Ecommerce could be Facebook’s next big business … if it addresses a few things
March 9, 2011 §
Much hoopla has been made about Facebook’s ecommerce opportunity. Just as it has quickly earned a strong position in display advertising, and has grabbed share in virtual goods and payments, the industry pundits now say that online commerce will be its next billion dollar business. The tools already exist, in fact, for merchants to integrate commerce directly into their Fan Pages, obviating the need for customers to link out to conduct their business.
But I think Facebook, and the merchants who sit atop its platform, are going to have to go beyond a “build it and they will come” approach, if they expect to reap the full potential of this new revenue stream. I recently conducted an informal poll to gather insight on people’s attitudes and intent when it comes to Facebook commerce. While there’s all sorts of caveats here, ranging from small sample size to survey bias, I think the findings are directionally useful – absolutely no one had the desire to buy traditional goods or services from within a Facebook page. The rationale varied, but tended to fall into two themes: distrust and value.
Thanks in part to continuous headlines accusing Facebook of privacy violations (or of making it difficult for users to control their privacy settings), many people, it seems, are hesitant to relinquish any further data to the service. And purchase decisions can be as revealing and personal, if not more so, than just about any other category. Others simply don’t appreciate the value of buying through Facebook. Some even assume that the inventory and buying experience will be a slimmed down version of what’s available on the merchant’s own site. Facebook’s ecommerce strategy, therefore, should seek to resolve these barriers. For example:
- They should strengthen their online privacy policies. A tall order, perhaps, for a data-oriented business model, but low hanging fruit include simplifying privacy controls, and being more sensitive to how its constituencies will react when it considers new features with questionable protections. Remember Beacon, and the poor guy whose engagement ring purchase was revealed to his soon to be fiancé prior to the proposal?
- Merchants would be advised to offer a comparable (if not unique) selection within Facebook. If strategy or availability dictates otherwise, go deep on the specific categories that are offered there.
- Product reviews and brand suggestions could be more personalized within Facebook (as compared to outside of it) if users opted-in to a higher level of disclosure. For instance, Facebook could give buyers the option to share a purchase with their network anonymously or in the aggregate on external pages, and openly within Facebook pages. So if you were shopping for the Motorola Xoom on Amazon.com, you might see that 15 of your friends “Like” the item or even purchased it, but if you shopped for the same gadget within Facebook, you could see specifically who those friends are, whether they posted any feedback, and so on. Today, there’s no such distinction.
- There’s no denying that credit cards are a suboptimal payment method for ecommerce, and even if you keep your card on file with multiple merchants, managing all those logins and passwords is a major pain. Facebook’s payments platform, originally implemented to take a bite out of the virtual goods market, will be expanded to make real world purchases a whole lot easier. Think PayPal for Facebook.
- Facebook will ultimately host thousands (millions?) of commerce pages, likely positioning it as the broadest “store” on the Web. As an aggregator, it could structure a rewards program with greater benefit than what’s offered by sellers individually. Tied to its payment platform, points could be redeemed across its participating merchants, both physical and virtual. It could also choose to award status and privileges to users who make purchases within its pages. Facebook has done little to date with status awards, but history shows (recall Yahoo! Answers) that they can be extremely motivating.
Ecommerce could be a big deal for Facebook, and in fact, may be necessary to justify its massive valuation. But to reach its potential, it should address its privacy issues, and seek to offer advantages over merchants’ own sites.