20 Aug 2014 Will Facebook’s ‘buy’ button succeed where its previous ecommerce attempts have failed?
Facebook is determined to finally crack e-commerce and if it proves to be a success, its rivals are determined to cash in too.
In recent years, Facebook has been frustrated with incorporating micro-payments, removing its virtual currency ‘credits’, as well as twice culling its ‘gifts’ offering, and several major brands have closed their Facebook stores too, after claiming that return on investment was poor.
Now the social network is hoping a ‘buy’ button, currently being tested by a few businesses in the US, will enjoy prolonged success. If it does, then Twitter and Snapchat’s recent moves in e-commerce will leave them well-placed to capitalise too.
Twitter appears ready to monetise beyond advertising too, after acquiring payments company CardSpring. It has previously experimented with a ‘buy now’ button and letting its users add items to their Amazon shopping carts by tweeting #AmazonCart. Meanwhile, Snapchat has filed two trademarks hinting at the eventual incorporation of in-app purchases and payments.
In fact, the reasons behind social companies’ latest e-commerce drive become clearer when considering that one of Snapchat’s investors, Tencent, owns Chinese mobile messaging service WeChat. As we discussed on the blog recently, this app has monetised well through in-app purchases and marketplaces – this year, it sold 150,000 smartphones within 10 minutes. Snapchat CEO Evan Spiegel has previously expressed his admiration for WeChat’s business – Facebook and Twitter’s new micropayments strategies suggest that they too share the sentiment.
WeChat’s success suggests that, managed in the right way, Facebook and other social platforms can succeed with e-commerce and enjoy several important benefits. If Facebook takes a small cut of sales, or charges retailers for selling their products on the site, e-commerce could be a way of monetising the social network beyond advertising revenue. It could also provide Facebook with additional data on users’ purchasing habits, enriching its comprehensive understanding of its customer base.
But social or mobile messaging e-commerce is far from a guaranteed win and needs to be handled carefully. Facebook’s previous e-commerce attempts, its so-called ‘f-commerce’ stores, have seen some high-profile failures. Clothes firm Gap and games retailer Gamestop have both opened, then subsequently shut, stores – Forrester Research analyst Sucharita Mulpuru told Bloomberg that selling on the social network is “like trying to sell stuff to people while they’re hanging out with their friends at the bar.”
Nevertheless, the potential for success has again been outlined in China – last year Gap was one of the 10 most popular international brands on Tmall, an online marketplace with social channels owned by Alibaba. Thanks in part to Tmall, responsible for half of China’s $300bn business-to-consumer market, Alibaba is expected to go public next month and raise $20bn – surpassing current record-holder Facebook’s $16bn IPO in the process. If the West’s social companies can learn from China, then social e-commerce could finally truly take off.