Blippy, the social purchase sharing service where consumers can automatically share their credit card purchases, has failed, after $13 million in funding and more-than-enviable enviable media coverage. Many theories have sprouted out in an attempt to explain why it failed, from the fact that it did not solve a problem to baked-in privacy issues. It is always easy to judge and rationalize why a company failed after it has failed; our take is that Blippy deviated too much from prevailing user model.

Blippy probably did not fail because it did not solve a problem. Many companies do not solve a “problem” but are considerably successful: HotOrNot.com, FMyLife.com, and countless game and porn companies. Too many analysts tend to strain the definition of a “problem” and try to fit successful companies into the problem-solution model (e.g. “Game companies solve the problem of consumers lacking a channel for escapism”). Blippy also probably did not fail because it tried to solve a real problem incompetently. They had a great team.

We believe that some ideas do not need a problem to solve. They just need to not deviate too much from prevailing user model. It is arguable that one of the reasons that Facebook succeeded is that it resembled preceding social networking websites quite a lot, just with a cleaner user interface and more AJAX; people were familiar with how social networking websites worked and caught on quickly. Twitter was way too different from what was already out there in 2006/2007, which might explain why it still has not truly gone mainstream. Google is just a better search engine. YouTube is just a better video-sharing website. Groupon is just a better group-buying coupon website., etc.

The problem is that Blippy was just too sexy. It got media attention not because of revenue, profit, or traction success, but because of how radical the idea was. To be radical means to be different – and not just incrementally so – from what is already out there. Blippy wanted users to share how much they spend and where to everyone by surrendering sensitive credit card information in exchange for nothing valuable in particular. However, nobody shared their credit card information for nothing good in return, online or offline; practically nobody shared all of their purchases to random people either, online or offline. Blippy required consumers to dramatically alter their habits and go against their usual instincts and, worst of all, there was no value proposition to support this switch in behavior.

Blippy was too abnormal. Normal sells. Sexy gets media attention, but little else. A similar trend can be observed in the entertainment industry, particularly in talent shows like Britain’s Got Talent. The mainstream media features those who are not necessarily the best talents; social media natives similarly tend to want to share the outlandish, overly-eccentric acts instead of the established types of acts that are nonetheless good. Yet the winning acts (and, more relevantly, those who go on to succeed in the industry) are almost always the same old boring singers, dancers, actors, comedians, circus performers, etc. Different does not seem to go very far even though people want to talk about them.

Perhaps the lesson for all of us is not to be fundamentally different but to differentiate by simply being better – faster, easier to use, more useful – within existing frameworks that are already successful.

Direct marketing remains a popular channel for many businesses to reach potential customers. Traditionally, direct marketing on its own is used to increase awareness, arouse interest, and drive action. For those who are familiar with the AIDA framework, direct marketing is used to achieve all of the four stages of AIDA: Action, Interest, Desire, and Action. Despite claims that direct marketing is still as effective as before (e.g. here), what we are seeing is that, particularly for high-ticket purchases, direct marketing is increasingly losing its ability to drive action or arouse an interest to buy. These days, the value of direct marketing largely lies in its ability to build awareness.

The reality today is that the emergence of social media and search engines has allowed consumers easy and free access to a wealth of information about brands and products in the market. Consumers almost always want to make an informed purchase decision, and information from unbiased third parties now form an indispensable component in consumer research. In fact, information from other consumers who have had experiences with the product, brand, or company in question is considered more trustworthy and useful than information from the company itself. The only valuable information that can be obtained from the company itself is objective information, which the company is in a position to provide. Marketing is about facts and not opinions after all.

Direct marketing is nonetheless still useful in increasing awareness, because awareness is neutral. People either have or have not heard of your products, services, brand, or company. Consumers are unlikely to shut out new or unfamiliar offerings from their windows of consideration, since consumers love having a choice as well. However, generating awareness is only a small part of effective marketing. Awareness about a brand is ultimately knowledge of the existence of a certain offering. The merits of said offering have to be evaluated and verified with reference to the reviews, opinions, and experiences of others who have personally tried the offering.

A potentially effective strategy to reach new customers is to use direct marketing in concert with word-of-mouth marketing. Direct marketing captures attention; word-of-mouth marketing converts that attention into desire and action to buy. Ultimately, real sales are driven by what others say about you, not what you say about yourself.

