Facebook Commerce

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FACEBOOK COMMERCE

September 2011

Trading Commerce

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ForewordWe live in fast-moving times in which changes happen on a daily basis. Some of these changes demand decisions about the future, and many companies are now confronted by one such challenge, because something is heading their way which could permanently change conventional online retailing. Facebook Commerce has got underway, and we should look carefully to see whether it is a train onto which it is really worth jumping.

Up until very recently, Facebook was simply a social network in which friends met in their own communities and kept each other updated about their activities. That has now changed. More and more brands are establishing a presence on Facebook. Nowadays, many Facebook users are friends with numerous brands, which have thus become part of their networks.

This kind of direct dialogue within a very private sphere is at the centre of F-Commerce, and it is becoming an effective marketing tool with which products will soon be able to be sold extremely successfully.

In this study, BBDO sheds light on the subject from four different angles: Facebook, users, businesses, and service providers. We then draw up some recommended actions for businesses on the basis of these different points of view.

One thing, after all, is certain: it is crucial to get firmly to grips with this transformation in retail. If F-Commerce is going to establish itself as a relevant sales channel, then it is important to make use of the opportunities and to occupy vacant ground.

So stay tuned.

I hope you enjoy reading the study.

Michael SchipperCOO, BBDO Germany

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ContentsMANAGEMENT SUMMARY | F-COMMERCE

BACKGROUND AND SETUP | STUDY FOR ACTION

STATUS QUO | F-COMMERCE IS STILL IN ITS INFANCY

PLAYER 1: FACEBOOK | FROM FRIENDLY SPACE TO MARKETPLACE

PLAYER 2: USERS | FANS BECOME BUYERS

PLAYER 3: COMPANIES | SELLING BY COMMUNICATING

PLAYER 4: SERVICE PROVIDERS | NEW PLAYERS EMERGE

GLOSSARY

6 – 7

8 – 11

12 – 19

20 – 27

28 – 41

42 –55

56 – 65

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The commercialisation of Facebook is moving ahead at full steam. Numerous brands and games have paved the way for commercial offerings on Facebook. Up until recently, most companies used the platform primarily for customer loyalty purposes. Half of the people surveyed as part of this study are friends with at least six brands on Facebook. Two-thirds of those asked consider Facebook a central place for all kinds of interesting themes. This situation has led to products being sold via the platform alongside pure dialogue activities.

F-Commerce is currently in a relatively early stage of its evolution. But it is safe to assume that it will be taken up by consumers more quickly than e-commerce was a few years ago, because it is no longer necessary to accept a completely new technology as it was with e-commerce. Furthermore, shopping online is now absolutely normal. F-Commerce, therefore, will expand over several stages. In the first stage, product recommendations will be generated by incorporating Facebook functions, and then disseminated in the social network. In the second stage, products will be presented in Facebook storefronts. In the third stage, complete purchase transactions will be put on offer.

Facebook wants to get its foot in the door of online retailing because it can see the enormous potential that lies in retail activities on its platform. The social network already has its own currency, called Credits, and it earns 30% of the turnover generated by social gaming through virtual goods traded in social games. In order to push F-Commerce forward, Facebook set up an internal Commerce Partnership Group at the end of last year which is intended to help retailers to use Facebook as a sales tool. Retailing inside Facebook does not cost companies anything at the moment, but that can change. The question is not whether, but when, Facebook will capitalise on retail within, and using, its platform.

Convenience is one of the most important motives for buying on Facebook. It is the clinching argument for 36% of those surveyed. Great offers and discounts come second (32%), followed by exclusive products (30%). Only 8% of those asked have already bought things on Facebook, while twice as many have browsed through an F-Store. One in five people stated that the social component is an advantage. What they mean by that is shopping together with friends and commenting on the purchases they have made. Products that can easily be shared with others and given away are especially well received on Facebook: two-thirds of those asked can definitely imagine buying vouchers and tickets on Facebook.

F Commerce

MANAGEMENT SUMMARY

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But F-Commerce is still more suitable for impulse buying. That is because most Facebook users still visit the site without any particular intention to shop. Instead they are more likely to stumble upon product recommendations for interesting products from their Facebook friends or brands they are friends with. Instant rewards as a shopping incentive will play a major role in F-Commerce for this reason. Products requiring a lot of information, on the other hand, are less in demand, and are more suitable for e-commerce channels.

