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Facebook Trades Up: From Community to Commerce

November 29th, 2012

An Innovative Sales StrategyIt’s been beaten like a dead horse for years now: At those important historical benchmarks of 200 million, 400 million, 800 million, and finally one Billion users, analysts and tech pundits wondered how Facebook could ever truly yield any real profit.

Well, with the purchase of Karma, Facebook took its first serious step toward the enviable crossroads where social media meets commerce. After buying the mobile app, Facebook has continued to develop a new gift-giving service to add to its portfolio of offerings. Now, with Facebook GIFTS, the company has been expanding its efforts at serving as a portal of e-commerce for its massive audience.

The New York Times article seems to suggest that the moves are part of a shareholder relations PR effort to build confidence in Facebook stock after its IPO debacle, but I think it’s an untapped market that could quickly outstrip all other revenue streams for the company.

Consider a community of one billion plus users — all getting updates and reminders about upcoming birthdays and anniversaries of friends, not to mention holidays — and having the access to directly make a purchase on their mobile device for items such as Hulu, iTunes, BabyGap, or Dean & DeLuca. It’s a simple, easy transaction that starts with a nudge about a Facebook friend’s birthday, and ends with a selection of greeting card and credit card transaction.

For fulfillment, Facebook rented a facility in South Dakota and developed a proprietary software to monitor inventory and shipping. The company has not disclosed the commission earned on each purchase, but merchants with a similar agreement with Amazon provide that company with about 15 percent of sale price. The average purchase price to date has been about $25.

It’s a stroke of genius that will also continue to build the unfathomable amount of user data that the company already owns. Having demographic information and email addresses for one Billion customers is desirable; having credit cards and an easy-to-use method to shop? Priceless. LinkedIn should be so savvy as to offer similar types of corporate and professional gifting.

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This entry was posted on Thursday, November 29th, 2012 at 11:08 am and is filed under Advertising, Business, Customer Experience, Marketing, Media, Social Media, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

DWAYNE FLINCHUM
Founder & President,
IridiumGroup Inc.

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