ConnectU is a company that never ceases to haunt Facebook co-founder Mark Zuckerberg. According to an article published in The Recorder, the Winklevoss brothers (who founded ConnectU), were awared $65 million in their suit against Facebook. You may also remember that there was a follow-on suit as the brothers were provided with stock options based on Microsoft’s $15 billion valuation despite private Facebook stock trades that valued the company at around $4 billion.



If the brothers were paid completely in stock and if the follow-on suit was settled at a reasonable valuation for Facebook, the brothers could have obtained up to 1.6 percent of Facebook. That would be the best case scenario for the brothers. This isn’t what happened though according to the Recorder, the settlement “was paind in a mix of cash and Facebook shares.”

The brothers are also now in a legal battle over the fees paid to Quinn Emanuel, the firm who won the settlement. The firm’s current tag line is “It’s Our Opponents Who Needed a Bailout.” This was published in the company’s brochure which included a statement about the $65 million settlement against Facebook. The other tag line published on the company’s website is, “When an 8-Figure Setttlement Simply Won’t Do”.

If you are looking for a big payout, it looks like the Quinn Emanuel trial lawyers are the guys to go to. It’s a great advertisement for the company, yet it probably won’t help their dispute with the Winklevoss brothers over the total fee owed to the company. While the brothers don’t own 1.6 percent of Facebook, they should be pretty satisfied with the result of the suit.

Update

A commenter noted that $65 million is 1.6 percent of Facebook at a $4 billion valuation, not 16 percent. They would be accurate and I’ve updated the article to reflect that.

Yesterday I was reading tweets from friends in Israel who were mentioning a live streaming setup similar to the one CNN had during the inauguration. Today, Orli Yakuel posted a screenshot to Flickr of the event. This is the second time that Facebook has integrated a streaming news feed for coverage of an event. This year’s election in Israel is a historic one with all of the buzz surrounding the recent Gaza conflict and other regional political tension.



Now that Facebook has a solid news feed integration solution for media companies, it appears that they will be working to partner with other media companies for more interactive event coverage. Facebook also recently used their old polling application to obtain live poll results from across Facebook during the World Economic Forum. While Twitter has been one of the leading solutions for live event coverage, Facebook has been focusing on more broad-based event partnerships.

It appears that Facebook has been focused on supporting larger events, yet it would be interesting to see Facebook provide a more integrated solution that companies can self-implement. It’s most definitely one service that Facebook could charge for and something many media companies would benefit from. Historic events have been a primary focus for Facebook as few other events attract some many individuals.

It’s also a great way for Facebook to encourage new members to register. While competing MySpace

has produced a few election related products, there has yet to be any product launched with the type of integration found through Facebook Connect. The few implementations of live event coverage with Facebook Connect integration have proven to have a strong impact.

The only remaining question is when will we see Facebook provide an easy way for any company to integrate this interactive viewing environment? Hulu, who was supposed to be a launch partner, could prove to be a huge opportunity for Facebook Connect by providing a robust interactive environment in contrast to their existing forum platform.

For now we will have to sit and wait but it’s most definitely exciting to see these new implementations of Facebook Connect roll out.

What’s in a name? A whole lot. And when your surname is Kills The Enemy, you’re swiftly reminded of that when Facebook swiftly deactivates your account. 28-year-old Parmelee Kills The Enemy had to send Facebook scanned copies of a government identification document to prove her real last name after the social networking site deactivated her profile, according to KX Net.

A Native American, Parmelee’s name is a hot topic for Facebook, social networking users and advocates. Nebraska journalism student Nancy Kelsey wrote a news story about Parmelee’s issue with Facebook, even going so far as to create a Facebook group called “Facebook: don’t discriminate against Native surnames!!” The group already has 1,000 users, and highlights ongoing issues automated systems have for individual scenarios.



While Parmelee’s particular case could be fodder for racial and cultural discussion, Native American names don’t appear to be the only ones receiving discriminatory practices. A friend of mine has a name that could be considered to be associated with a middle eastern religion and came to me for help when he was unable to even register for an account because his name was repeatedly rejected. I eventually advised him to use a ‘common” first name and drop a few letters from his last name in order to create an account, as well as sending a letter of complaint to Facebook.

Unfortunately most issues that arise from this particular action of denying a user’s name will appear to be discriminatory and racially or culturally driven. And maybe they are, considering an actual human or team of humans need to determine what words/terms/phrases can and cannot be accepted by an automated system.