For companies, F-Commerce is also a place to try out new concepts. They can experiment there with time- and volume-dependent offers, fan-first and fan-only items, and group purchases. The results from this will give rise to new marketing and sales concepts which will aim at attracting attention and creating relevance. Merging communication and retail in this way will produce unique possibilities which are only feasible on Facebook. Dialogue with the brand will always be at the centre of F-Commerce.

At this point, Facebook has not yet fully undergone the transformation into a sales channel. This means that for companies, F-Commerce is currently an investment, and primarily a marketing tool. The monetary benefits are still low. Emphasis is very much on customer loyalty and customer involvement, because there are few buyers, and the ones there are are not very willing to spend. Not until F-Commerce establishes itself fully (stage three) will companies be able to convert these customer relationships into hard cash.

The development of F-Commerce will depend very much on Facebook as a platform. If users abandon the social network, then F-Commerce will fail. Half of the people polled expressed reservations about data privacy and security, but only one in five fundamentally distrusts Facebook. For Facebook to establish itself as a retail platform, it will not only need to demonstrate more dependability to businesses, but it will also have to make security and data privacy its priorities.

MANAGEMENT SUMMARY

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Study for Action Definition of F-Commerce: F-Commerce describes retailing inside or by means of Facebook. Retailing inside Facebook means that either the products are presented on the platform, or the complete purchase transaction takes place there, while retailing using Facebook enables companies to generate traffic on their own e-commerce sites, or to collect user data.

This study focuses on retail inside Facebook. That includes (fully integrated) F-Stores, product presentations (storefronts), group purchases (deals) and trading in virtual goods within Facebook games.

BACKGROUND AND SETUP

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“Exciting Commerce is one of the most prominent German e-commerce blogs. One of its authors, Jochen Krisch, deals

with themes that include social commerce, and advises e-commerce businesses.”Jochen Krisch, Exciting Commerce

“Smatch implemented numerous Facebook Commerce activities for the Otto Group starting in 2010. Stephan Wolk is responsible for marketing and product developing at Smatch.”

Stefan Wolk, Smatch

“ShopShare is one of the best-known providers of Facebook Store solutions. This Austrian company offers both customised

and standardised store concepts.”Hendrik Maat, ShopShare

“HORNBACH has maintained its own successful brand fan page on Facebook since 2009. Christoph

Strassburger, its Director of Social Media, is responsible for managing all social media channels.”

Christoph Strassburger, HORNBACH

And in order not to neglect the corporate perspective around this theme, one of the clients of

the BBDO Group was interviewed.


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Criterion 1: Facebook users.

The people in this category use Facebook at least every two or three days. They

are divided up as follows:

•64%areheavyusers: they use Facebook several times a day.

•36%areoccasionalusers: 12% use Facebook every two or three days,

24% use the social network once a day.

Criterion 2: brand friends.

In this category we only asked people who have made added brands and

companies to their list of friends on Facebook.

Criterion 3: regular online shoppers.

In this category we only asked people who shop online at least once every six

months. This is how their shopping behaviour broke down:

•75%areheavyonlineshoppers: 13% of those asked buy things at least

once a week online, 32% several times a month and 30% at least once a month.

•25%areoccasionalshoppers: 20% of those asked buy something online

every two months, 5% every half a year.

ReseaRch step

ReseaRch step

ReseaRch step 1

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Method: Desk Research

Existing, published knowledge in industry magazines, blogs and

surveys on the subject of Facebook Commerce was gathered

together, and on that basis hypotheses were formed as the starting

point for the next research steps.

Interviews

Three experts were interviewed in order to gain an understanding of

how Facebook Commerce is likely to develop in the future. Each

expert embodied a specific perspective of the subject.

Online User Questionnaire

As part of the study, a representative cross-section of 504 people

were polled online. These 504 people were selected according to

three criteria:

Authors: This study was produced by BBDO Germany in conjunction with

Jelden Trend & Transformation Consulting and brand foresight.

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F-Commerce is still in its infancy

STATUS QUO

Over the past three years, Facebook has established itself as the world’s

biggest and most important social network. Brands and games have

discovered Facebook for themselves in a big way, and are helping to drive

the commercialisation of the platform. Retailing will be the next step of this

commercialisation.

