– Written by Robert Henderson
The recent Facebook IPO filing has forced mainstream media and business professionals into micro-analyzing every part of the Facebook revenue model. Since 2004, when Mark Zuckerberg launched the social network, fans of Facebook (pun intended) have celebrated the numerous opportunities for monetizing the company itself, and more importantly to us, declared it a new medium for marketing efforts. Not everyone has figured out how to use Facebook as a marketing channel yet, and the confusion has persuaded some to give up.
Monetizing Facebook and a History of F-Commerce
There wasn’t a real opportunity for monetizing the young Internet startup until August 2006, when Facebook reached a one-year deal with J.P. Morgan Chase to show banner ads promoting the Chase credit card. This was primarily aimed at the social network’s high percentage of users between the age of 18 and 25 (college age).
After dabbling in small products (including Virtual Gifts that users could buy for a dollar and post to another friend’s profile), the company took its biggest step forward in their revenue model by launching Facebook Ads and Pages for Brands in November 2007. This made it clear that Zuckerberg planned to grow revenue in similar ways to Google – through pay-per-click advertising – at least at first. This became more apparent when Sheryl Sandberg left Google to join Facebook as COO in March 2008.
Facebook ads and brand pages allowed marketers to take advantage of the highly-targeted user base. Over time, traditional marketers discovered that users did not want to leave the Facebook platform through an externally-linked ad, and it became more obvious that brands would have to persuade users to convert within Facebook to be most successful.
The success of an online ad click depends highly on the landing page. Therefore, keeping the landing page on a Facebook Page’s tab or within a custom developed app maintains the user trust that a brand may otherwise have to rebuild on an external page.
For eCommerce retailers, this meant attempting to sell their products within Facebook, or at least listing their catalog for fans of their brand to see. This new marketing channel has been coined F-Commerce.
Social Commerce, F-Commerce, and the Benefits
F-Commerce is included under the larger umbrella of Social Commerce. There are many definitions of the term, but the one I like best describes it as “the use of social channels to connect, listen, understand, and engage to improve the shopping experience.” This broad scope doesn’t just limit Social Commerce to selling within a social media channel. It can also include a retail store using a status update to incentivize people to come in and buy their products.
Social Commerce is to eCommerce as F-Commerce is to a platform like Magento. Technically you can display a list of products within your Facebook page with external links and call it F-Commerce (as referenced above). But frankly, this is like saying Google Shopping is the same as Google Checkout. It’s not.
Yes, F-Commerce is still evolving, but as marketers, we’ve already established that traditional marketing efforts work better if they stay within Facebook. This means the whole lifecycle – the ad to the conversion – lives inside Facebook. So, I simply don’t buy the inclusion of external product page links on a Facebook tab as F-Commerce.
The benefit of using your highly targeted user base – coupled with the fact the users don’t want to leave – means retailers must allow users to add to cart and checkout within Facebook. This is F-Commerce.
Is there any value in F-Commerce?
The F-Commerce failure buzz started about two weeks ago when Ashley Lutz from Bloomberg reported a few large brands – including Gap Inc and Nordstrom – had closed their Facebook storefronts. Since the Facebook IPO, it makes sense to raise the question as to whether F-Commerce provides value. However, Lutz’s conclusion to say it doesn’t work – although normal – is premature.
Lutz quoted Wade Gerten, CEO of 8thBridge, as saying F-Commerce has “cracks in the model” and “It was basically just another place to shop for all the stuff already available on the retailer websites. I give so-called F-commerce an ‘F.’”
The Bloomberg report open and shut the case for F-Commerce. Articles referencing their findings started appearing everywhere. Even the Wharton School of Business, one of the best in the country, got in on the act last Friday when marketing professor Stephen Hoch said, “Whereas [brand] websites can categorize and organize social media, blogging and other engagement devices in a form that is easily navigated and searched, this is not true of Facebook, where all relevant postings are listed in a linear order based on time of posting. My guess is that Facebook is actively working on how brands can better link their brand pages to their [own] websites.”
Wait, what? First off, his claim that all postings are based on a linear, chronological order is just wrong. Facebook’s algorithm organizes what a user sees in his or her newsfeed based on Edgerank. Similar to Google’s use of Pagerank in its search algorithm, Facebook is using Edgerank to show relevant results within its social platform.
