Tag: Facebook

Trading Compliments, not Insults

Over the last three and a half weeks, a Facebook page called Penn Compliments has inspired University of Pennsylvania students to post more than 500 compliments about their fellow students, according to a recent article in the Daily Pennsylvanian student newspaper.

The creator of Penn Compliments prefers to remain anonymous — as are those who post compliments on the site — but told the DP that he had seen a similar compliments page at Columbia University in November and decided to start one at Penn. Since September, when the first such page appeared at Queen’s University in Kingston, Ontario, more than 50 schools around the world have adapted the idea to their own campuses, according to the DP.

The goal of Penn Compliments is to “learn to do good and spread good,” the Penn Compliments founder told the student newspaper. Penn “can be a pretty high-stress, competitive environment, at times even negative.”

Can such a high-minded initiative last at a time where one is more likely to see Facebook posts with snarky insults and innuendos rather than uplifting, affirmative praise?

“This can definitely work,” states Maurice Schweitzer, Wharton professor of operations and information management and an expert on trust and emotions in business. “There are real benefits from positive thinking, and self-confidence can be boosted in many ways. This site is unlikely to be popular with everyone, but there are some people who will gain a positive boost episodically and others who may become ‘regulars.’”

The premise behind Tesser’s Self Evaluation Maintenance model — which assumes that people behave in a way that maintains or increases self-evaluation and that people’s relationships with others have a substantial impact on self-evaluation — is that people seek to maintain a positive self-image, Schweitzer says. “The self-image is easily threatened — by, for example, negative feedback on a project — but can be maintained by seeking positive feedback in a different domain.”

 Schweitzer predicts that the Penn Compliments site will have staying power. “I believe there are some people who will derive significant benefits from this. For these people, a positive boost at the right time could make the difference between success and failure. For example, it could be that someone teetering on the edge between staying in a program or dropping out could be tipped to stay because of this.”

Wharton marketing professor Jonah Berger — who studies social contagion, social influence and viral marketing, among other topics — applauds the site for its positive nature. “It’s contagious because it’s self-propagating,” he told the DP. “Getting a compliment informs people about the site and encourages them to pass it on and compliment others.”

A Time.com article two weeks ago featured the four original founders of the compliment site at Queen’s University, who say that their Facebook account now has more than 4,000 friends and 1,300 compliments. Posts on the site have called the student founders “the human equivalent of a ray of sunshine” and “the inspiration for Aretha Franklin’s ‘Respect.’” The founders themselves, according to Time.com, say they want to contribute to anti-bullying crusades and increased awareness of mental health issues, especially following several student deaths — both suicides and accidents — in 2010 and 2011.

Of course, even something as benign as complimenting others comes with a few rough edges and quirks. The Penn site’s founder has commented on his need to delete foul language and inappropriate political comments from some of the compliments. But he didn’t delete one especially popular compliment directed toward a long-standing syndicate firmly embedded in the Penn community — squirrels.

The compliment reads: “UPenn squirrels, don’t ever change. You guys are so fat and furry, always with an oversized piece of food/garbage in your cheeky little cheeks…. I love all you guys.”

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The Pope on Twitter: 140-character Sermons?

As probably the whole word knows by now, Pope Benedict XVI plans next week to start tweeting in eight languages. His Twitter handle is @Pontifex, and he has already generated several hundred thousand followers even before his first official tweet, scheduled for December 12.

The pope’s decision to open a Twitter account raises a number of questions, including: Is this a good marketing strategy? Will it help the Catholic Church reach out to younger generations, and will those younger generations tweet back? What kinds of messages should the pope tweet? Finally, does the pope seem a little late to the game, since, as FastCompany.com noted today, he joins “an impressive, highly retweeted group of religious leaders,” including such names as the Dalai Lama, Joel Osteen, Rick Warren, the Rev. Jesse Jackson, Sr. and Rabbi Shmuley Boteach.