But perhaps the real issue boils down to Facebook’s automated system and how it handles individuals on a case-by-case basis. With Facebook growing at a reported 600,000 new users a day, it’s impossible to manually approve all username requests, especially upon registration. But there’s certainly room for improvement, and it may be a worthwhile investment for Facebook, in order to avoid anyone thinking that Facebook itself is insensitive to other cultures and races.

TurnTo launched late last year as a social shopping service, alerting you when you come across shopping sites that your friends have already been to, as well as what items they purchased. The service is now looking to integrate deeper with existing social sites like Facebook for enhanced utility, bulking up its feature set to improve on ease of use and tap into larger networks that you already have across the web.

As TurnTo already stands, you can add connections based on the contacts from various email accounts, Facebook, and AOL instant messenger. Most recently, TurnTo added the ability for raves (reviews) to be posted through your Facebook account and shared with friends. If you’d like a more local approach, you can also type in your zip code to see what type of shopping patterns exist on a local level. From within your TurnTo account you can see what products other users are raving about, check out some of the sites others are frequenting, or just keep track of ongoing activity within your social circle that you’ve imported into TurnTo.



One important aspect of TurnTo’s approach is that it tracks activity even when you’re not signed in, so regardless of what activity you and others are tracking, TurnTo has a good handle (without necessarily giving up personal data) on what particular shopping data consists of. This in turn becomes good feedback for you, and readily converts into recommendations based on te network you’ve created around your TurnTo account.

Currently TurnTo’s Facebook integration revolves around the use of the “old” Facebook API, which isn’t ideal for TurnTo’s ultimate goals. So TurnTo is actually looking to better leverage a user’s social graph on Facebook by integrating via Facebook Connect. According to George Eberstadt, CEO and Founder of TurnTo, the anticipated adoption rate and user familiarity of Facebook connect “will result in a higher use-rate. We want to tap in to that.”

If overarching concept sounds familiar, it’s because it vaguely resembles what others, including Facebook Beacon, are going after wih social shopping behavioral data. So far, its most powerful use case scenario as a data collection process has been for the use of search and useful search results presented in the form of unbiased recommendations based on a number of filters for personalized needs. In the end, I expect that TurnTo’s use of Facebook Connect could be more effective for sharing purposes, and can foster decent growth for the company. Turning that into search data would be my expectation for further monetization of TurnTo, among other integrated features that would combine user data, relevant interaction and algorithms to provide useful recommendations in the end.

This is a guest post by Jeremy Liew, Managing Director at Lightspeed Venture Partners. Jeremy invests primarily in the Internet and mobile sectors, with a particular interest in social media, commerce, gaming and methods for increasing monetization.

Last September I estimated that Facebook is doing around $35m in digital goods sales. In November anonymous insiders suggested that it was closer to $50-60m in digital goods sales. That’s a healthy run rate, but I think Facebook could make a few product changes to do even better.

I’ll split my suggestions into three categories: Opportunity, Means, and Motive.

I. Opportunity

Facebook has made some smart changes to its digital goods/gifts product recently, highlighting upcoming friends birthdays on the home page, prompting gifts on birthdays and allowing users to buy birthday gifts in advance. As birthday gifting is the most common usecase for Facebook digital goods, these are changes that increase a users opportunity to buy virtual goods.

Facebook could increase gifting opportunities by prompting gift giving on other calendar events as well. Some are natural gift giving holidays, such as Christmas, Chinese New Year, Valentines day etc. It already provides a selection of holiday specific gifts for each of these occasions. Facebook could generalize the “birthday” section on the homepage into a “calendar” and note upcoming events that are gift worthy, and perhaps even suggest recipients. For example, if you are “in a relationship” with someone on Facebook, then they would be a natural person to prompt for a Valentines day gift.

Chinese New Year themed virtual gifts

Facebook could also prompt gift giving on certain notifications in the feed that might be “gift worthy”. Especially notable are changes in relationship status (e.g. moving from “in a relationship” to “married” or to “single” for example), but others might include changing address (housewarming gift?), changing educational or job status (graduation gift, or new job gift etc).

Finally, Facebook could prompt for gifting more generally through more, and more direct, calls to action. “Give a gift” is the fourth option for writing on someone’s wall, and moving it to first would likely increase gifting immediately. So would prompting for gift giving (not just comments) on Status Updates on a profile and in the news feed. Simply putting a link to “gifts” as the default first application in the application box in the right rail would help.

I suspect that increasing opportunity could increase gift giving by 50-100%.

II. Means

Last year Facebook switched from denominating gifts in dollars to gift credits. This was a good first step as users tend to be more willing to spend virtual currencies than real money, even when they are readily interchangeable.