More than mere friendship: Facebook is currently approaching the

750-million-user mark (source: Facebook, April 2011). No other social

network is anywhere near as successful or far-reaching. All of its rivals are

exhausted and are losing users or simply serving niches, while Facebook

steadily gains users. Facebook is already much more than just a place to

chat with friends. To 65% of the people polled in this study, Facebook is the

central place at which they follow all interesting themes. To its users,

Facebook has become a real-time newsletter.

Facebook is booming thanks to openings: Two revolutionary openings have

enabled this ascent. Firstly, Facebook made its own interfaces available to

external developers back in 2006. This had a networked effect: the more

offerings Facebook users found there, the more attractive the platform

became to them, and the more users there were on Facebook, the more

attractive it became for external developers and companies to programme

applications and set up a brand presence. Secondly, in April 2010 Facebook

began to integrate its social elements into external websites. This included

features such as Likes, Comments and Shares. It was these two decisions

which were the key to Facebook’s victory over other social networks.

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First come the brands, then comes the commerce: The current commercialisation of

Facebook is based on two key developments. The first is the growing presence of

businesses who use their brand communities to build up customer loyalty. This kind of open

dialogue with companies has found widespread acceptance among users. Around three-

quarters of all Facebook users are friends with at least one brand (source: AdAge/Ipsos,

February 2011). The second key development is the spread of social gaming inside Facebook.

The goods purchased within these games have caused the virtual goods market to grow to

835 million dollars (source: Fast Company, April 2011). In response to this, Facebook has

introduced its own virtual currency, Facebook Credits, through which it earns 30% of the

turnover generated by social gaming. Around 600 applications currently use these Credits,

and 85% of the turnover in those applications is generated through Credits (source:

Facebookbiz, May 2011). These developments have laid the foundation for transactions.

STATUS QUO

65% 35%

Most people use Facebook to follow themes they are interested in

To me, Facebook is a place where, as well as exchanging information with friends and relatives, I can follow all kinds of themes.

Basis: 504 people polled between 20 and 39 years of age; Facebook users who are friends with brands and who shop online regularly.

To me, Facebook is simply a place where I can stay in touch with friends and relatives.

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“Facebook is now big enough to

support further commercialisation.”

stefan Wolk, smatch

STATUS QUO

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F-Commerce is the personal version of social commerce:

Retail inside or using Facebook makes use of its social

components. As in social commerce, F-Commerce is about

stimulating sales by means of ratings, reviews and

recommendations.

The difference is that in F-Commerce, this word-of-mouth

propaganda takes place within dedicated networks, which

means that product recommendations come from your own

Facebook friends. Because we befriend people who are

similar to us, and because we trust people more whom we

know personally, these recommendations have a much

greater effect than recommendations from people we do not

know. That is why 90% of Facebook users state that they

trust in recommendations received from their Facebook

friends (source: ExactTarget, August 2010).

STATUS QUO

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Facebook is becoming Amazon’s and eBay’s most dangerous

rival: Facebook is now so big that these recommendations and

ratings are scalable. But it is not only Facebook’s reach which

makes it Amazon’s and eBay’s most dangerous rival, but it is

also its ability to locate users within the zones of their friends,

products, places and all of the things that they “like”.

F-Commerce is establishing itself more quickly than

e-commerce: Where e-commerce took around ten years to

establish itself, F-Commerce will be accepted much more

quickly among consumers. There is no new technology that

needs to be accepted, since F-Commerce is based upon the

already existing components of e-commerce: from shopping,

to wrapping up the deal, to payment. People learned to

shop online a long time ago. Furthermore, companies have

already created the structures required to retail products

on the Internet. The main obstacle to F-Commerce is the

demand for shopping among Facebook users, without which

retail will not be able to assert itself inside Facebook. But the

first F-Commerce success stories do seem to indicate that

Facebook will be able to support further commercialisation

(See chapter “Player 3: Companies”).