In the past, we have used the Facebook Like button as a baked-in promotional mechanism to drive referral marketing of deals, and that formed the core functionality of our product (see screenshot below for an idea of how we did it with our SaaS group buying solution for online retailers). After nearly 6 months of collecting data and experimenting with the Facebook Open Graph API and plug-ins, we have decided once again to use Facebook like how every other business uses it – as an independent, bolt-on, add-on sharing mechanism, and nothing more. We will no longer be giving Facebook VIP status in our product.

Here are some problems with Facebook:

1. The Facebook API changes too often. The plug-ins are buggy, the API changes without notice rather often, and there are too many rules constraining how developers can use the API in building applications. As a platform, it is unstable, period. It may be a good idea to use Facebook as a platform for consumer applications, but it might have been a mistake for us to use Facebook as a platform for an ecommerce application.

2. Facebook is overhyped. Personally, even though Facebook actually has 600 million active users, developers still tend to overestimate how many people actually 1) have a Facebook account, 2) use it regularly, and 3) are comfortable using it as a third-party authentication method. Many consumers across different niche markets are simply not familiar with how Facebook works; developing Facebook-only applications marginalizes this segment of users, who may be substantial in number.

3. Facebook is still mainly social for most, and exclusively social for some. We are still not completely convinced that Facebook can be an effective platform for ecommerce or any commercial activity, i.e. does anyone even care about commercial offerings on Facebook? Low sales on so-called f-commerce platforms seem to support our view. Some businesses may be too quick to assume that, just because Facebook works for games, it will work for ecommerce. Of all the new variants of ecommerce, the one that might actually take off is, in our view, mobile commerce.

So which direction are we now taking with our product, Zuupy CrowdDeals? We are now focused on point-of-sale transactions, working more like a sales tool that facilitates group buying transactions and processes, leaving the marketing of deals largely to our customers (online retailers themselves). We hope that this small product pivot would serve as a better fit to what the market wants. After all, Likes are ultimately useless. Sales are what matters, and that is what we aim to bring to our customers from here on.

A recent Harvard Business School study has found that, if your customers are heavy social media users, they are more likely to refrain from making purchases as a result of encountering commercial offerings on social media, particularly those from friends. The results are succinctly summarized in this article.

The interesting question is obviously why. According to the study report, heavy social media users are “well connected, high status members” who are less likely to be positively influenced by the purchase behaviour of people in their network. Instead, they are likely to be influencers themselves and essentially see no reason in following their followers. In fact, they would probably actively go against what their so-called followers advocate, as it is unbecoming that a leader would want to look to her followers for direction, even when it concerns something trivial like online shopping. Pride seems to be the underlying reason.

The study did not authoritatively pinpoint the reason for the negative effect of social media on the purchase behaviour of heavy social media users but merely made speculations as to the explanation behind the results. What is relevant, however, is that more impressions and more buzz do not necessarily lead to an increase in positive engagement. There is also the possibility that heavy social media users are just not active purchasers in general, i.e. the negative engagement observed is not caused by their being heavy social media users. The results can truly be interpreted in many ways.

Does this mean that, if your customer base comprises heavy social media users, social commerce may be a futile investment? It is perhaps so, but if your customer base consists primarily of influencers by definition, there may be an opportunity to use them as a conduit to reach a wider audience, driving an increase in awareness and reach. So while their own purchase tendencies may be suppressed, their ability to affect the purchase tendencies of others may not be diluted.

After all, you do not have to purchase an offering yourself to (want to) promote it to your friends. What is your take?

In the past, we have chastised the idea of selling on Facebook (f-commerce): here and here. Recently, there have been several reports that social commerce may just be a bunch of hype, and, more relevantly, there are now compelling sales data pointing towards the infeasibility of Facebook as a platform for commerce. Forrester Research, Inc. released its latest report on the so-called f-commerce phenomenon, which has been neatly summarized in this SocialCommerceToday.com article.

Simply put, the results are pathetic; nobody has made any major money on Facebook to make it a worthwhile customer acquisition channel to consider. Worst of all, online retailers infected with the herd mentality still often charge ahead with plastering their website with Facebook Like buttons, buying fans (seriously?), installing f-commerce software on their Facebook Pages, etc. without a clear idea on how to turn a profit on those efforts. We have always wondered if Facebook’s explosive growth and hype have actually clouded the judgment of brands and retailers into believing that Facebook is the elixir to all marketing and branding woes.

No, Facebook is not the panacea for all ills. Use it for customer service, user feedback, or even for short-term deals and promotions if you want, but do the actual commercial transaction elsewhere – somewhere more stable and less vulnerable to API/policy changes. Any Facebook developer can testify that developing Facebook applications can be a nightmare sometimes; we never know what will change tomorrow. Platform issues aside, we really should also consider what or who we are competing against when we decide to peddle our goods on Facebook. No, your competitors are not other brands within your niche; think again.