Wharton marketing professor Jonah Berger suggests that the pope’s new communication strategy is a good marketing decision for the Vatican. “As technology advances, religion often gets less attention. This raises the church’s profile and reminds people it is relevant to [our] day and age.” As to whether this strategy will help the church reach the coveted younger generation, Berger predicts that most of this age group won’t respond, “but some will. Churches have a target market just like Pepsi does. And this is another channel to reach that market.”

What kinds of messages should the pope tweet — and what kinds should he avoid? Berger’s advice: “Be authentic. A formal ministry in Japan started tweeting using slang, but people found it incongruous. No one wants to hear the pope talking about YOLO [you only live once] or using phrases like OMG. Tweeting useful information about faith or inspiring stories will spread their ideas while staying true to the [church’s] core message.”

Wharton marketing professor Peter Fader says the pope’s foray into Twitter “seems entirely sensible and natural to me. Twitter is nothing more than a personalized broadcasting channel. No one would think twice if the pope had his own radio station or cable channel. Perhaps he already does.” It makes sense for him, “and any other highly visible person/organization, to have a way to share information, perspectives and other relevant content with followers.”

In that respect, Fader sees Twitter as “very different from Facebook. I actively use the former, multiple times a day, but very rarely use the latter. I find it very valuable to be able to offer one-way broadcasting about my work, and find it equally valuable to read the broadcasts from other people/organizations that interest me. I’m not interested in having conversations.”

Fader laments what he describes as Twitter’s “cutesy name. If it were just called ‘micro-blogging,’ no one would think twice or raise eyebrows that the pope is doing it.”

According to an article in The Wall Street Journal, the Vatican already uses other social media tools such as Facebook and YouTube. In addition, the pope’s “first tweets will be in response to questions put to [him] via Twitter about faith; the pope isn’t likely answer queries unrelated to religion.” The Vatican’s media advisor adds that the pope “won’t physically write each tweet, [but] will be personally involved in what it says,” the Journal reports.

Given that other religious leaders are already tweeting, does Pope Benedict XVI seem a little late to the game? “So maybe he’s a little late, but better late than never.” Fader says. “And as long as [Twitter] is used in an appropriate manner – and I’m sure that will be the case – then I don’t see any downsides to it at all.”

Adds Berger: “No one is counting. Or expecting the pope to be on technology’s bleeding edge.”

 

 

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Facebook Passwords, Privacy and the Lack of Legal Protection

Reports that some employers are requiring job candidates to hand over their Facebook log on information have caused an outcry over perceived violations of personal privacy — and even calls for a federal investigation by some members of Congress.

But U.S. job seekers and the currently employed as well  should exercise caution, according to Wharton legal studies and business ethics professor Janice Bellace. She says in the U.S., anyone trying to challenge such a practice in court would have almost no legal ground to stand on. “People think they have more rights than they actually have; they seem to think they have rights that are just not there,” she says.

For example, she notes that employment law for decades has said that non-unionized workers could always be fired for taking actions that publicly disparage their employers. But 30 years ago, doing so was relatively complicated, and catching workers in the act was just as difficult. “When I was in law school, we used to read about cases where it did happen because it was so unusual,” Bellace recalls. “If you were talking to your friends about how much you hated your boss, you probably did it face-to-face. Although technically, under the law you might have gotten in trouble, nobody ever knew about it.”

But social media has been a game changer. “Technology has made it so much simpler for employees to get into trouble,” Bellace says. Years ago, an employee might have written a letter to a newspaper tearing apart an employer, “but it took time to sit down and type it out. Now you can Tweet it so simply. People say things before their mind stops them and says, ‘What am I doing?’”

The law is equally devoid of traction for potential employees who might be asked to provide access to their Facebook accounts, Bellace notes. “It has always been the case that employers could ask others about you for a reference and, if you refuse to give them names, they can refuse to hire you,” she says. “I’m not saying it’s right or wrong, but it’s the state of the law.”

So why are the current incidents causing such an uproar? “Employees think that their private life is protected by some right of privacy and that either a current or potential employer shouldn’t be able to invade their private lives.” But, legally, in the U.S. there is little guarantee of that, Bellace says.

