Six Pixels of Separation - The Blog
March 15, 2011 9:10 AM

F-Commerce - Rise Of The Facebook Consumer

What the Facebook?

While visiting Florida last October, I noticed a wall of gift cards near one of the checkout counters at a Target store. Gift cards are big business these days and many retailers are getting in on the action. With all of the options available, one brand really jumped out at me. It was a gift card for Facebook. The current incarnation of these gift cards assigns Facebook Credits into your Facebook profile, which can be used to buy stuff like virtual tractors in the popular online game, Farmville, or toward other virtual goods. These are the early days of the virtual goods economy (you're already taking part if you've ever bought a song on iTunes or an app for your smartphone), but this is also the very early stage of F-Commerce, or Facebook Commerce.

Facebook is huge and continues to grow at a staggering pace.

With more than 500 million members, if Facebook were a country it would be the third largest by population after China and India. Last month eMarketer reported that Facebook reaches the majority of Web users, saying that 132.5 million Americans will use the site. Facebook will reach almost nine in ten social network users and 57.1 per cent of all Internet users, eMarketer added. Soon after that, an Ad Age/Ipsos Observer survey of digital media habits reported that 75 per cent of Facebook users have "liked" a brand as well. When you put these pieces together, it's clear that should Facebook look at creating a currency within its network, it could become a dominant global force in monetary transactions.

The arrival of Social Commerce.

For the past few years, many media pundits (including me) have lauded the arrival of Social Commerce. Once online social networking took hold, it became apparent that people liked talking about the brands they use and they respect the opinions of those in their social circle when it comes to making purchasing decisions. Shopping - by its very nature - is a social act and it was only a matter of time before social media-like tools became prevalent throughout the e-commerce world. Now, it's hard to sell anything online if you don't let your customers rate, review and share their collective experiences. In fact, at the end of last year, Facebook allowed its now infamous "like" button to be placed on anything online - from pieces of content to products and brands. Imagine the data and information that Facebook now has from all across the Web and mobile channels about what people like (along with who they are, where they live and who they are connected to).

The arrival of F-Commerce.

It seems like the last mile - actually having commerce take place within the Facebook domain - is under way, and this is a huge deal that every business should pay attention to. The conversation around social media was about building loyalty, trust and chatter around brands by using platforms like Facebook where people like to engage with one another. The challenge was in figuring out the analytics to link those social acts back to a sale in order to create a semblance of proper retail attribution. Now, all of that changes.

Now, there is actual commerce taking place within Facebook.

Have you seen the Best Buy Facebook Page? If you look at the navigation, you'll note a tab titled, "Shop + Share." The antiquated Internet strategy of two years ago that insisted brands drive consumers back to their website is slowly dying. Why force people to leave Facebook to have a great Best Buy experience? Best Buy understands this new world of consumer engagement and if consumers use Facebook as the primary way that they stay connected to loved ones and friends, who is Best Buy to break up that party? Now, you can buy from Best Buy and even share your experience with your online social network without ever leaving Facebook.

It's not just Best Buy.

P&G also entered the F-Commerce fray last year with Pampers. Parents no longer have to leave Facebook to buy Pampers online. The brand choice of Pampers for P&G is interesting as the CPG giant constantly leverages its own data and analytics to develop the most ideal marketing outcomes. It's a clear indication that those who think that Facebook is just a bunch of university students trying to hook up are sorely misinformed.

Let's do the math...

Facebook has close to 600 million members. It has its own currency system in place, called Facebook Credits. Facebook Credits is the default monetary exchange system used on the Facebook platform. Brands are being talked about and engaged within the Facebook platform. Some of these brands are paying a premium to sell within Facebook. As Facebook extends its platform into any and every digital space (websites, blogs, smartphones, etc.) and people have a level of trust in the security of their Facebook Credits, it's not out of line to think about what the major implications of F-Commerce might be on the future of business. Think about the money being exchanged on iTunes in terms of gift cards, etc. . and take another look at Facebook's statistics.

In a globalized economy where exchange rates fluctuate based on geo-local politics and economics, how do you think this will affect our world when everyone (everywhere) is also using the same monetary system and virtual credits?

