It’s a matter of time before the giant is into all things commerce, another sign that advertising will increasingly and inevitably give way to commerce-related business models says Anthea Stratigos CEO of Outsell Inc.
Important Details: In recent months, Facebook has taken steps into e-commerce. Earlier this year it acquired  Karma, a gift-giving application, and in the past two weeks announced  that it has added even more retailers to its gift giving service, a service which it launched early this fall. Facebook lets users purchase gifts and send them to others in their network. Users can locate and send gifts, and recipients can further refine the gift (amending the color or size) or exchange it.
Implications: In 2001 Outsell predicted that the Global 2000 would be the dot.coms of the future. In 2004, around the time of the emergence of Google, we posed a question at an analyst brainstorming session: if everyone had a website and could “go direct”, what was the point of many forms of advertising long term? Sure enough beginning in 2006, Outsell’s Chuck Richard, by studying a 360 degree view of marketers’ spending, was the first industry analyst to reveal that some $65 billion (the equivalent of US TV advertising at the time) was being funneled from advertising into marketers’ own websites (see Insights 30 June 2009, Projected 2009 Investments in Web Sites Continue to Take the Air Out of the Ad Room).
Marketers have pushed into direct to user experiences by becoming their own advertisers for quite a while now; with this move, Facebook – the mother of all publishers – has moved into commerce. It was only a matter of time, and for us an obvious move for Facebook as the world of marketing continues to turn inside out.
Facebook’s foray into e-commerce is a tiny step by a giant whose footprint is only getting larger as it accelerates towards what is clearly the writing on the wall: commerce. The business has struggled to demonstrate advertising growth in an increasingly mobile world, and commerce is a logical and more direct extension for them. Global retailers don’t want more leads, they want more sales. Facebook allows them to ‘hook into’ their environment, and suddenly it becomes the giant mall in the sky.
For those who dismiss the possibility of Facebook achieving commerce scale due to user privacy concerns, let’s be clear. Users are notoriously willing to give up privacy for the ability to gain something of value.
First, Facebook’s facilitation of private gifting shuts down concerns that users won’t buy on its site for fear of giving up too much of themselves.
Second, throw in a few Groupon-like moments, and you can bet users will keystroke faster to get good deals on a moment’s notice. More commerce, more promotion and more vendors with which to do business, and it becomes a rich sticky environment where real money flows. Who needs advertising when the same user is hanging out in an environment now offering bigger, better, access – to ‘stuff!’
One can fast-forward and see rivals cooperating as only they can do on the west coast. Facebook will no doubt move into other goods and services that go beyond ‘gifting.” For a fuller service experience, we can envision a deal with Amazon, which itself is shaking retail, and advertising with its same-day delivery blitzkrieg. In fact, the counter-moves of Walmart,
Best Buy, Sears, eBay and Google all point to a greater muddying of “advertising” and “selling” (see Insights 29 October 2012, In Battle of Retail Behemoths, How Will Advertising Morph?). Throw in local and small business retailers, and the virtuous circle of all things commerce for a billion people on the planet takes hold. Who says Facebook doesn’t have runway? Its world is not about advertising, but about enabling a platform on which a billion people can do just about anything, and when that anything involves money it has the potential to be an amazing thing.
So what does this mean for the rest of the world’s publishers? What goes on in B2C ends up in B2B, and we’re already seeing publishers move from advertising to marketing services to commerce – Hearst, F&W, and Dwell to name but a few. This continues to be an area we follow closely because the dollars are moving, and moving faster. It will not be long until users both B2B and B2C are conditioned to buy just about anything via not only the web but from ‘publishers’ of all stripes. In Outsell’s opinion, the future will be much less about advertising or even marketing services in some case, and more about commerce. Long term, it is about closing the loop on the ultimate wheel of fortune, and having a commerce strategy is becoming a bare bones essential. Otherwise we believe the future may not be so kind.
Courtesy: Anthea Stratigos, Co-founder of Outsell
Outsell is a Co-guarantor of BIIA