“Parts of the Bill of Rights refer to the right of the citizen or person against the state,” she notes. “No state can come into your house and ask to read your diary or computer files without a search warrant. It doesn’t say anything about an employer.” Last week, Maryland legislators passed what is believed to be a first of its kind bill that prohibits employers from requiring job applicants to hand over access to private social media accounts. States including California, Michigan, Minnesota and Illinois are considering similar legislation. Bellace says that she knows of no previous state law that explicitly offers this right of privacy, nor any case law that would support an argument in court, “although we may begin to see that.”

She points out that circumstances are very different in other countries where statutes exist that recognize an individual’s right to privacy. In Germany, for example, laws date back to the post World War II era when officials there sought to ensure that people could not be fired from their jobs for aspects of their personal lives, as they had been under the Nazi regime. A few years ago, Bellace attended a conference in Australia and recalls that the organization later couldn’t get a list of attendees from the Australian firm it hired to plan the convention because the law in that country prohibits the sharing of data without permission from the individual.

“Some of these countries developed laws before social media took off,” she notes. “That adds an interesting wrinkle in those countries because they are building on a foundation of law that says you own your information.”

Bellace says even people in the U.S. who try to sue an employer – one who has asked for access to social media accounts — on the grounds of discriminatory hiring practices (because the accounts may contain information such as an applicant’s age or race) may have trouble making a case. The employer could argue that it is asking all job candidates to provide the access and thus applying the policy broadly, Bellace points out, and if that is the case, the job seeker would have to prove that the company violated the law after checking out the entire applicant pool, which could be harder to prove.

“How do you know why others didn’t get hired? How do you know why you didn’t get hired?” Bellace asks. “That’s why employment lawsuits are so hard to bring.”

She predicts that there will eventually be further changes in the law “because younger people used to interacting with others online through social media will be more disturbed by what they view as an unreasonable intrusion into their private lives and therefore may propose legislation.” But Bellace adds that it will be some time “before people completely coalesce around this notion that you have a right to a private life and privacy in online communications.”

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Facebook Deals in the Virtual, but Its Expansion Has Real Impacts

Attracted by the promise of jobs and tax revenue, most towns would offer significant economic incentives to attract a large corporate headquarters. But being the home base of a corporate giant like Facebook has its challenges, too. At least that’s the position leadership in the city of Menlo Park, Calif., are taking in asking the social media behemoth to consider compensating the city for some of the increased pressure the company’s expansion creates on civic services and the potential impacts it has on sales and property taxes. But Wharton real estate and finance professor Susan M. Wachter says the story is an example of the need to rethink city tax structures in an increasingly knowledge-based economy.

Three months ago, the rapidly expanding Facebook moved its headquarters from the Stanford Research Park in Palo Alto, Calif., to two sites in neighboring Menlo Park that formerly housed Sun Microsystems and Tyco Electronics. The social media company now wants to expand by building more office space at the former Sun campus, asking the city to nearly double the permitted employee count there from 3,600 to 6,600. A city study found that Facebook’s move will bring many benefits to the municipality, including $8 billion in construction spending and related jobs, new property taxes of $182,000 and sales taxes of up to $55,000 annually, according to the San Jose Mercury News.

But the expansion also creates potential stumbling blocks for the city. For one, Facebook’s online ad sales don’t bring in revenue from sales taxes. By contrast, the computers, components and other products produced by Sun Microsystems led to Menlo Park reaping sales taxes of up to $827,000 annually, or 15 times what it could get from Facebook, the Mercury News reported. The relatively high salaries paid to Facebook employees could increase the price of property in Menlo Park, but a California law called Proposition 13 will cap the property tax revenue the city could earn. Another worry expressed at recent city council meetings was that Facebook’s expansion will increase the pressure on civic services.

The story begs the question: Do cities need to revisit their incentives and job-creation programs in an increasingly knowledge-based economy? “There may indeed need to be a rethink of the reliance on sales taxes for goods as we move to more of a virtual world, where services are exchanged and knowledge is created,” Wachter notes. “The problem here is the reliance not on property taxes but on sales taxes.”