Consider this quote by Paul Marsden:

“Facebook is a people-centric forum, and whilst huge – a forum it is. And the forum has been around since the 1970’s – do you know any businesses that made money from connecting forums with retail?”

Try competing with a consumer’s closest friends and family members. We would be very surprised if a large number of consumers would prefer to pull out their credit cards and make a purchase on a cramped “Facebook store” than to comment on their friends’ new haircut or post witty status updates to garner Likes and congratulatory comments. The blue bar on top of Facebook.com is an f-commerce retailer’s biggest enemy, just as the back button in a browser is a website owner’s biggest enemy. Once a red notification number appears, it is game over (or cart abandonment, whatever you prefer to call it).

Ecommerce and online retail are very, very competitive – some even say saturated. New entrants into the market would quickly realize that, while barriers-to-entry are low, barriers-to-scale and barriers-to-growth can feel insurmountable sometimes. The main problem is usually the lack of brand awareness and visibility: how can retailers get the attention of consumers when they can compete with the big guys on neither price nor strength of brand?

We have always believed that the best way to learn how to market a new business is to ask ourselves, “Of all the new businesses that I have heard of recently, how did I hear of them?” For us at Zuupy, the answer is not Google AdWords. We all know how financially suicidal it can become for new entrants to “invest” in the complex search marketing channel without proper knowledge and experience on how to optimize campaigns. The answer is usually something more organic, more grassroots-driven, as this is one of only few practical marketing tactics that a young business with limited resources can utilize.

From our experience, here are some tactics that we have seen worked:

1. Run fun contests/sweepstakes (e.g. EyeBuyDirect.com, BridesVillage.com)
Contests can be very engaging and relevant to a consumer who may not be ready to buy from a particular retailer. Young businesses know that any contact with potential customers is an opportunity to engage and build trust with them. Plus, contests – in which consumers stand to benefit for free – are more shareworthy than products and online stores. Contests are less likely to be perceived as spam on Facebook, Twitter, and even in emails, because of the potential upside of freebies and, failing that, excitement.

2. Do charity, not guilt marketing (e.g. UK2.net, CauseOn.com)
Putting aside possible ethical issues, running promotions in the name of charity – done tastefully – would usually give a reputational boost to a new business. An actionable plan is to have a “Groupon for charity” where your business only donates whatever pledged revenue or profit if a specific number of people have committed to participating in a promotion (a la CauseOn.com) or, for less friction, if a specific number of people have shared the promotion on Facebook, say, by clicking a Like button (minor plug: see how we are solving this problem for SMB online retailers). People are more predisposed to helping out in their favorite causes than supporting commercial entities in general. Also, explore cause marketing.

3. Create unique, value-added content (e.g. OKCupid.com, GetElastic.com)
Undoubtedly, many new businesses are already churning out content at an alarming rate and then promoting said content on Twitter and Facebook, so how does one stand out in a sea of noise? The key is to produce content that is different, preferably with value-added insight. When people consume content, they want to learn something. If we expect them to read our content instead of our competitors’, we have to give them insights that only we can provide (or provide better) than our competitors. Original data is one ingredient in creating unique content; another is a well-substantiated contrarian point of view. The risk, however, is that we might become a content hub known and trusted only for the quality of our content (and not the quality of our brand, products, customer service, etc.), thus the key lies in relating said content to our commercial offering without overtly selling.

4. Build a native community, not Facebook Likes (e.g. Bodybuilding.com, CozyCot.com,)
Garnering advocates and enthusiasts who are passionate about your niche and encouraging them to foster a community is hard. While the road may be hard and long, the potential upside is enormous. People are drawn more towards communities, because it can be very rewarding to interact with like-minded people. Bodybuilding.com is very successful with this strategy. What about Facebook Pages? Do they amount to communities? The problem with Facebook Pages is a lack of control. Consumers are quick to click on their notification boxes and may not be necessarily keen to engage with strangers in a realm filled with real-life friends.

The fact is that consumers are not prejudiced against new businesses; they just need a unique reason to pay attention to said businesses. For new businesses, getting a sale should not be the main goal of their marketing strategy in the earliest stages. The main goal should be engagement, i.e. getting people to care about their businesses first. Big brands have an easier time engaging their potential customers because of compelling social proof and their ability to create buzz via wasteful ubiquity. For the rest of us, we have to rely on other more subtle means with potential for word-of-mouth marketing to engage and connect to our potential customers.

