The Problem With some 1 billion members, Facebook is a very desirable Web site on which to advertise, sell, and conduct other social commerce activities. (Social commerce is the delivery of electronic commerce activities and transactions through social computing.) With its size, Facebook offers opportunities for companies to reach out to customers and conduct business transactions. What is the best way to take advantage of Facebook's size—as well as its existing customer base—to do business? The Solutions Facebook commerce (or f-commerce) refers to commerce executed on, or influenced by, the Facebook platform. Two major types of f-commerce are emerging: commerce-on Facebook and commerce-off Facebook. Commerce-on Facebook. Commerce-on Facebook is a type of electronic commerce in which the transaction occurs completely inside Facebook. Vendors create Facebook stores for their customers, who conduct transactions without leaving Facebook. There are many examples of Facebook stores:
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The P&G Pampers F-Store, powered by Amazon WebStore, sold 1,000 diaper packs directly to consumers in less than one hour after the store “went live” on Facebook. |
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ASOS, Europe's first fully integrated F-store, makes it possible for consumers to complete purchases without ever leaving Facebook. |
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Delta Airlines has built a complete ticketing system into its Facebook page. Although the airline allows the user to promote Delta by posting a general message on his or her Wall, it does not do much to help the user share details with friends involved in the trip, something that a Send Button could do nicely. |
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Facebook credits are just like tokens at an arcade or amusement park. Credits are a secure way to play games and purchase virtual and digital goods on Facebook. You can buy credits using your credit card, PayPal, mobile phone, or other payment methods. For instance, Warner Brothers allows consumers to use Facebook credits to stream movies in Facebook for 30 Facebook credits ($3) per movie. Commerce-off Facebook. Commerce-off Facebook takes advantage of Facebook's Open Graph, which allows shoppers to sign in to Facebook from any Web site with any computing device (e.g., laptop, netbook, phone). Merchant integration with Facebook works in five ways: Facebook-enabled Web sites, Facebook in-store retail, Facebook-initiated selling, Facebook check-in deals, and Facebook mobile ads. Facebook-enabled Web sites are traditional Web sites and e-commerce sites that integrate with Facebook to offer customers a Facebook experience while shopping or researching purchases. Brands can bring the Facebook experience to their Web sites, tapping users' connections and interests to support the purchasing process. The simplest examples involve using social plugins, which include the Like Button, Send Button, Subscribe Button, Recommendations, Login Button, and many others. The Like Button is the most common plugin, and it is usually regarded as a content-sharing device. However, when it is used in conjunction with a product page, it can provide peer support by displaying the names and profile images of people who have Liked the product. For marketers and producers, the most appealing feature of the Like Button is the fact that it also highlights any of the user's Facebook friends who have Liked the product. In Facebook in-store retail, brick-and-mortar retailers integrate with Facebook to offer customers a Facebook experience while shopping in their stores. For instance, Macy's Magic Fitting Room is a Facebook-connected fitting room equipped with a camera-enhanced 72-inch mirror and an iPad that allows customers to try on clothes and then share the experience with their Facebook friends. With Facebook-initiated selling, businesses can set up a storefront for free on their Facebook pages. Customers begin the shopping process on Facebook and are then directed to the business's e-commerce pages at some point to complete the purchase process. For example, Best Buy keeps shoppers in the Facebook environment and takes advantage of its social features while they are there. Best Buy's store app is labeled “Shop 1 Share.” Users can search or browse for products. When they find something that interests them, they have two options: Ask Friends or Shop Now. Ask Friends leads to a Wall post asking about the product. Interestingly, Best Buy makes Ask Friends much more noticeable than Shop Now, which takes the user to the product page at www.bestbuy.com for the shopping cart and checkout process. The Facebook check-in deals program allows local retailers to drive traffic to their stores by offering special discounts to consumers who check in to their location with Facebook Places on their mobile phones. For example, The Gap ran a promotion in which it leveraged check-in deals by offering a free pair of blue jeans to the first 10,000 consumers who checked in at Gap stores. Similarly, Mazda UK offered a 20 percent discount for the Mazda X5 for check-in deals when Facebook Places launched in the United Kingdom. In October 2012, Facebook launched mobile ads. Several of Facebook's large advertising clients who used the mobile ads indicated that these ads can be used to develop e-commerce on Facebook, turning the social network into a mobile shopping and sales service. For example,Fab.com tested the service with Fab's shopping app (over Facebook) and noted that the app was 5 times more effective than any other mobile download channel that the company had ever used. The Results F-commerce is still in its infancy. In 2007, Facebook initiated Project Beacon, which collected e-commerce activity on third-party sites and announced a user's purchases on his or her friends' news feeds. Facebook quickly withdrew from that privacy nightmare. However, the damage done to its reputation for freely dispersing user data still deters f-commerce. Many Facebook users have become so accustomed to Facebook's aggressive data-sharing policies that they automatically assume the worst. In fact, studies have shown that a majority of Facebook users have concerns about Facebook's privacy and security. Experienced e-commerce managers also perceive problems with Facebook itself. Facebook has relatively slow page loads and a smaller page size due to its advertising and navigation. Analysts wonder why customers would bother shopping through Facebook when a faster and better experience is only a browser tab away, at the vendor's e-commerce site. Facebook advertising is also an issue. No matter how you structure your f-commerce store, the user will still be subjected to targeted Facebook ads during the buying process. Going further, many Web marketers question the social nature of shopping itself. There is a widespread belief that people visit Facebook to catch up with their friends, not to be sold products. However, a J. Walter Thompson study reported that 48 percent of millennials (aged 20 to 33) would like the places where they shop to give them the ability to buy directly on Facebook. In January 2012, P&G announced that the company was scaling back its $10 billion annual ad budget (primarily in traditional media) to take advantage of free impressions offered by Facebook in the form of Likes and status updates. Several months later, General Motors canceled its entire $10 million Facebook ad budget. The companies made these decisions for different reasons: GM was not convinced that Facebook ads are effective, and P&G was looking for free media advertising efficiencies. Some industry analysts contend that advertising on Facebook is not as effective for some advertisers as advertising on search engine Web sites. Their reasoning is that people searching for information on purchase decisions are better targets for ads than are people checking out messages from friends. They also argue that advertising on Facebook is problematic because it interrupts personal conversations with impersonal branding. WordStream (www.wordstream.com), a search marketing management company, compared advertising on Google with advertising on Facebook. WordStream's findings suggest that Facebook is a much less effective ad medium than Google. Let's take a look at the findings.
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Total Reach
| Facebook: 51 percent of all Internet users |
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| Google: 90 percent of all Internet users |
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Fourth Quarter Revenues, 2012
| Facebook: $5 billion |
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| Google: $14 billion |
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Click-Through Rates
| Facebook: 0.051 percent |
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| Google: 0.4 percent |
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Average: 0.1 percent
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The click-through rate of an advertisement is the number of clicks on an ad divided by the number of times the ad is shown, expressed as a percentage. The average click-through rate for an ad on the Internet is 0.1 percent. That is, an ad that appears 10,000 times on the Internet would be clicked on 10 times. An ad that is shown 10,000 times on Facebook would be clicked on 5 times. In contrast, if the same ad were displayed 10,000 times on Google, it would be clicked on 40 times. Thus, Google ads receive 8 times as many clicks as ads on Facebook, which represents a significant competitive advantage. Regardless of the pros and cons of f-commerce, however, modern businesses must acknowledge one overwhelming fact: Facebook is where the customers are, and they should be able to buy wherever and whenever they like. Today, almost 70 percent of companies conduct transactions on or through Facebook. |