Facebook leadership has said the firm is willing to consider investing in some of the mitigating features city officials propose. Among them are payments to compensate for its relatively lower sales tax contributions, investments in affordable housing, and local bike trails and shuttle services to help alleviate traffic concerns. “Beyond that, it’s worth noting that Facebook didn’t go skulking around Silicon Valley demanding tax breaks or incentives,” San Jose Mercury News columnist Chris O’Brien wrote.

Wachter points out that it is not unusual for municipalities to negotiate with companies over the services and costs that will shouldered by the community and the revenue that will be brought in by the firm. Facebook’s proposed expansion could potentially benefit both Menlo Park residents and the company. “But there are costs that will be borne by Menlo Park and benefits that will accrue to Facebook,” she notes. “Thus, negotiations are in order.” An environmental impact assessment report due in late April is expected to help decide the course for Facebook’s expansion plans.

The debate over Facebook’s headquarters expansion underlines some ground realities as the virtual world advances, according to Wachter. “In the immaterial world of services that Facebook delivers, in the end, they deliver these services from real space,” she says. “Land and location matter.”

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Making Social Media ‘One Giant Hangout’

On a recent weekend afternoon, dozens of people showed up at the New York offices of Warby Parker, an online eyeglasses retailer. They were there to participate in a “photo walk” organized by the company. Every participant got a pair of novelty glasses to use in photos taken across the city. The company awarded prizes to images that received the most “likes” after being uploaded to Instagram, an online photo editing and sharing application.

“Up to that point, we had 700 photos on Instagram tagged with Warby Parker,” said Tim Riley, the company’s director of online experience. “Then the day of the photo walk, we had about 750 additional pictures tagged with our name. We also had 120 people in our offices and got to talk to all of them. It was a giant friendly hangout.”

As social media becomes an increasingly important part of retailers’ marketing and customer service efforts, it’s not just a matter of having the largest number of fans on Facebook or Twitter. Retailers also have to know how to engage users and how to turn those online conversations into positive offline interactions.

At a panel discussion on social media held this week as part of a conference organized by Wharton’s Baker Retailing Center, Riley and others from the industry discussed efforts to unlock the value in their online followings.

“‘Why don’t you have as many fans as Starbucks?’ is obviously a metric, but it isn’t the most important metric,” noted Chuck Hansen, vice president for media strategy at Macy’s. “We want to look at engagement level: When we create a post and look at similar posts across our competition, are we seeing a higher engagement level? And is it a positive engagement level?”

A key way to grow engagement is to figure out how consumers want to interact with the brand in question. For example, when Macy’s initially started its Facebook page, the company made the decision to focus on fashion rather than promotions. “But when we asked [our followers] what they wanted to talk about, they said promotions,” Hansen said. The retailer is now testing a beta program that allows coupons to be delivered via customers’ Facebook feeds.

Dennis McEniry, president of online efforts at Estee Lauder, noted that cosmetics brands can spend as much as $1 million to produce “how to” videos for different beauty products. But those videos typically get a fraction of the viewership on YouTube that amateur videos — those uploaded by individual consumers — do. “We’ve tried to switch to thinking about how to move the conversation to consumers doing videos, rather than necessarily having all of our brands make videos.”

Customers also want to feel empowered, panelists said and one way to do that is to get their input at the product level. Estee Lauder, for example, has solicited feedback about names for lipstick shades. Meanwhile, Macy’s ran a promotion asking followers to design a balloon for its annual Thanksgiving Day parade, and is running a different campaign allowing people to vote on songs that will be used for the mixtape that accompanies its July 4 fireworks display.

“Done well, social can be predictive,” noted Dan Clifford, vice president of marketing for Victoria’s Secret. “There’s a fine line between letting the customer drive the product too much, but there are definitely moments where we have sought feedback, whether it’s about names or certain functions built into a product. When done well, [the feedback] has matched the real-time testing we’re doing in stores. But it’s also a matter of getting the merchant comfortable [with] hearing from the world at large.”