Trust is often perceived as the primary driving force of social commerce. Consumers make shopping recommendations on Twitter or solicit shopping advice on Facebook, because they want to share or get information from people with whom they have a personal relationship. Therefore, social media platforms are seen as trust-based marketing channels, where brands and merchants can leverage on the personal network and goodwill of their customers to drive further sales. Brands and merchants thus increasingly move away from traditional advertising (which, experts say, consumers no longer trust) and invest more in social media marketing.

This strategy is fair, but some sellers go one step further and measure the relative “trustworthiness” of different social media platforms in order to make strategic decisions. A recent study revealed that consumers trust shopping advice and recommendations from Facebook more than from Twitter or Groupon (source). Prima facie, it seems to imply that the Facebook environment inherently inspires or creates more trust than Twitter and Groupon, since we at least know that there is a correlation between Facebook and trust.

The truth is that there is nothing magical about Facebook and its features, interface, etc. that results in more trust; it is the people that we trust or not, not the platform. Facebook just happens to house our real-life friends and family, while we generally follow people more liberally on Twitter. The difference is subtle yet important, because, if it is the people who are the true source of trust, we should discover how people primarily connect to their friends and family online and then invest in those channels.

There are two main benefits of following this route. First, by working with first principles, we discover and can tap on other less-hyped, under-utilized channels that we would have otherwise unwittingly overlooked. For instance, Dropbox’s referral system leverages on its users’ email networks, an increasingly-forgotten marketing channel. Second, measuring trust based on what consumers claim or say is dubious in itself; there is no measurable or verifiable action (e.g. a purchase after seeing a product recommendation) that accompanies said claim, making said claim less credible. It is, however, less dubious that people generally trust people whom they know personally more than people whom they do not know. More than one thing can cause Facebook to look or feel more trustworthy, such as its support for multimedia or even clean interface, and those things do not even necessarily result in more sales, which is what really matters.

The point is that trust cannot and should be measured not only by what people say but also by what they do. Actions speak louder than words, and, in online marketing, action is king.

Social media marketers in general are fond of garnering more Likes for their Facebook Pages or web pages, in hopes of either providing social proof through sheer number of fans or amassing subscribers to be fed announcements, promotions, offers, and contests. Clearly, there is some evidence bolstering the effectiveness of these tactics (see SocialCommerceToday.com’s latest article on social commerce statistics), but, as with any prudent use of social media marketing tools and technologies, what really matters is not adoption or user behavior but ROI. The key question is still, “How many dollars am I getting back for every dollar I sink into this channel?”

There are many use cases for the Facebook Like button (to create a viral group deal solution, for instance), but consider the following points before adopting a “the more, the merrier” strategy with Facebook:

1. The number of subscribers alone is not ROI. It is helpful to view Facebook Pages as websites. Facebook Likes are somewhat analogous to traffic, and engagement (i.e. the act of actually following your updates) is somewhat analogous to conversion. Focusing on improving the Like count without ensuring that there is a valuable offering or content to drive engagement and action is, needless to say, a wasteful strategy. Of course, as Sean Ellis said, we should focus only on channel building or channel optimization at a time and never do both concurrently. The point, however, is that engagement is a crucial marketing component that is often overlooked.

2. The “social” context of Facebook is not conducive for commercial offerings. Our view has always been that “commercial social” is unlikely to work on a big scale, because it does not add value to the core purpose of Facebook: to stay connected with the people whom we love and care. This is a major pitfall of commercializing social media: unlike search engines, showing ads and offers is not contextually relevant and interferes with the socializing process. Search engines, on the other hand, are used to answer questions, and, often enough, ads are the answers to said questions. Social recommendations are only likely to work if it has some contextual relevance factor working in its favor.

3. Users click the Facebook Like button for different reasons. It has been reported that 40% of consumers Liked a company, brand, or association on Facebook to receive discounts and promotions (ExactTarget, September 2010) [1], while nearly 40% of consumers Liked companies on Facebook to publicly display their brand affiliation to friends. (ExactTarget, October 2010) [2]. Depending on how you interpret the statistics, they can mean different things. One possible interpretation: the majority of consumers who Liked a brand did not care about discounts and promotions (from [1]), while nearly 40% of consumers Liked a company merely for a social reason – to garner peer approval (from [2]). Any prudent marketer knows that assuming worst-case scenario is a standard procedure in the decision-making process.