Currently there is only one way to buy Facebook gift credits, and that is via a credit card. But a lot of Facebook users don’t have or don’t use credit cards. They may want to be able to buy and give gifts, but they can’t do so. This is a common problem for a lot of game developers, including many game developers on Facebook. The techniques that worked for them can work for Facebook too.

As a start, Facebook could enable additional payment mechanisms, including Paypal, cell phone billing (including premium SMS) and direct debit from checking accounts. With such an international audience, additional payments mechanisms would allow many of Facebook’s international users to more easily buy gift credits.

Some Facebook users, especially those younger than 18, may not have access to any payment mechanisms other than cash. Accepting cash in envelopes for Facebook points would not scale very well. However, many game companies have been successful in getting their branded prepaid cards distributed at retail. This is one way of turning user’s cash into a payment mechanism that can be used online. Facebook has the brand awareness to do the same thing by striking deals directly with the two biggest distributors of prepaid cards, Incomm and Blackhawk. Alternatively, if they did not want to deal with retailers directly, a company like GMG Entertainment could handle it for them.

However, some users don’t have any money at all to spend on gift credits. Super Rewards and Offerpal have found one way to reach this market, through incentive offers. These companies allow users to trade their attention (through filling out market research surveys, applying for credit cards, getting a free trial of a service, signing up for email newsletters or other activities) for virtual currency. They take the bounty paid by the company acquiring the user, and use some of that to buy the user their virtual currency. Facebook could enable users to buy gift credits with incentive offers.

The combination of these tactics to increase Means to buy digital goods could provide an additional lift of 50-100% in digital gifts revenue.

III. Motive

Let us start by understanding the motives of gift givers. Gifting serves the same purposes on Facebook as it does in the real world. Firstly, it serves to strengthen social ties. Secondly, it serves to draw the receivers attention to the gift giver. Facebook can increase motivation for gift giving by playing into these two familiar behaviors, looking to the real world for conventions that can easily be borrowed.

Strengthening Social Ties

One of the strongest conventions of gift giving is reciprocity. It is awkward to receive a holiday card from someone that you did not send a card to. So too with virtual gifts. But right now it is difficult to know who has given you a Facebook gift. Since virtual gifts are given with the context of the wall, the wall is the best place to highlight gift giving. If each time I visited a friends wall I could prominently see what gifts that friend had given me, that would increase the pressure for me to buy a virtual gift for my friend to accompany my wall posting, especially so if it was a gift giving occassion (such as a birthday, holiday etc). Of course the opposite is also true - if a friend had not given me any virtual gifts you would not want to highlight that at the point at which I was considering whether to give a gift myself.

Gift giving is strongly influenced by immediate social norms. If I were to show up a dinner party empty handed when all the other guest had brought a bottle of wine, I would also feel awkward. People look to the behavior of others to see what is appropriate for their own behavior. Once again, the wall is the right place to highlight this. Right now the wall displays all postings in reverse chronological order. Since a new wall posting appears on the top of the wall, you will only see the most recent postings on your friends wall, many of which may not have digital gifts attached. What if the top postings on the wall were those with virtual gifts attached, and then reverse chronological order after that? (Perhaps with some time limitation, so that top posts would be virtual gifts received say in the last week). This would create a sense of social pressure to a visitor to the wall who would see virtual gift giving as a social norm. This will be especially effective around traditional gifting occasions as before. By highlighting desired behavior, you can influence social norms in the direction that you want.

Drawing Attention to the Gift Giver

Facebook can be a noisy environment. On your birthday you can receive 10s and even 100s of birthday well wishes. That is a lot of messages to sort through, and often these wishes are not responded to individually due to the volume. How can I make my well wishes stand out from the rest? How can I show how good a friend I am or how much I care? One way is to attach a virtual gift. Because the gift is not free, the very act of attaching a gift serves to differentiate my message from the rest. This is visible not just to the recipient, but also to all other visitors to the profile. Facebook could makes product changes to make this differentiation more prominent. One way would be to “pin” gifts to the top of the wall for some period, as noted in the preceding paragraph. Another would be to similarly “pin” gifts received to the top of the News Feed page for some period, ensuring that the gift is noticed and emphasized to the recipient. Finally, having a small profile picture accompany the gift, instead of just the name of the giver on the News Feed would serve to further draw attention to the gift giver.