In some cases, consumers also have to get comfortable with that kind of mass feedback. Warby Parker allows customers to have a selection of frames sent to their homes so they can try them on and pick the one they like best. The company started encouraging people to post pictures of themselves wearing each pair of glasses so staff from the company could weigh in. “The customer becomes empowered, and when someone else posts a picture and asks, ‘Hey, what do you think about these glasses?’, the person we helped before will start answering on our behalf,” Riley said.

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The $100 Billion Facebook Question

Facebook’s long-awaited initial public offering filing has landed, and the company is likely to see the largest market debut ever. And while retail investors are expected to gobble up Facebook shares, experts at Wharton point out that there is no guarantee the social network giant will be a long-term winner on the stock market.

First of all, it’s unclear whether Facebook can grow into its estimated valuation of roughly $75 billion to $100 billion, says Luke Taylor, a Wharton finance professor.

On the surface, Facebook, which will trade under the ticker FB, looks like a juggernaut. The company has 845 million monthly active users, who contribute 250 million photo uploads and 2.7 billion comments a day. The company’s financial picture also looks good. For the year ended December 31, Facebook reported net income of $1 billion on revenues of $3.71 billion. In 2010, the firm saw net income of $606 million on revenues of $1.97 billion.

It’s not certain when Facebook will actually go public, but press reports estimate that late April or May is a likely target. Taylor notes that Facebook’s debut prospects will largely depend on how the Nasdaq trades and other market conditions. (The Nasdaq index is often viewed as a proxy for the tech industry.) How will the company’s shares trade ultimately? Facebook is likely to capture the imagination of retail investors, but so-called “smart investors” may pare back demand. “It’s not automatically true that Facebook will soar,” Taylor points out.

What will Facebook’s long-term profits look like? According to Taylor, companies often show strong profits heading into an IPO, but then they drop afterward. He adds that there is a lot of debate about whether the profit drop is related to less innovation or just the higher expenses that come with being a public company. In its IPO prospectus, Facebook cites Sarbanes-Oxley compliance costs as a potential profit margin hit.

Another pitfall would be what Taylor calls “short-termism.” Managers of newly public companies “often become myopic and focus on short-term numbers. That’s a risk of going public.” In a previous Knowledge@Wharton story about Facebook’s future on the open market, Wharton management professor Lawrence Hrebiniak cited a similar risk. “The challenge for Facebook will be to keep top executives focused on strategy and not regulation.”

In a letter to potential shareholders, CEO Mark Zuckerberg noted that “Facebook was not originally founded to be a company. We’ve always cared primarily about our social mission, the services we’re building and the people who use them. This is a different approach for a public company to take.”

Lastly, the company may feel the effects of management turnover, as some managers cash out and the leadership team looks to hire seasoned executives to help steer the company while it matures. “Facebook’s IPO will be a massive liquidity event for thousands of employees,” Wharton legal studies and business ethics professor Kevin Werbach said in the Knowledge@Wharton article. “Many of them have already monetized at least some of their stock options through private secondary market activity, but the IPO will still be a massive wealth transfer. It’s difficult to retain employees who have already made millions of dollars on their stock options.”

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Facebook Shunners: Is Resistance Futile?

Shortly before Christmas, The New York Times became the latest media outlet to write about “Facebook resisters” — people who have never set up an account with the increasingly ubiquitous social network or those who started a profile, but later shut it down after they grew dissatisfied with the site.

As Facebook, its competitors and partner companies amp up the social aspects of their sites, and encourage consumers to share more of their activities and preferences online, it’s natural that some people are growing uncomfortable with the amount of information about their lives that is becoming publicly available, Wharton legal studies and business ethics professor Andrea Matwyshyn says. But that heightened level of sharing also makes it that much harder for consumers to completely break away from sites like Facebook, she notes, because they have become inextricably linked with how people live and work.

“There’s a growing concern among people about losing control of their own information, in particular the prospect of employers using social media as a filtering device” for prospective applicants, Matwyshyn says. She knows several law and MBA students who have opted to shut down their Facebook accounts because they were concerned about the reach of the information they were posting. “Depending on your privacy settings and the privacy settings your friends have on their own Facebook pages, you’re not just governed by your own conduct, but by the conduct of every one of your friends to the extent that they share data with third-party applications.”