STATUS QUO

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I click on Like on brand or company websites

65 %

36 %

29 %

19 %

20 %

12 %

12 %

23 %

15 %

I click on Like or Recommend for certain products on websites and online shops

I click on Share in websites and online stores in order to tell my friends about particular products

I visit brand and company websites or online shops whose brands or products my friends also Like

I use the option of logging in to other websites and online shops using Facebook

I tell my friends using Facebook about what I have bought

I tell my friends using Facebook about what I want to buy

I only use the Facebook functions on websites or in online stores in order to obtain discounts or take advantage of special offers

I do not know about or I do not use these functions


Many websites and online shops belonging to brands and companies (e.g. Amazon) have already integrated Facebook functions. Which of the following functions do you use?

Open Graph features are already being used

STATUS QUO

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The two spheres of F-Commerce: F-Commerce consists of retail inside Facebook as well as retail using, or by means of, Facebook. Retail inside Facebook is the heart of F-Commerce. It includes all buying activities that are concluded through Facebook such as Facebook Stores and the retail of virtual goods using Credits. The extended sphere of F-Commerce constitutes retail using Facebook as a means. This includes incorporating Facebook mechanisms on e-commerce sites using social plugins such as Likes, Shares and logins. This is known as the “Open Graph” and is about generating traffic on e-commerce websites and gathering data. This extended sphere is already widespread. Two-thirds of those asked (65%) use the Like button on external websites belonging to brands and companies, and one in three (36%) click Like or Recommend for certain products on websites and online stores.

Shopping as a personalised social experience: More than 250 million people use Facebook features on external websites every month (source: Facebook, April 2011). These widespread social plugins enable companies to collect data about their users and generate traffic. This way they can find out which of their offerings are most popular, and which are most frequently shared in user networks. But that is not all. The Open Graph stores all of a user’s public data, which means all of the interests he or she has listed (and made public) in Facebook, as well as all of the websites, articles, products and many more things which he or she prefers. Facebook currently provides companies with this data free of charge. Evaluating this data not only helps companies to optimise their range of products, but it also helps them to personalise their e-store to comply with user preferences. Visitors to an e-store can also see which of their friends also Like the e-store and products. This makes shopping both more personalised and more social at the same time.

“F-Commerce is a variety of social commerce. Companies that have mastered all things “social” have the

potential to become the new eBay or the new Amazon. I see enormous potential turnover in the social arena, because

there you can sell very close to your target group. In this respect, Facebook is a very suitable platform with

hundreds of millions of users who can be activated.”Jochen Krisch, Exciting Commerce

STATUS QUO

Facebook Commerce expands step by step: F-Commerce will spread over a number of stages. The first stage is that the use of the Open Graph will make shopping a personalised social experience. Users’ attention will be drawn to new products by recommendations from their own networks, and they will also learn to share their shopping experiences with others. The second stage is searching for products

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and presenting products directly on Facebook. Many brands are beginning to set up storefronts on their Facebook pages, where they can present their products. The purchase itself, however, takes place at the retailer’s own e-store. P&G, for instance, currently uses its brands’ F-Stores as a learning platform on which to gather knowledge about the shopping behaviour of its target group, and, as a non-retailer, about e-commerce in general. Users have also yet to experience shopping on Facebook. Once the acceptance of commercial offerings inside Facebook rises, then fully integrated F-Stores will establish themselves in stage three.

Stage 1:Generate and disseminate product recommendations[Open Graph]

Stage 2:Product presentation [Storefronts]

Stage 3:Complete purchase transactions[Fully integrated shops]

The success of F-Commerce depends on all of the players involved: As a multi-faceted

market, Facebook must remain an attractive platform to users as well as retailing

companies and service providers. But it is up to all of the players involved to shape the

future of F-Commerce.

“F-Commerce is made up of elements which users already know and accept from e-commerce. All users have

to learn is that shopping is now possible on Facebook as well. There is no need to build up trust in a new technology,

only in Facebook itself, and store-holders. That will not take long: 18 months may be all we need.”

Hendrik Maat, ShopShare

“F-Commerce is currently in a trial-and-error phase. Companies are watching to see what others are doing,

and how much of that can be adapted.” Stefan Wolk, Smatch

STATUS QUO

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PLAYER 1: FACEBOOK

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From friendly space to marketplaceTo Facebook, the rise of F-Commerce means entry into a new sphere since it opens up

additional sources of income. If F-Commerce succeeds, Facebook will be able to extend its

influence massively and will finally achieve key player status alongside Google, Apple and

Amazon. But Facebook will first need to prove itself to commercial enterprises and users

alike as a reliable partner.

