To Facebook Or Not To Facebook, That Is The Question
Social commerce is a symbiotic activity between platforms like Facebook and Twitter and traditional and mobile e-commerce. The question for marketers is how many eggs to put in the Facebook basket. E-commerce sales will hit $197 billion this year, per Forrester. But while Amazon has about a 10% share of that, for Facebook to generate even 5% of that total, it would need to spend millions upgrading infrastructure to support the retailers, buyers, devices and payment options that Amazon does, according to a new report from WebMediaBrands' SocialTimes Pro.
Still, social and mobile commerce is huge. The firm cites third-party data suggesting that 34% of shoppers clicked on an ad in response to a location-specific message; 51% of consumers have made a mobile payment within the past three months; 60% of all time spent on the mobile Internet is on social networking sites; and 27% of the top 100 retailers have a "like" button on their product pages.
Among that trends the research group identified are: the larger revenue opportunity is beyond the social network and includes retailers' sites; mobile devices and startups launching their own platforms; Facebook sales are less than 10% of the monthly revenue for most retailers with virtual Facebook storefronts; industry experts say the volume of transactions for physical goods on Facebook will top $250 million by 2011; and retail revenue generated from Facebook this year is likely to be between the $75 million and $100 million range, conservatively.
Says Tameka Kee, author of the study: "When I went into this, I thought it was all about buying stuff on Facebook. But you realize that it's a piece of a bigger thing fed by mobile, core e-commerce and all of these functions together. Facebook is one of the more exciting parts but not the only part."
SocialTimes Pro went to some startups and marketers in the social space to examine what they are doing on Facebook. Among them are: Roy Hessel, CEO of six-year-old prescription eyeglass retailer EyeBuyDirect; Wade Gerten, CEO of 8thBridge, a social shopping company that powers Facebook storefronts for Delta Airlines, Avon and Lands' End; Eric Best, CEO of Mercent, online channel marketing company for retailers like Bass Pro, Guess? and REI; and Kevin Ranford, VP of online marketing, mobile and social media at 1-800-Flowers.com.
Best argued that the majority of large retailers Mercent works with see social platforms as tools for dialogue and brand awareness in a less forceful way than advertising. He says that for them, transaction isn't the point. EyeBuyDirect's Hessel shared that sentiment, saying Facebook sales are less than 5% of the company's monthly revenue, "and increasing that to 10% or more is not something we are aiming for." He said the real growth opportunity is from using social media platforms to enhance the user experience at EyeBuyDirect. com. The company created its own social experience on its site that Hessel says has increased sales. The platform, a Facebook-like experience called "Wall of Frame," lets consumers do things like upload pictures of themselves and modify them with different glasses.
The risks of using Facebook for commerce are obvious: turning off people for whom Facebook is a digital living room. Best said the retailers Mercent worked with are trying to figure out how to do social shopping programs without violating users' trust. "The last thing an established brand wants to do is go out and start pitching products to Facebook fans unless they've been asked for it," he said.
Ranford said knowing when not to pitch Facebook users is as important as knowing when to do so. He said when the company first pushed offers to Facebook, it got pushback from consumers. "They told us they wanted less sales and more content, like insights into what kinds of gifts they should give, and when," he said. That tactic worked, Ranford said, doubling its fan base in advance of Valentine's Day.
Perhaps the most critical issue is one of marketer dependence on Facebook data, which is not available through Facebook transactions now but might be if Facebook decides to sell it. That means if marketers become dependent on Facebook to do digital sales, they will become like sharecroppers forced to buy Facebook data because that's where they grow their crops. "At some point," said Hessel, "Facebook's data will have greater impact on retailers' conversions than paid search."
Says Kee: "I want to be clear that Facebook said they have no plans to sell data. But who's to say what will happen?" She says this isn't such an issue for small or large retailers, but for those in the middle, "they need to worry about it more. For small ones it's all upside and a gigantic retailer has the money. But companies like EyeBuyDirect have to be more cautious."
SocialTimes Pro's study projects that $20 million flows across transaction expediter Payvment's Facebook storefront each month from 500,000 Facebook users, which adds up to $240 million in yearly transactions. If that were extrapolated to five other vendors at similar rates, the projection tops $1.2 billion, the firm notes. But 8thBridge's Gerten says all retailers will more likely generate a more conservative $75 million to $100 million in revenue for sales on merchandise on Facebook this year.