Building from this approach, gift giving draws attention but it currently cannot draw gradations of attention. The absence or presence of a gift is the only distinction because all gifts currently cost the same (with the exception of free sponsored gifts). If Facebook were to provide gifts of different prices and levels, this would enable a gift giver to express their interest in a more nuanced way. One problem with implementing this approach on Facebook is the sheer volume of available gifts. There are over 300 Facebook gifts available today. It will be hard, if not impossible, for a gift recipient to tell what is a more valuable gift versus a less valuable gift just by looking at the gift. HotOrNot’s Meet Me solved this problem by starting with a small range of gifts with value tied to a conventional scale; flowers, ranging from the least valuable daisies to the most valuable red roses. Given the profusion of gifts available on Facebook today, Facebook would need to find some other way of demonstrating value to a recipient than relying on the image itself. Perhaps it could show the point value of each gift when the gift displays. But that is a bit crass - it is like leaving the price tag on a gift.  It may need more creativity to make this obvious. Facebook could change the background color of the gifts according to a scale of value that is well enough understood: perhaps white - bronze - silver - gold? This would allow for the current large range of gifts but make it easy to tell at a glance the gradations of value.

Obviously, allowing gifts to have a range of prices will increase the average sales price of gifts, hence increasing revenue from digital gifts sales.

Motivation for Gift Receivers

Looking at gift givers motivations is only half the story. The other half of the story is the gift recipient. What are their motivations?

One simple dynamic to increase gift recipients’ motivation to receive gifts is to make gift getting competitive. Keep track of how many gifts have been received and display this prominently. This could be done on the profile page; in the same way that number of friends is tracked and thumbnails of friends shown, number of gifts receieved and thumbnails of gifts received could also be shown. Or it could be made even more explicit with leaderboards for the people who have received the most gifts. The power of displaying metrics to drive behavior is well documented by game designers. (If you haven’t read Amy Jo Kim’s work on game design for social environments, you should). Once people want to receive more gifts, they will start acting in ways that encourage gift giving, whatever that might be.

Game design provides a second possible mechanic to induce gift recipients to want more gifts; collecting. Gifts are all treated the same right now. If Facebook were to offer awards and achievements for getting “sets” of gifts, you would most likely see some users work very hard to collect gifts to complete those sets. PackRat has shown just how powerful and addictive collecting behavior can be on Facebook. Facebook could for example offer a free [birthday cupcake] to give to someone else if you were given five [birthday cupcakes], or put a custom Christmas skin on your wall if you received 10 Christmas themed gifts.

I believe that through increasing the motivations of gift givers and gift receivers, Facebook could see a more than doubling of their virtual gifts revenue.

This article is based on a series of posts that can be found here, here, and here.

It’s all about presentation, or at least that’s the latest word from the Facebook Platform Team in a recent post on the Developers Forums.

Invite/request incentivation has been around since the Facebook Platform initially launched 2 years ago. In essence, incentivization is the act of rewarding users for sending an invite (or using some other other integration point such as a notification, the publisher, etc.) to use an application. With the dawn of the redesign several months back, Facebook placed an emphasis on eliminating these ungenuine invites with the introduction of Platform Policy #8.4. Fast forward to today — while it would seem the problem has been reduced, it has been all but elimated.

It’s a regular occurrence on the Developers Forum: a user reports some application XYZ for incentivizing an integration point. A typical thread includes comments from other developers about how Facebook doesn’t enforce its policies, or about how the platform is unfair, and subsequently the Facebook Platform Team will respond with a standard message that they will look into the pressing issue at hand. In the past two weeks, however, the Platform Team has taken a different approach to the topic.

About a week ago, Inside Facebook reported on a new trend revolving around some of the Pacman applications on Facebook. In particular, this was fueled by lengthy discussions on the Developers Forums about the application’s misuse of the platform and policy violations. There, the Facebook Platform team went into great detail regarding the work they put in behind the scenes to preemptively catch incentivizing apps:

“While we catch and remove most violations before you know about them, there are on some occasions violations which you are able to find first. The latter are by far more rare than the former.”

However, last week, the Platform Team more specifically addressed the issue of incentivation with their reply in this thread. The response boils down to a few details:

• The current incentivization rules exist despite a “gray area” of enforcement.


• Facebook is actively looking into ways to further define these rules.


• If your application associates app invites or requests with rewards, it will cross the line.

Essentially the gray area they refer to is about how your application portrays its integration points. For example, if your application is a poker app and you reward users with virtual currency strictly for the number of friends they have playing the game, you are currently in the clear. However, if you reward the user for the action of actually sending invites to their friends, you’ll be crossing the line.

While these two scenarios seem very close (and in reality, are), they highlight two different mentalities. With the former, you are encouraging users to spread the game, not necessarily through the use of an integration point - while with the latter you are explicitly encouraging users to send spammy app invites.

