Should brands, retailers and businesses bother investing time, effort and money to sell with Facebook?

Yesterday, market research agency, Forrester, published a report “Will Facebook Ever Drive eCommerce?” answering the question with a NO and with analysis to support their scepticism about the viability of f-commerce. “Analyst slams Facebook’s e-commerce potential” screams the Wall Street Journal video (see below).

Forget f-commerce it’s foolish – according to Forrester’s research analyst Sucharita Mulpuru…

[blockquote]“In spite of the fact that hundreds of millions of people around the world have Facebook accounts, the ability of the social network to drive revenue for eCommerce businesses continues to remain elusive. eBusiness professionals in retail collectively report little direct or indirect benefit from Facebook, and social networks overall trail far behind other customer acquisition and retention tactics like paid search and email in generating a return on investment. For some companies and brands, Facebook promises to support branding and awareness (i.e., “top of the (marketing) funnel”) efforts, but for most eBusiness companies in retail, Facebook is unlikely to correlate directly to near-term sales. A few pockets of success, however, have surfaced, and a cottage industry of vendors who can support these programs will inevitably burgeon”

Sucharita Mulpuru – Forrester[/blockquote]

Bottom line, according to Forrester, unless you’re a small online retailer, or using f-commerce in the context of a loyalty program (CRM), in publishing or gaming industries, or running online flash sales or marketplaces, then forget f-commerce.

Whether you’re for or against f-commerce, it’s useful to know the arguments against – whether  it’s against using Facebook itself as a retail channel or as an e-commerce traffic generator or against adding a Facebook layer to existing retail channels – in-store or on the Web.

And whilst it’s disingenuous to dismiss early positive results as selective data trawling to find any link between f-commerce and business performance, it’s also disingenuous to dismiss bearish naysayers as having the same myopic mindset as those who were dismissing the viability of e-commerce 15 years ago, when the Web had far fewer users than Facebook today.

Even for the most ardent f-commerce fans, ‘know thy enemy’ is good policy; to argue for something – it helps to know what – and who – you are arguing against.

So here’s the case against f-commerce (see here for an earlier related article)

  • Online shoppers don’t want to buy on Facebook – the Booz & Allen report on social commerce found that 73% of online shoppers would not purchase goods on Facebook or through other social networking sites

  • Facebook itself is an immature and risky platform – do you really want to be investing in next year’s MySpace?

[blockquote align="right"]“Ditch your Facebook efforts and start thinking about mobile where the ROI is at least quantifiable…”

Sucharita Mulpuru – Forrester[/blockquote]

  • Where’s the money??? No major brand or retailer has yet provided compelling evidence that selling with/on Facebook unequivocally drives ROI or CLV (customer lifetime value)
  • A recent WPP survey found that 23% of marketers said they were convinced that they were getting a good sales return on their social media investment, while 18% said they think their ROI is “average” and 9% described it as “poor.” (see slides below)
  • Where’s the (independently verified) money??? There have been no independent research demonstrating the value of selling with Facebook – all data is from people with vested interests – companies themselves and their technology partners.
  • Businesses find social networks to be the least effective new customer acquisition tool (Forrester Data – see chart below)
  • From a purely practical perspective, designing a gold-standard customer experience in Facebook is an up-hill struggle, with restrictive and oft’ changing formats and requirements
  • 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?
  • Facebook Credits is a non-starter for most retailers. This is the “currency” that consumers can use to buy, say, potatoes on Farmville. Facebook however has little to no credibility with respect to financial services among consumers and the same retailers reluctant to implement PayPal (which so many large merchants are) will be ten times more resistant to a less-tried, less-reliable, newer payment mark.

[blockquote align="right"]“The likelihood that Facebook will ever [become] a key sales-driving tool for retailers and creating a reliable revenue stream for Facebook, is unfortunately far-fetched”.

Sucharita Mulpuru – Forrester[/blockquote]

  • When only 1% of site visitors come from a social media URL,it’s difficult to take Facebook seriously as an e-commerce traffic generator
  • While email marketing campaigns can boast an 11 percent click-through rate and a 4 percent conversion rate, Forrester’s findings show that Facebook can only generate a 1 percent click-through rate, with only 2 percent of those people converting to actual customers
  • According to a Goldman Sachs survey, Facebook has little effect on online shopping activity

  • Overall, Facebook for businesses is more suited to generating insight, advocacy, loyalty and engagement — but not sales.