacon is — an automatic way of sharing a user's implicit endorsement.

I understand why users balked. Some purchases are sensitive — for example, health care items or anything related to sexuality, and even birthday surprises.   But Facebook has affirmed that the program remains opt in. As long as it remains that way, participating companies shouldn't experience any liability.

 There may be some exotic exceptions. Last week a New York law professor argued that Blockbuster video violated the law by participating in the Beacon system, simply because they're prohibited from ever sharing a customer's rental history. But that won't be settled without an interesting debate. If a customer agrees to the sharing of their information, then they're affirming that Facebook has their permission to share their rental history.

As in all aspects of this, the important ingredient is the user's consent.