4. Facebook is biased towards its own users. It is baffling that many agencies, companies, and brands are ready to expend top dollars on even buying Facebook Likes. Clearly, this method is the ultimate shortcut to Facebook list-building, but consider that Facebook makes it very convenient for users to unlike a Facebook Page or a web page (look at the tiny X on the top-right corner of each post). Unlike Friendster, Facebook knows that spam kills and kills quickly.

5. Facebook Likes are only useful if they are not used solely as social currency. The concept of social currency states that brands and companies will offer something valuable in exchange for sharing said offer or company via social media by users. We have previously explored the use of Facebook Likes as social currency (here and here) and opined that anything achieved through compulsion is unlikely to produce returns. Also, unlike cash, Facebook Likes and Tweets are also very easy to take back. The problem is that the social currency model is becoming increasingly common (e.g. “Like this Page first for...”) and is sometimes even the core fan acquisition strategy.

In the final analysis, the real value of Facebook lies in its user base and mass distribution model for content. However, a user base is just that: a market, which may or may not be easy to penetrate or engage. Although trite, the key to effective Facebook marketing is to attach an actionable metric to every tactic that measures ROI directly. Perhaps even buying fans is a highly-viable fan acquisition strategy; all we have to do is to look at the numbers and then decide.

A recent article by Techcrunch revealed that Facebook Shares are worth nearly three times as much as Tweets when it comes to social commerce. After using both Facebook and Twitter for more than a year, we at Zuupy do not find the statistics surprising, considering that Facebook has the significant advantage of leveraging on our real-life social graph to empower our purchases while Twitter merely relies on our interest graph. Alas, for Twitter, we are still more likely to trust a friend than an industrial expert or celebrity.

One implication of these findings is that Tweets will be perceived as less valuable as social currency. The reason is pretty obvious: the Twitter experience is horrid. First, for professional networking, Twitter generally comprises a body of self-serving broadcasters who are constantly pushing out content of their own and increase their follower count without any intention whatsoever to engage with their followers. Second, the text-only, 140-character nature of Twitter lost its novelty after a while, and, despite recent attempts to support multimedia from Twitter.com itself, it is still a slow and cumbersome process to consume content on Twitter. Even the infamous one-liner updates achieved via Facebook Likes monetize better than Tweets.

The lesson for us is clear: focus on Facebook first, and then explore Twitter. Google recently announced its social search feature, which, although more focused on Twitter than Facebook (Facebook profiles are not crawlable after all), underscores the importance of the social graph in empowering search results. In general, especially with consumers, “Facebook is the people you went to high school with. Twitter is the people you wish you went to high school with.”

Also, with recent studies showing that Facebook social commerce is really about deals and not engagement, the lesson for us is perhaps to focus on Facebook and deals simultaneously. Indeed, the launch of our latest competitor, CrowdBunny, provides testament to the opportunities available in the area of Facebook group buying. We have launched a couple of months before them, and we are just excited to see some validation in terms of competitors entering the space. We see social commerce as focusing on Facebook and group deals in the near future, as evidenced by our Facebook group buying solution. What do you think social commerce will look like in the near future?

The definition of social commerce that we are most familiar with here at Zuupy is that of consumers helping one another to make better buying decisions. Although the most common way of introducing social into commerce is using love-based product recommendations (e.g. Blippy, ShopSocial.ly, Facebook’s new ad system), another potentially-valuable strategy is to facilitate hate-based social commerce. Of course, promoting negativity seems antithetical to good business sense, but it is arguable that some, possibly many, consumers see their friends as not a go-to source for product recommendations, but a checkpoint for “buyer beware” information.

Promoting hate is certainly damaging to business reputation, but consider Boutiques.com, one of Google’s first forays into social commerce, where consumers are allowed to literally hate a product. While Facebook’s content curation strategy is solely based upon Likes or endorsements, Google’s social commerce content curation strategy seems to be based on both Likes and Hates. Hatred per se is unconstructive, but substantiated negative comments about a product can be very valuable information to consumers that most platforms or merchants neglect to provide.

In our opinion, the new form of community voting (for lack of a better term) based solely on saccharine-sweet Facebook Likes and other approval signals is less useful than the older system based on ratings and reviews. Just for interest, Amazon has been slow to experiment with Facebook-like community features (e.g. Likes, stories, feeds) and continues to rely on its consumer reviews feature to provide purchase planning information to its customers. We have also previously argued that Facebook Likes alone are useless for any real product research.

Let us promote some hate and see what happens. Has anyone ever run an A/B test that pits an all-rosy product page against an objective product page?