The above posting is my twice-monthly column for the Montreal Gazette and Vancouver Sun newspapers called, New Business - Six Pixels of Separation. I cross-post it here with all the links and tags for your reading pleasure, but you can check out the original versions online here:

By Mitch Joel


Comments Comments Feed
  • Posted by Janice Diner
    Mitch Joel

    HI Mitch, I presented at Social Media Week at the JWT Retail Slam a month ago on F-Commerce. Check it out. The presentation is a quick overview of the Facebook commerce landscape and it gives a snapshot of retailers and businesses/brands exploring the space

    http://www.slideshare.net/jdiner/facebook-commerce-turning-like-into-buy-6872002

    Reply
  • Mitch, I just had to leave a comment today - it's been a few days since getting my Six Pix fix and, after a few hours online this evening researching tools and applications for implementing Facebook e-commerce for my e-boutique, I was blown away to find your post re F-Commerce. Thanks for your insight and in particular the key point you made regarding "Why force people to leave Facebook to have a 'Best Buy' experience".

    Reply
  • Posted by Gahlord Dewald
    Mitch Joel

    I see where this is going and I definitely hear it.

    However if you do click on Shop + Share in Facebook and then find your way to a product, the actual sale is consummated back at the Best Buy store. In fact the button says "shop now" even though you're already shopping.

    Maybe just semantics, but the traffic is still driven to the corp site for the sale.

    Pampers system threw an error in FB so I didn't get a chance to see if that did the same thing.

    Some related bits of data to contrast with the gigantic global reach metrics of Facebook are in Hubspot's 2011 State of Inbound Marketing report.

    The chart on page 10 shows companies more likely to acquire a customer via a blog or linkedin than via Facebook. Which I thought was surprising until I considered all the useless Facebook marketing out there. And that the data is a mix of B2C and B2B (where the B2C success is much much lower on Facebook).

    The chart on page 11 shows the breakdown of customer acquisition by channel for B2C and B2B. For B2C, Facebook was stronger than the company blog here--but only by 4%. Given the massive reach and customer engagement and so on we hear about (and personally experience) with Facebook I was surprised to see only a 4% difference in ability to acquire customers via that channel.

    I know that budgets and attention for FB vs company blog are higher than 4% in a lot of the orgs I work with. Perhaps we're just at the very beginning of the curve when it comes to executing?

    Great post as always, Joel. Got my gears turning this morning.

    Reply
  • Posted by KOJO BONTI- AMOAKO
    Mitch Joel

    This is a great post as always.
    bonti

    Reply
  • Mitch Joel

    Facebook did an excellent move to earn audience in two main ways.
    First by improving the on-site experience and usability, to give more reasons to actually stay on Facebook 24/7, as you mention. Now you don't have to leave it even to shop (not yet to that, but we'll go towards that direction indeed).
    Second, even IF you really have to get out of Facebook to an external site, they offer means to interact back with "The Platform", with Likes, Facebook Comments and whatnot.
    It's kind of a perfect strategy to engulf whatever we do in our online lives and put it under an F-perspective.

    Reply
  • Posted by James Barnes
    Mitch Joel

    "In a globalized economy where exchange rates fluctuate based on geo-local politics and economics, how do you think this will affect our world when everyone (everywhere) is also using the same monetary system and virtual credits?"

    Well, surely Facebook set the forex rates for IRL currency to FB Credit. Please, just think that through for a minute or two.

    Do you think Goldman Sachs will be happy to take their IPO management fees in FB Credits?

    Reply
    • No, I do not think that would make the current Goldman Sachs happy. But I see them banking a lot of dollars on how successful Facebook will be with this monetary platform.

      As for the evolution of commerce... is your weekly pay check a wad of cash or zeroes and ones? We can call "currency" whatever we want, but it is evolving and the way we exchange currency currently is completely digitized. Adding a layer of credits on top of that seems logical to me (and many consumers) rather than grappling with exchange rates and service charges.

      Reply
      • We are not far off from having all of our debits and credits on one huge connected digital database. Money as we know it won't even be needed. We will all have a computer chip or card that has our "balance" of what we are worth.

        Reply
      • Posted by James Barnes
        Mitch Joel

        Thank you for the clarification. I agree that new forms of money/value tokens are a significant development, we also see this in Tencent's QQ as well as in Mixi and Gree's networks. Then consider how RFID and NFC are changing the way we make payments, and how M-PESA is skewing the Kenyan economy.

        I would argue that we are a long way from seeing an overlay virtual currency going global simply because the vast legions of unbanked rely heavily on cash. Connect them and we'd be ready.

