Is 2011 the Year for Social Commerce?

2011 will be the year that social commerce begins to take root on Facebook with solutions that are both merchant and customer friendly.

To be fair, pundits have been talking about “shopping on Facebook” since about 2006 when it first opened its platform to developers and concurrently introduced two new products (to an overwhelmingly negative public response, I might add): the news feed and mini news feed that made it easier for people to share information about themselves and their activities, including shopping. At the time, “social shopping” was the domain of shopping portals like ThisNext, StyleHive.com and Kaboodle and a handful of others that purported to make it easy for users to search for stuff and then to share those results (aka suggestions for gifts, advice on whether to buy) with friends, including items that later ended up on personal wish lists. At the time, these sites were written in a programming language that was not compatible with Facebook or other social networks, but were instead were blogger friendly, building traffic and revenue for both sites by providing a monetary value proposition that benefited both sides of this “new” shopping platform.

Back then, these social shopping sites were also ironically characterized as the “MySpace killers” since MySpace had 100 million users to Facebook’s 7 million predominantly college student user base. Still, that did not stop developers from devising Facebook apps like SecretPrices that helped users easily connect with Shopping.com and Amazon product databases and to add that portal to their profile page. A week after its launch, a whopping 375 Facebook users had done so.

My, times have changed.

Fast forward now 4 years. Facebook has 600 million users worldwide and adding hundrends of thousands of users a day, with roughly 140 million of those users in the US alone. MySpace, is still the 10th most trafficked web site in the world with 100 million users, 50% of them in the US. Facebook reports that about 50% of those users check the site every day and devour the information that is posted on those once despised news feeds. Time on Facebook represents about 25% of time spent on line (11 hours a week for the average user), now cannibalizing time spent on line doing things like reading news and other online media, instant messaging and emailing, thanks in part, to entrepreneurs who have developed applications that keep users on the site more of the time.

It’s also due in part, to three other things, that I believe will set the stage for the biggest innovation in commerce that we’ve seen since eBay enabled commerce with micro-merchants back in 1995.

1) People use [their networks on] Facebook to get product recommendations. Nearly 50% of consumers use social networks for product referrals. Last Christmas I was stuck about what to buy my nephew – and posted my dilemma on Facebook. Within a few minutes, I had 10 suggestions. I’ve also weighed in when friends who queried everything from “what’s a good restaurant in Soho” to “is the Season Three DVD set of Mad Men worth buying?” Additionally, about 50% of consumers now use social media to learn about offers, and 45% percent use the social media space to learn about products, mostly from their friends who post news and updates in their status feeds.

2) People want to interact with brands on Facebook. Globally, just about a third of Internet users connecting with a brand now do so on a social network (Facebook and Twitter for the most part), while the proportion of those checking out brand sites has dropped like a rock over the past two years.  New research from Beyond suggests that nearly 25% of consumers would prefer to receive information from brands via Facebook, rather than a brand’s website (21%) or company blog (3%).

3) People are more loyal to brands with which they interact on Facebook. At the same time, just about one-half of all of the Internet users worldwide have joined an online brand community, and once they do, feel more positive about the brand  and end up buying from it more of the time. Reports suggest that nearly three-quarters of these fans are more likely to buy the brand they say they like, feel more loyal, and most importantly, recommend others to join.  Research also shows that 67% of shoppers spend more online after receiving recommendations from their friends online versus “going it alone.”

       

      Not surprisingly, all (or just about all) merchants and big brands have a Facebook fan page, and most of them are stepping up their investments from mere experimentation to building and engaging those who “like” them on this powerful platform in 2011. According to a recent eMarketer survey in 2011, four out of five US businesses with 100 or more employees will allocate dollars to social media activities, a dramatic change from 2008 when just 42% of companies did.

      Still, it’s early days. There still remains a lot of variability among the number of fans brands have, some fan pages for remarkably well established brands have as few as 1k fans with the average hovering around 10k fans (there are obviously a lot of outliers at the extreme end of the spectrum like Starbucks with nearly 19 million fans and Burberrys with more than 3 million fans – remarkable for a luxury brand). There’s a lot of variability around engagement too; brands use Facebook for everything from providing customer service messages, announcing offers that drive users to their off-Facebook sites and creating engagement on Facebook using contests and queries designed to encourage fans to post on their wall.

      What’s next, in my humble opinion, is using those fan pages to engage in commerce. But not the way that “social commerce” is being practiced today. Brands have collectively invested millions in creating a presence on Facebook that supports a long-term, value added relationship with those who “like” them. What they need is a solution that allows them to leverage this “4th retail channel” in a way that makes it easy to extend their existing ecommerce workflow, enable the sale of physical products much like they do today on their own sites and enable the capture of data about those customers and their buying and browsing behaviors. They also need a solution that enables the leverage of group dynamics that make Facebook as interesting and potentially more powerful than anything that they can do with mobile.

      At the moment, very few brands are using Facebook for commerce, mostly because the more mature commerce solutions force them to make a lot of sacrifices (e.g. loss of customer data or the customer relationship, need to support a one-off workflow, incompatibility with their brand style, lack of ability to customize the buying experience around volume-based sales or exclusive offers) or assume a lot of the heavy lift (simply plopping a shopping cart on their tab, forcing them to figure out how to drive traffic and engagement).

      A new crop of entrepreneurs and solutions will change all of that; we’re starting to see some early incarnations of that now.  But, anyone who still believes in 2010 that Facebook isn’t going directly drive a massive commerce opportunity for merchants and retailers alike on that platform will find themselves this time next year in 2011 wishing for their own Christmas miracle.


       

      Twelve Days of Christmas

       

         

      1. Did Payments Get a New Mom, or Enter Rehab?
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      3. Will 2011 Be The Year of the Opt-In?
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