Facebook is becoming the new online advertising giant next to Google: Facebook already

has more users per month than Google. On top of that, Facebook has access to extremely

sensitive personal user information, something which the social network is capitalising on by

means of advertising. According to eMarketer, Facebook posted a two billion US dollar

advertising turnover in 2010 (source: eMarketer, June 2011), a figure which is set to double

in 2011. Using Facebook, companies can reach target groups more effectively and efficiently

than ever before. The TechCrunch blog predicted back in June that Facebook would soon

overtake Google in terms of advertising turnover (source: TechCrunch, June 2011). But

Facebook still does not have any data about its users’ shopping habits. If the social network

manages to include a shopping history and product recommendations in its data set, then a

completely new range of business possibilities will open up to it.

PLAYER 1: FACEBOOK

“Facebook is giving F-Commerce a high priority. Positive results in the field of social gaming have motivated Facebook to turn to

e-commerce as a source of sales – and e-commerce here is very broad, ranging from music all the way to goods retail.”

Jochen Krisch, Exciting Commerce

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PLAYER 1: FACEBOOK

Facebook is giving a high priority to commerce: Facebook has

identified considerable potential sales in retail activities on its

platform, and in providing its data pool from the Open Graph.

The company can expect serious profits both as a retailer and

as a data aggregator, and it is pushing ahead with both types

of F-Commerce. Which of the two will in the end assert itself in

the market, and which will be the more profitable, is something

we cannot yet foresee. What is most important for Facebook is

to get a foot in the door to the retail world. That is why they set

up an internal Commerce Partnership Group in November 2010,

which is aimed especially at retailers and which will help them

to utilise Facebook as a selling tool. At the moment, companies

do not have to pay anything to use data from the Open Graph,

but this could change if at some point it becomes essential

for commercial businesses to access this data. In order not to

become dependent upon Facebook’s data pool, Amazon has

already installed its own “Like” button.

Mobile devices as an F-Commerce driver: 250 million users

are already accessing Facebook today using mobile terminal

devices. What is more, these users are twice as active as

stationary users. F-Commerce is currently unfeasible using

existing mobile apps. However, in June 2011 it became

apparent that Facebook is to pursue a new app strategy

by establishing an HTML5-based platform under the name

Project Spartan. In this way Facebook intends to bypass

Apple and Google and land its own cross-platform apps on

mobile terminal devices. Developers will be able to make

and market their own apps, and utilise Facebook instead

of Apple or Google as their infrastructure for processes like

payment, identification and so on. Facebook Credits would

then become the central payment system. It is still unclear

exactly what this platform will look like. What is certain is that

if Facebook succeeds in integrating mobile terminal devices

into F-Commerce, then F-Commerce will take off massively,

because so far only very few online retailers have managed to

sell anything via mobile devices.

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“It is still unclear whether Facebook will become a kind of aggregator like Google, or

emerge as a retailer like Amazon. As an aggregator Facebook would display products while the purchase transactions would take

place on external websites. As a retailer, Facebook would conduct the transactions

itself. What is probable is that Facebook will try to keep users on its platform by means of a

payment and log-in solution.”Stefan Wolk, Smatch

Growth is not infinite: So far Facebook has enjoyed constant,

rapid growth, but lately things have begun to falter. Although

the number of global users is still on the rise, user figures in its

core markets have for the first time declined for two

consecutive months. Six million users left Facebook in the USA

in May 2011 alone, and negative figures are also being posted

in Canada, the United Kingdom, Norway and Russia. This

development does not indicate a general exodus, but it does

indicate saturation. After all, Facebook has already reached

approximately 60% of the populations of the USA, Canada and

the United Kingdom. In any case there is no getting around the

fact that F-Commerce will depend for better or worse on

Facebook itself. What we can also say is that the half-life of

online platforms like AOL and social networks such as

Friendster and Myspace tends to be short. An exodus of users,

with the concomitant negative network effect, would have

colossal consequences for F-Commerce. There are certain

preconditions which Facebook will have to establish for both

users and businesses if it is to assert itself as a communication

and sales platform.

PLAYER 1: FACEBOOK

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What do you or would you dislike about shopping via Facebook?