The gray area is further expanded by “gameplay necessity” — that is, the platform policy states you may allow incentivized app invites to take place if it’s a crucial part of gameplay or application functionality. Several applications have tried to design themselves around this notion, strictly so to skirt the platform policy.

This is the first time we’ve seen the Platform Team explicitly talk about the incentivization platform policy, and this newfound approach looks promising. We hope to see more explanations of this caliber from Facebook in the future, and will keep you updated.

Facebook launched today a new default action link on many types of feed stories called “I Like This.” It’s a really simple way for friends to give feedback about which status updates, photos, and notes they like, right in the feed.

The new feature will make it easier for friends to say “I Like This” with the click of a button when they might otherwise leave a regular comment. It will also give Facebook’s feed distribution systems another explicit user feedback signal to take into account when picking feed stories to show to friends.

For application developers, getting a lot of feed stories “liked” may be another way to get more distribution in the feed. Developers are also able to create their own custom “action links” on feed stories they publish in order to increase engagement.

Social feed aggregator FriendFeed’s “I Like This” feature has been very popular with FriendFeed users since it was introduced. The feature should become popular on Facebook as well.

Back in January, Compete.com reported that Facebook surpassed MySpace in total US unique visitors for the first time ever in December 2009. Well, Compete.com just published their new data for the month of January, and Facebook has increased the gap over MySpace even further.

January data shows that US visitors to Facebook have grown by almost 15% in the last 30 days alone, bringing the total unique visitor number to 68.5 million people. By contrast, MySpace experienced a 1.7% decline in January, continuing its slight downward trend over the last year.

Compete also reports a “velocity” number that shows whether a particular domain is increasing or decreasing in overall share of online minutes. It’s clear from the graph below that Facebook’s share of attention has been growing faster in recent weeks.

Nevertheless, Comscore and Hitwise still report higher US visitor numbers than for MySpace than Facebook. The discrepancies are likely due to different sample sizes and ISP sampling pools.

Last month I wrote that Facebook was preparing to launch a “Like” feature similar to the one currently provided on FriendFeed. Today, the company finally announced the launch of that feature. The main purpose of the feature is to avoid excessive comments from users saying “I agree” or “I like this”, etc.



It’s extremely simple and currently there is no page which aggregates items that you’ve liked as far as I can tell. FriendFeed probably isn’t too happy about this new feature, given that it’s identical to something that they’ve had since early on. Leah Pearlman equates this new feature to a five star rating system for restaurants. I’m not quite it’s really that robust.

So far I have yet to see the feature in action because I can’t find it on my friends’ walls but I’m sure that the feature will be launched shortly since the company has now formally announced the feature launch. Should FriendFeed be nervous? Of course, but not because Facebook has launched a new “like” feature. The real concern should be about Facebook opening up their news feed activity more extensively.

So do you like this new feature? Has it gone live for you yet? What other features would you like to see within profile news feeds?

Gift Creator is a new application on Facebook that lets you create your own gifting application. It works much like the Quiz Creator applications that gained popularity last year, and there is in fact a quiz creator option within the Gift Creator app. It’s easier to use than the Gift Creator option, and doesn’t require any additional downloads.

The Gift Creator option, however, will require that you install The Facebook Developer App, since you are effectively creating an application that acts almost autonomously within the Facebook platform. You won’t need any programming skills in order to complete the application or the installation. All you need to create a gifting app is a title, a description and an image. Each image you upload represents a single gift. Facebook users can send this gift to their friends.



In this regard, the gifting app you create on Gift Creator acts as any other gifting app on Facbook. Since you don’t have full control over the app’s look and feel, or the level of integration within the Facebook platform, it’s going to be difficult to leverage the app for raising money or earning you money via advertising or otherwise. It doesn’t appear that there’s an option for selling gifts through Gift Creator, though that would be a powerful incentive for users that would like to take advantage of the gifting economy that’s playing out on social networks.

Gift Creator does, however, have an incentive for inviting friends. So for every application that’s created, a slew of invites can easily be sent out to friends on Facebook, effectively spamming a number of other users. This violates the Facebook Terms of Service, especially as Facebook has continually modified the terms restricting spam-like behavior.

It does appear that Gift Creator has some built in mechanisms that curb some spam behavior when it comes to actual gifting to friends. The app you create acts just like any other application running on Facebook’s platform, meaning that sharing behavior is regulated based on the popularity of your app, the amount of content available to gift to others, and the number of friends that a gift can be sent to.

If you want to create your own gifts application, then go install the application. Don’t be surprised if the Gift Creator gets shut down anytime soon though for offering incentivized invites.