While he is a decorated Wharton marketing professor (whom I probably have no right arguing traditional marketing topics with), Hoch is clearly missing the point behind why Facebook and F-Commerce exist in the first place – to keep users on Facebook. If Facebook wanted to encourage third-party links, why would they charge 45% less for clicks that keep users within Facebook?
Traditional Marketing Rules Can Apply to New Social Marketing Channels
ShopIgniter, which specializes in Social Commerce, was quick to dispute Bloomberg’s report and label it premature. Kevin Tate, Chief Marketing Officer of ShopIgniter, claims that Social Commerce experiences must be compelling. He explicitly says, “You can’t just re-create your eCommerce catalog in Facebook. It won’t work.” Tate is right. You can’t just copy your catalog and expect conversions. This would be similar to launching an eCommerce site without a post-launch marketing plan and proper SEO structure.
The fact is, a page with a million fans might not do as well with its F-Commerce store as a page with 10,000 fans. If users don’t know it’s there, and it isn’t promoted correctly, you’ve already failed.
Who says you can’t sell product in unconventional places?
Sucharita Mulpuru, an analyst at Forrester Research in Cambridge, Massachusetts, was also quoted in the Bloomberg article: “But [selling on Facebook] was like trying to sell stuff to people while they’re hanging out with their friends at the bar.” She’s exactly right, but again, missing the point.
Companies have been able to sell products to people in social situations for years. People go to amusement parks to have fun, but might end up spending hundreds of dollars more on merchandise and spur-of-the-moment purchases. Sporting events, concerts, churches, and yes, even bars are all places people go to do something other than buy products – but they still do. Airports are nontraditional retail spaces, but they have thrived in selling products and turned into quasi shopping malls because people are trapped there, much like people trap themselves within Facebook.
A more closely-related medium to F-Commerce would be email marketing. People aren’t there to buy product. They’re checking their email, yet email marketing still works.
This is exactly why Tate is correct in his dismissing the Bloomberg report as premature. Traditional marketing has always had to break chains in order to push creativity. There is often an agreement among industry professionals that there is a “natural” way to do things, but as Andrew Savikas points out in a 2010 Forbes article: we’re bad at dealing with change.
When we were accustomed to print advertising, we didn’t understand new channels like the radio and television. When we had perfected the television ad and accepted its imperfect ROI measurement, we didn’t quite see how Internet ads would work. And now we don’t really get Social Commerce and apparently are ready to prematurely discount its potential success.
Why F-Commerce Works When Done Correctly
Marketing essentially comes down to the four “Ps” (the Marketing Mix): price, place, product, and promotion. If these four exist, you can market and sell your product. Price and product have to exist. The place is within Facebook, and the promotion is up to you.
Place: The same rules of usability, optimization, and design apply to an F-Commerce store as they do to an eCommerce store, but they must be catered to exist within Facebook. For example, a well-designed storefront customized within a Facebook App must have responsive design because not only will this store exist within the new 810px-wide page tab, but it must also expand to fit within a wider defined app interface.
Promotion: It’s as if traditional marketers have suddenly forgotten the fourth “P” of the Marketing Mix. Without it, all marketing efforts are essentially moot, and even if they haven’t forgotten about it, firing status updates with links to your new F-Commerce store does not substitute as promotion. Promotion requires creativity, and in instances of new marketing mediums, new brainstorming and ideas.
The truth is, Facebook stores work similarly to email marketing, airports, amusement parks, and the other examples listed above as nontraditional retail space. Promotions must include exclusivity, time sensitivity, and have a VIP deal feel to them.
F-Commerce Isn’t as Black and White as Bloomberg Implies
Ashley Lutz offers no reasons in her report as to why Gamestop, Gap Inc., J.C. Penney, or Nordstrom’s Facebook stores didn’t work, other than customers at Gamestop not having any incentive to shop on Facebook over Gamestop’s similar eCommerce store. Herein lies the issue we’ve explored throughout this article, which is also pointed out in Tate’s article, there must be incentive and promotion.
Is F-Commerce right for my brand?
Don’t make the same mistake most companies do with a Facebook store. Once your store is up, you need to channel your marketing efforts and budget into the new storefront just like you would any other eCommerce store or sales effort. The difference is you’re taking advantage of Facebook’s easily-targeted audience through the use of Facebook advertising, promotions, and incentives to get users to “friend” your brand.
There is value in F-Commerce if you have the resources and budget to build, attract, and optimize your F-Commerce store as you would with your retail space and eCommerce website.