Forget advertising revenue. The real money play for Facebook may be breaking into e-commerce.
Facebook has launched holiday promotions for its online gift service — a brilliant ploy, because it adds a new communication element that no one else, not even Amazon.com, offers. If you buy a gift for a friend inside Facebook now (anything from sweets to socks to Legos to electronics), your friend will be instantly notified inside Facebook — and have the option to adjust your order. If you send me clothing that’s the wrong size, not only will I feel good knowing it’s on the way, but I can make the shirt size L instead of XL (not that big, folks) before it ships.
Beyond the gimmick, though, this is an aggressive move in Facebook’s transition to full e-commerce. Amazon.com might worry, because Facebook offers things other online retailers cannot:
1. Facebook has reams of data on your profile far beyond transaction observations. While other retailers like Amazon can mine data on your past purchases of spy novels or lingerie, only Facebook can scrape your self-written personal profile to determine you’re a former East German Victoria’s Secret model who is a Tom Clancy fan. This gives Facebook better potential for targeting.
2. Facebook doesn’t need to build warehouses, because it has already convinced nearly every brand in the world to build a promotional page inside Facebook. These brands are, like lemmings headed for a cliff, rushing to promote Facebook … er, their Facebook page … with their own marketing dollars. They’ll surely be interested in a new way for Facebook users to buy their stuff inside Facebook.
3. The social dynamic wraps the delivery in content that could spread fast. Ping! Your friend loves you and has sent you a gift! You can response, share, or propagate either the message, or perhaps the gifts themselves. The spending itself could go viral. Imagine how happy Lego would be if every gift begat a similar purchase.
4. Facebook has taken one-click ordering ever further. You don’t need to punch in your friend’s address, if Facebook already has it. While most e-commerce sites remember your information on your behalf to make transactions easier, Facebook can also offer to remember all of your human network’s information as well.
$160 billion opportunity
This so-called “F-commerce” has been around for a while, but brands selling via Facebook have met resistance, mainly concerns by most consumers that social transactions are not secure against fraud. To make online purchases take off, Facebook needs to train us that its purchase system is safe. So Facebook is starting us on training wheels, with this little last-minute gift promotion.
The size of the prize is huge. If Facebook can break down our resistance to using it for real purchases, it may grab a chunk of the $160 billion spent annually in the U.S. — and far more internationally — in e-commerce. Success would make its paltry $5 billion in annual ad revenues look like an investor appetizer. Once we load our payment information into Facebook, it could then move this service to mobile commerce as well — enabling one-click ordering of anything on our iPhones.
Clever, Facebook. You’re convincing us to make you our new wallet, UPS shipping and Amazon.com storefront all in one. You might finally find a way to make mobile advertising work by turning our Facebook app into a click-to-buy icon. You even save us from typing in our friends’ addresses.
We’re running late for Christmas, so we may just dive in.