        Reply
  • Posted by Fazal Mayar
    Mitch Joel

    haha, facebook never ceases to amaze me. This is a unique idea, social e-commerce? the hell?

    Reply
  • Posted by Chris Greco
    Chris Greco

    Part of the reason why Facebook is pushing F-book credits is social/causal gaming. The latter is the largest growing gaming category, and Facebook is by far the most popular platform. Virtual goods are powering that economy. Facebook has mandated come 1 July all virutal goods must be purchased using Facebook credits, taking 30% of all revenue off the top.

    Reply
  • Hey Mitch!

    Good article. I was one of the pioneers selling virtual goods on eBay 11-12 years ago (using EverQuest), so an article of this nature tickles me deeply.

    The implications of this direction are vast. I see two factors currently in the way of its full adoption:

    a) Consumers are far from forging the habit of doing commerce on Facebook. Although the internet was like this at one point in time. I suspect it'll take a) most Corporate pages developing e-commerce pages (or F-Credit pages), b) Media & PR making mainstream c) A greater benefit to FB users to shop on FB and not on a brand's website (this benefit I suppose could be as simple as "they don't have to leave FB!", but a greater benefit would help).

    b) FB making it's News Feed algorithm, Edge Rank, more brand-friendly. Many aren't aware but FB recently created a default setting for users news feeds that, allows FB to filter what the news will be (likely 90% of users have this default setting in place right now). Following my own account, out of the 100 or so pages I've "Liked", very few brands are showing up on my Feed (maybe 5-8 consistently). Twitter alternatively has the default of showing every object in a users News Feed.

    So I'm going to bounce the conversation back at you Mitch (or anyone else) if you will with these two questions:

    a) What will it take for the mainstream adoption of consumers using FB for their purchasing needs?

    b) Should brands be concerned for this new default filter FB has in place that may be restricting their updates fan reach?


    I hope everyone has a wonderful day!

    @AndrewSchiestel

    Reply
  • Posted by Line Ghisler
    Mitch Joel

    Hi Mitch. I'm a great fan of your blog - thank you for all the inspiration and food for thought.

    I must comment on this post. Right now there's a lot of writing on f-commerce but I still havn't seen a shopping experience remotely as good as in 'real-internet'. Fx try finding your camera on Best Buys Facebook shop... If you don't know what you're looking for that's going to be really difficult. And that is just a small example of all the functionality missing when browsing products in Facebook shops.

    So I don't think that people have 'a great Best Buy experience' on Facebook. To me it's like shopping shop-in-shop when you have the flagship store right next door.

    I am really curious to see if the Facebook masses will not in most cases still prefer to shop their favorite stores outside Facebook.

    IMHO f-commerce still has a long way to come.

    /Line

    Reply
  • Posted by Brian Johnson
    Mitch Joel

    The whole virtual economy thing never ceases to amaze me. I mean, I GET buying music or applications. I get real world practical utility out of those. I just find the whole Farmville Tractor, Mafia Wars weapons baffling. Where I get really disturbed is the "virtual gift"

    Don't get me wrong. Im a believer in the viability of the business model, I'm all for free commerce and, if there's a market for it (which there no doubt is) I say go for it but, as technologically advanced as I like to consider myself I'm having trouble making the leap and understanding the utility people get out of a virtual puppy.

    Reply
    • Hey Brian, I'm not sure of the utility of the virtual items FB has sold before (ie. puppy), but people have obviously bought them in the past so I'm sure there is some utility. I'm sure a small survey of customers can be useful for us.

      In re: to virtual goods of games (ie. Farmville, Mafia Wars and more historically Everquest, World of WarCraft), I can tell you there is definitely value in those items for people who choose to pay.

      The best analogy I can make is many people like sports like hockey, golf, billiards. Once you play for a while, you may get hooked (for whatever reason - maybe the competitiveness, the camaraderie, the observation of you gaining more skill). At that point, you stop borrowing your neighbours golf clubs. You stop using the pool hall provided billiards cue. Instead, you go out and spend money.

      Why? Because these items will often increase your capability to perform and/or make you look better in the environment ("oh wow Jim, you just bought the Mezuno Big Bertha 45K. Can I take a swing with it too?")

      Your drive as a result may a) increase an avg. of 3 yards each time and b) make you look better to others playing the game.

      The utility lies in those two benefits amongst likely a few others.

      Have a great day!

      @AndrewSchiestel

      Reply
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