Facebook to add shopping service to its menu

 

By Abbey Klaassen and Matthew Creamer

Advertising Age
November 5, 2007

 

NEW YORK (AdAge.com) -- Lots of people find the next books they plan to read by browsing the New York Times or Amazon best-seller lists. Others count on referrals from friends and colleagues. But what if you could eye a hot title as it began to climb the best-seller list within your Facebook network? You'd be alerted: "Thirty-one people in your network have bought 'Microtrends.'"

A scenario like this soon will play out on Facebook, as the company is about to unveil plans to make shopping part of its social network.

The shopping feature, according someone familiar with the work Facebook has been doing in this area, will go something like this: When Facebook members buy something at a commerce site, they can let those in their Facebook networks know about the purchase, passing along information on the item as well as a discount or coupon. The service will bring a sort of easily tracked viral element to online shopping. Two other people described it as part of a larger plan by Facebook that will allow data about Facebookers' online transactions and interactions to circulate within their social graphs. Marketers will be able to plug in to the program, enabling consumer interactions such as purchases to become part of the social network. But these people suggested the program won't be limited to shopping and is just a sliver of the larger announcements Facebook will unveil to marketers during an event in New York on Nov. 6. Facebook declined to comment on the feature.

Recommendations
Of course, this social-shopping play comes at a time when marketers are increasingly realizing the benefits of recommendations and word-of-mouth as sales drivers. Allowing users to broadcast their purchases to people in their social networks and act almost as affiliates, passing along offers and discounts, no doubt would be appealing to online retailers and product marketers. According to a recent Deloitte survey, family members' or friends' comments about a product are the second-biggest influences on consumer purchases of new products or brands (after the reputation of the manufacturer or supplier).

"This is a smart move for Facebook because the true revenue opportunity for social networks isn't straight ad serving or interruptive marketing, but rather embedding 'virality' into members' natural purchase behaviors," said Dave Balter, CEO of BuzzAgent, in an e-mail. "This capability may present a glimpse into the long-term value of social networks in general."

But he pointed out possible challenges: The application applies only to online shopping, which limits the number of products that can participate. Also, most people still talk about products in person, so the critical component of offline dialogue seems missing from the solution.

Beyond CPM
Affinity groups are the best ways to market products and content, said Paul Martino, CEO of Aggregate Knowledge. "It's not about an ad but about in-network content or services." He called social shopping "a fantastic idea. ... That's way more relevant than run-of-site CPM ads."

However, he, like Mr. Balter, suggested its limitation lies in its online-only nature. "Ninety-six percent of Best Buy purchases happen in the store and only a fraction online, so there might be a big gaping hole there," Mr. Martino said. "Having the right collection of retailers in your network will be the key to making a product like that work."

Facebook does have ties to online retailers. When CEO Mark Zuckerberg took the stage in May to announce to developers he was opening up Facebook's platform, Amazon VP Russ Grandinetti was there to talk about launching the book-reviews application. Another e-commerce giant, iTunes, is expected to be part of Facebook's New York advertiser-focused event this week.