Situations like this are also causing users to set up multiple personalities on Facebook, with one account for private use and another to use professionally. But bifurcated profiles and the use of pseudonyms creates other complications, Matwyshyn says, because they raise further questions about what is considered fair and legal conduct on social networking sites. “Third parties watching our conduct, or friends giving access to our information to third party vendors, are very messy spaces that will continue to flourish as the social reader phenomenon continues to expand,” she notes. “There’s a push toward having all of us increase the sharing of our information; to avoid sharing information, you have to adopt an increasingly aggressive, defensive posture.”

But given how pervasive Facebook has become, is it really possible to be truly disconnected? “The joy and pain of Facebook is that once you begin participating in the community, disconnecting means, in essence, that you lose a major source of information about people,” Matwyshyn notes. And social networking has also become an important aspect of the way many people do their jobs. “It may not be integral to the career prospects of an art framer, but for someone like me who works in a research field related to technology, it would not be possible for me to opt out of Facebook,” she points out.  “In fact, it would be, in my opinion, almost a credibility-diminishing choice.”

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Groupon’s IPO Scores Big, But Doubts Persist

Groupon made its debut on the stock market today, and company shareholders collectively stand to earn billions in one of the most anticipated IPOs of the year.

Late Thursday, Groupon priced shares at $20, which was above the expected range and values the group buying site at around $13 billion. The stock soared up to 55% higher in Nasdaq trading this morning, climbing to a peak of $31 a share. It was around $28 by early afternoon.

But concerns persist over the long-term sustainability of the company’s business model, which has spawned dozens of competitors since Groupon launched in 2008. Kartik Hosanagar, a Wharton professor of operations and information management, says Groupon faces not only the challenge of finding the right business mix, but also managing the waves of change that come with being a young company.

Groupon faced several hurdles in the run-up to its IPO. Barely a month ago, some early institutional investors raised concerns about possible write-downs as the IPO market then seemed tepid, according to the Wall Street Journal. Around that time, the U.S. Securities and Exchange Commission (SEC) faulted Groupon’s method of calculating revenue because the firm wasn’t taking into consideration subscriber acquisition expenses such as marketing costs. The company has since made adjustments in response, the WSJ reported. But those developments hurt Groupon’s pre-IPO valuation, which fell from a peak of $30 billion to one institutional investor’s estimate of $8.7 billion.

Meanwhile, another company expected to launch a closely watched IPO this year — social gaming firm Zynga — is also facing roadblocks. Zynga’s games, which include FarmVille and Mafia Wars, are almost completely dependent on Facebook’s platform. SEC filings made over the summer in preparation for taking the company public showed that while Zynga was able to build a large user base with little upfront investment by partnering with Facebook, Zynga’s fate is largely in the hands of Facebook. In October, Zynga announced that it will begin delivering games directly to consumers through a service called Zynga Direct.

Zynga’s efforts to diversify its delivery methods beyond Facebook are “critical in the long-term,” Hosanagar notes. “The dependence was not good because Zynga’s fortunes depended so heavily on Facebook’s strategy. That was disconcerting to potential investors. Ultimately, Zynga needs to deliver on Zynga Direct and show that it has a large and growing revenue stream independent of Facebook. When it does that, Zynga will have a more convincing pitch for the market.”

The common theme, according to Hosanagar, is that “these are all young companies and it may take some more time before they are ready for retail investors.” In the case of Groupon, the accounting method that drew scrutiny from the SEC “was not uncommon and is not fundamentally flawed either,” he points out. “That said, the approach seemed to inflate [Groupon's] top line.”

But Groupon’s challenges are not over. In a recent Knowledge@Wharton story about the business model for group buying sites, Wharton marketing professor David Reibstein noted that when the economy enters a more robust recovery, offering steep discounts via Groupon becomes less attractive to partner businesses. “The reason some retailers might be willing to provide supply to Groupon is because they have excess inventory…. As the economy picks up and there is less excess inventory, the availability of supply will go down. The willingness of the merchant to offer deep discounts will go down.”

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