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Facebook / Contagious Comment on Deals, Places and Single Sign-On

by Nick Parish

Contagious' North American Editor Nick Parish on how Facebook's latest pushes will impact flash deals, location-based marketing and the future of e-tail

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Facebook's latest product announcement from its mobile event last Wednesday, in addition to recent statistics, suggests the social network is firmly moving to bring unprecedented next steps to location-based marketing and flash deals, potentially crowding out the firms that have made waves originating the concepts. 

The two features announced, Single Sign-On and Deals, represent a solid attempt at disintermediation of rivals like flash deal site Groupon and the attempts Foursquare has made to woo marketers into using it for promotions. 

Single Sign-On simplifies the process by which you can use your Facebook account with other services, creating a sort of contiguous landmass of contacts that share your various app choices. Sites lose large groups of potential customers in the registration process; being able to log-in with your Facebook account makes the path to a transaction, or interaction with others in your network, much slicker. 

But Single Sign-On only further compliments Deals. Through Facebook Deals, marketers can encourage Places check-ins by offering free or reduced price goods. For example, in the inaugural push last Friday, retailer The Gap gave away 10,000 pairs of jeans, free, to any customers who checked-in to the store using Facebook Places, up to a $59.50 value, first come first served. You just had to show up, tell Facebook you're there, and show the cashier your phone to claim your free jeans. This may have led to hysteria and negative publicity if a million people show up, as over 400,000 participated in its recent half-price gift card deal with Groupon, but it seems to have worked out fine, with customers who arrived after the jeans were gone still receiving a 40 percent discount. 

Meanwhile, another Deals launch partner, 24 Hour Fitness, announced it will donate $1 per check-in to playground-building charity KaBOOM!, up to $50,000. The variety and scope of the Deals can be seen at the link to a Facebook release below. 

If it proceeds as Facebook Ads did, the company will be able to scale Deals to retailers large and small relatively easily, a move that took Foursquare months. So very soon, it seems, even local businesses will be able to offer discounts and promotions through the site. 

But, you say, no one will use Facebook Places. Real people don't like to check in to location-based services. There's truth to this, at least on other platforms; a Forrester study suggested only 1 percent of the 4 percent of U.S. adults online update on location-based services more than once a week. 

More than anything right now, Facebook is hoping the traction of its network - the social behaviours that it has used to spice up its ad offering and keep users clicking on content - will propel Places. And two important developments in the last week have made checking in on Facebook Places much larger. 

First, during the US midterm election on November second, Facebook placed a large block at the top of everyone's News feed, asking if they'd voted. From there, you could find your polling place, click 'I voted' and get a special badge broadcast to your network. A simple integration that drew attention to a crude bit of geolocation using the service. Over 11.6 million members claimed to have voted, according to Techcrunch. Meanwhile, on Foursquare if you checked into your local polling place, you could receive a similar badge. Just below 50,000 people participated on Foursquare. 

The second and stronger example is the release of a Places-ready app for Android, which also happened this week. Previously Android users didn't have the Places option on their mobiles. (The app update hasn't been pushed yet, but it's in the Android Market and presumably will be automatic soon.) Android users are now the largest share in the U.S. smart phone market, with 44 percent of the Q3 smart phone purchases, or 9.1 million handsets. And those users haven't even been able to have a go at Places from their mobile yet.

The conjecture bit: what could be next?

The next big logical step in this process is to integrate Facebook Credits into Places and Deals. From there the real fun starts. Credits are already being sold in Target stores the same way gift cards are sold, and they're planned to roll out to Wal-Mart and Best Buy before the holiday season. About 200 applications on Facebook accept the currency, which Facebook currently demands high processing fees to accept. 

And the concept of a check-in is already being monetised, the same way a Like drive discounts, as is the case with Skodawhich has valued it at 2 Euro in a Prisoner's Dilemma-style web promotion. Gap has set it, at the high end, as equivalent to the price of a pair of jeans. 

Once the systems are integrated consider these scenarios: The first 500 people to check in to Gap get a $50 gift certificate for 350 Facebook Credits‬ (they're worth about a dime apiece at this point). This sort of deal is essentially what Groupon offers. 

The social psychology aspect is built into Facebook's network effect; I see you've bought a Deal, and there are only 459 left. Whoops, the page refreshed, make that 435. Better act fast.

Even further down the line, tangible physical goods will likely be exchanged in a similar manner. Many people already order goods online and pick them up in the store. So, let's say Best Buy, to choose a pilot retailer where Credits can be purchased ‪in a physical locale and a likely early partner based on previous commitments. 

Like many 30ish American male videogame veterans, my friends and I are all interested in purchasing the new GoldenEye game for Wii. Best Buy is interested, above all else, in being the place where everyone goes to buy GoldenEye when it comes out. Best Buy, then, is motivated to float a Facebook Deal for the first 10,000 people to buy the game through Facebook, so they can receive it at a cut rate. You'd just pick it up in the store, logging in, for example, through your Single Sign-On to Best Buy's in-store Deals desk. 

Now imagine the deal coming from a Wal-Mart in Ohio that's got a bit of extra milk on its hands; you have to remember the milk that day, and when you log in to Facebook before you leave work you see it's available through a Deal special to people within a 5 mile radius, at a price of 25 credits (that'd be $2.50). Pick up the deal, drive home, hit the store, pay at the self-checkout with a confirmation UPC once the Deal's gone through, which would be nearly instantly. 

Chances are that Facebook, burned several times in the past (rightfully) over privacy issues, will move cautiously in these final directions. Refining privacy settings and making them as well-designed, from a user interaction perspective, as possible is a key precursor to any deeper engagement.

Facebook has been laggard in simplifying user controls for privacy, but it's necessary it makes opting in and out of myriad facets of the brand slick and simple. And it'll also have to lower administrative charges, now near 30 percent, on the Credits product. 

But the pieces of the puzzle are in place, and it would seem only integration and tidying remains to come. In many ways, an everywhere, adaptable, secure payment system on the web is Alice's white rabbit, something that's been sought after since near the very start. 

But it's beginning to look like if anyone can motivate new behaviors and new levels of trust in systems like Credits, it's the guys who're already holding the virtual social structure of 500 million of us.

Facebook Gap Giveaway
Facebook Credits
Facebook Election Data
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