Case One: Facebook Moves into E-Commerce

On the social networking site Facebook, users create profiles that allow them to connect with friends, organizations, and companies through posts and ads that appear in their personal News Feed as well as through Pages that are designed to help organizations and companies connect with interested users. And with more than 1.4 billion active users, including 900 million who visit the site every day, Facebook represents a huge potential online marketplace.

Over the years, Facebook has experimented with many different features designed to help marketers connect with prospective customers—from banner ads to sponsored links to highly visual engagement ads that allow advertisers to show several clickable images or videos within a single News Feed ad. Although Facebook has incorporated ads for some time, it is now focusing more intently on tools that make it easier for customers to purchase something immediately based on an ad they see—ideally, all while staying within Facebook’s site. In particular, the company is concentrating on ways it can streamline mobile purchasing, currently an often slow and cumbersome process. According to Emma Rodgers, Facebook’s head of product marketing for commerce, “We’re looking to give people an easier way to find products that will be interesting to them on mobile, make shopping easier and help businesses drive sales.”

For starters, Facebook is testing a new Shopping tool within the Favorites section that will aggregate a personalized mix of products users are likely to be interested in based on their Facebook likes and connections. In addition, Facebook has begun experimenting with “conversational commerce,” a highly personalized form of e-commerce in which consumers and retailers conduct entire transactions within a messaging application—in this case, Facebook’s Messenger app.

Facebook has also been rolling out a new mobile ad feature it calls Canvas, which offers marketers a customizable space where they can use video, images, text, and “call¬to-action buttons” (such as Book Now, Sign Up, and Shop Now) to engage with consumers. When Facebook users click on a Canvas, they will almost instantaneously see a full-screen ad that lives within Facebook’s infrastructure—rather than being redirected to an advertiser’s Web site, which may be slow to load and not always optimized for mobile devices. Canvas appeals to marketers looking for a new way to engage customers without losing them as they are being redirected to an outside Web site, and it offers Facebook the chance to keep more of a user’s online activity within its site.

Recently, Facebook has been testing a “shop” concept that goes one step further—allowing companies using Shopify’s e-commerce platform to build what amounts to a mini e-commerce site within their Page through the use of a Buy button. For now, retailers involved in the test can choose between an option that directs shoppers to their own sites and one that keeps the entire shopping experience—from product discovery to checkout—within Facebook.

A recent study found that 13 percent of all the time spent on mobile apps is spent within Facebook’s apps, and according to a Facebook survey, nearly half of its users come to Facebook to actively look for products. Facebook clearly intends to capitalize on these trends with e-commerce and m-commerce initiatives that will likely continue to evolve and expand. And marketers looking for new ways to extend customer engagement to online purchases will certainly be paying attention.

Critical Thinking Questions

1. What are some of the privacy concerns that consumers might have in terms of shopping on a social network such as Facebook, which already has access to so much personal information?

2. Are people likely to use Facebook’s current e-commerce offerings the same way they might shop on Amazon?

3. Do research online to find out more about some of the e-commerce initiatives of other social networks, such as Instagram, Pinterest, and Twitter. What features do they offer that differentiate them from Facebook? Do you think any of these sites will ever be a strong competitor to Amazon in terms of total e-commerce sales? If not, what niche could they succeed at?