Facebook alienated its community in launching Beacon; this blog guru explains the issue and gives pointers on how to avoid making such a mistake.

Facebook garnered significant traction this year, growing by tens of millions of users and establishing itself as the hottest social network. Since then, the company has sought to do more than open its network to application developers, it has taken steps to monetize its communities. But partnering with Microsoft and launching a new Beacon application-driven SocialAds program have suddenly drawn the angst of its many users. 

Facebook's Beacon program worked by notifying friend networks when someone purchased a product from a participating company. At first, these notifications were executed without the permission of their end users, creating a huge uproar in the national media and with social media stars like Forrester Analyst Charlene Li, whose own personal privacy was sacrificed by Beacon and chronicled on her Forrester blog.

Dissent grew and Facebook users began to organize. MoveOn took formal issue with the social network. When the roar outgrew the value, Facebook yielded.

Now users have to opt-in to the program before notifications are sent to their friend networks. However, as Forrester's Li reported in her blog, Facebook will still "archive" sales information between Beacon advertisers and the network to give users another "opportunity to click 'OK' to publish." Users cannot stop information traveling between Facebook and Beacon partners.

But the damage may have already been done.

"Personally I'm having lots of trouble with Facebook but Facebook doesn't care about people who have more than 5,000 friends unless they can figure out a way to monetize us," said Robert Scoble in his Scoleizer blog in response to an official statement from Facebook on Beacon. "Every time I look at Facebook I am reminded of how little Facebook cares about me. So, I care less and less about Facebook every day," he wrote.

Community first
As Brain Jams' founder Chris Heuer writes about, at the heart of this issue is monetization of social media. Social media is exciting, but at the same time direct monetary return on investment for some social networks and content creators has been elusive. Databases and further growth of semantic web applications allow networks to leverage users' information to serve up customized ads, or tell others exactly what the person purchases. In return, monetization occurs.

The Beacon launch highlighted a critical privacy issue and affirmation that users must give their permission before data can be used. Further, it clearly reaffirms that marketing in social media environments often comes from within the community itself. Often ROI is a by-product of community participation, as opposed to hard transactional advertising.

The Washington Post reported on how Goodwill of Greater Washington created a virtual fashion show and blog to highlight outfits created from donated goods. This new take on vintage generates more than 5 percent clickthrough to the company's online store. Users see the outfits, watch the show, get excited and want to know more.

Yes, social media marketing needs to be monetized either directly or indirectly. When the dust settles, any marketing organization must remember its most valuable asset is its community members. Social media is driven by people banded together to form communities, not by technology or informal networks. When community is sacrificed for dollars, organizations lose both. No community equals no transactions.

Organizations that use social media for WOM campaigns or hope to generate revenue through this dynamic two-way medium must serve their communities. By getting communities to opt into advertising or to willingly promote product usage as a part of the service needs to be addressed clearly and from the beginning. Otherwise it fails.

Geoff Livingston is owner of Livingston Communications and author of "Now is Gone." Read full bio.