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Here’a quick six-point speed summary on what Forbes (Tomio Geron) has to say on Facebook’s future as an e-commerce platform. Bottom line, the low cost of entry using Facebook as an e-commerce platform means businesses are increasingly willing to experiment…

  1. Traditionally, the role of Facebook in e-commerce has been as a traffic driver. Facebook’s referral traffic to Amazon grew 328% year over year in Oct. 2010, while Google’s traffic dropped 2%. Facebook traffic to eBay grew 81% while Google traffic dropped 3%.
  2. E-commerce sites have also placed Facebook’s ‘Like’ button on their own sites as a quick way for users to automatically create links on Facebook.
  3. Buying direct on Facebook is a relatively new trend;  8th Bridge, a Facebook e-commerce software company, forecasts retail sales on Facebook in 2011 will be IRO $100 million.  Payvment provides free Facebook stores for businesses, and has 60,000 clients – the company will look to make money by being a “discovery company”, charging businesses for getting discovered by new customers, not e-commerce transactions
  4. Facebook e-commerce revenue will come from either Facebook store apps such as those from Payvment or from ‘wall-stores’ that appears like videos in peoples news feeds. Click the “play” arrow on a wall-store, and users can browse and purchase products without leaving their wall. According to 8th Bridge, people are 18 times more likely to buy directly in their News Feed than when clicking off to a separate website
  5. Live shopping events, such as flash sales, have been especially popular on Facebook:  HauteLook (now part of Nordstrom) ran a fan-only Diane von Furstenberg Facebook shopping event on Dec. 7, 2010 generating in excess of $100,000 in sales.  Users were incentivised with a $10 coupon to refer new members in – and new members represented 40% of those sales. Conversion rates were above 6%.
  6. However, tech consultancy Forrester believes Facebook e-commerce has a limited future, specifically limited to five product types (below). Other businesses, according to Forrester, should eschew Facebook e-commerce and  restrict use of Facebook to “top of the funnel” branding.
    • a) word of mouth products (movies, music, books, events),
    • b) validation products (tech/fashion products needing social validation),
    • c) high volume popular products with many fans (Pampers or Pop Tarts)
    • d) social items (local, shared and community products and services, and peer to peer selling)
    • e) digital/virtual products (paid for with Credits)

Our take on this?  When you look at all the areas where Forrester does believe f-commerce has a future, the ‘say-no-to-f-commerce’ message looks either subversive or disingenuous – ‘say-no-to-f-commerce’ but yes really.  We’d add impulse, gift and convenience shopping to the list too. We’d love to be able to hit a ‘buy’ button on a weekly shopping list stored on Facebook.

We also like the idea of using f-commerce as a low cost, low risk sandbox for experimenting freely with new e-commerce models (flash sales, group-buy, brand merchandising). To hi-jack the immortal words of Karl Marx – with f-commerce, businesses have nothing to lose but their chains, and a world to win.

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    Chris Small

    Have to agree with your summary Paul. Even if Forrester were correct in their analysis that it’s only the categories listed that would be successful selling directly on facebook that’s a pretty big opportunity! We power thousands of facebook stores via our free VendorShop facebook shopping app and we can see first hand the value and types of selling that is happening directly on facebook and it’s certainly a lot wider than what Forrester suggests. We’ve got to remember that shopping on facebook is new (like internet retailing was 15 years ago) … most people don’t realise you can buy on facebook and most businesses haven’t yet understood how to leverage facebook as a sales channel. When these two things start changing we are going to see facebook sales explode!

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    Christina Buquid

    Great summary paul! Did you happen to have the link to the Forrester research piece detailing the 5 product types?

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    Jeff Sable

    Paul, Right on with everything you say above. We (Moontoast) provide our clients with Tab and Wall post stores and the revenue from Wall post stores dominates the revenue from Tab stores. Impulse purchases within Facebook Walls are driving real revenue (and ‘promotions’ don’t necessarily need to be discounts).

    As always, thanks for your support.

    jeff

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    Omar Sary

    I do believe that the accounting software/ERP/Social CRM industries should really pay attention to the evolution of social commerce as more SMB customers will embrace the social commerce delivery medium. I do see the following taking shape as:
    SAAS ERP-Accounting software + social CRM + social e-commerce integration/engagement is a monetization strategy to really consider!

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