I don’t want Facebook to know what I am buying

I don’t know whether shopping on Facebook is secure

I don’t want companies or brands to be able to access my personal data

I am afraid that companies or brands will be able to access my friends’ data

I don’t want to bother my friends with my shopping activities

I only want information from Facebook, not shopping

I don’t want to be disturbed by shopping activities on Facebook

I fundamentally distrust Facebook

I have no idea where to find stores on Facebook sites

I already have enough technical difficulties with Facebook as it is

55%

54%

53%

47%

41%

36%

31%

21%

21%

??%


PLAYER 1: FACEBOOK

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Facebook needs to become dependable: Facebook’s unique

status allows it to test its limits. New rules, regulations and

features appear unannounced, often without companies

receiving any notification or warning beforehand. Security and

data privacy are further concerns. If Facebook is to establish

itself as a retail platform, it will not only have to prove itself to

companies as more reliable, but it will also have to prioritise

security and data privacy.

Facebook must achieve security: Users still feel very uncertain

about shopping inside Facebook. Half of those asked do not

know whether it is secure to shop there (see chapter “Player 2:

Users”). These security concerns will disappear with time,

since only one in five people fundamentally distrust Facebook.

At some stage Facebook will introduce securer, i.e. encrypted,

data transmission; this will include, for example, the

introduction of secure HTTPS sites. But as well as that,

retailers will also need to convince their customers that it is

safe to buy from them (see chapter “Player 3: Companies”).

PLAYER 1: FACEBOOK

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Offer high security standards: Security will be a hygiene

factor in the still relatively unknown world of F-Commerce.

In that world, companies will have to offer the same security

standards as they do in their own e-stores. Collaboration

with entities such as Trusted Shops will ensure that F-Stores

fulfil all of the legal criteria as well.

Respect users’ private sphere: Users are worried about

how their and their friends’ data will be used. They also

value Facebook as a medium of information, and are

worried that a deluge of additional commercial messages

will destroy that experience. Restraint and data privacy

should be given the utmost priority.

Use F-Commerce as an accompaniment: F-Commerce

offers users (and retailers) new benefits over e-commerce.

At the moment, F-Commerce has the status of an

additional channel through which companies can offer

their customers a particular shopping experience; an

F-Store can complement an e-store, but not replace it.

Since the development of F-Commerce will depend very

much upon Facebook itself, companies would be well

advised to focus primarily on e-commerce so as to

preserve the greatest possible leeway for future decisions.

Lessons for companies

PLAYER 1: FACEBOOK

DRIVERS

OBSTACLES

SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF FACEBOOk AS A PLAyER

ThE COmmERCIALISATIOn OF FACEBOOk

mAy nOT FInD ACCEPTAnCE

FACEBOOk’S LACk OF CREDIBILITy In

FInAnCIAL SERVICES

RESERVATIOnS ABOuT DATA PRIVACy

AnD SECuRITy

POSITIVE RESuLTS In SOCIAL GAmInG /

FACEBOOk CREDITS

POTEnTIAL SOuRCE OF InCOmE

GROwInG RETAILER DEmAnD

uSERS DO nOT FunDAmEnTALLy

DISTRuST FACEBOOk

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PLAYER 1: FACEBOOK

DRIVERS

OBSTACLES

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PLAYER 2: USERS

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Facebook is among the most private areas of the Internet, and brands and media are

gaining increasing access to this area through their fans. Yet this acceptance is something

they have to keep earning anew, in return for which they are granted access to their fans’

personal recommendations. Tact is required to sell things in these zones. The majority of

users view F-Commerce favourably at the moment, even though the actual benefits are as

yet unclear; users have insufficient experience.

Facebook is the new TV: Not being on Facebook

is becoming more and more uncomfortable for

users. All kinds of social activities are posted on

Facebook. “I’m not on Facebook” is the new “I

don’t have a TV”. The adaptation speed around

Facebook is however quite different from that of

television. Two-thirds of all users have not even

been members of the social network for two

years (source: Pew Research Center, June 2011).

As a result, users’ general experience of

Facebook is quite scant, and since the platform

is in continual change, the Facebook experience

itself is also in flux for its users.

From interaction to transaction: Facebook was originally used to stay in touch with friends

and relatives and to keep up to date with what they are doing. Like emails, Facebook dealt

with a very private sphere. This is now changing massively on account of the growing

presence of media and brands. Half of those asked in this study (52%) are friends with at

least six brands on Facebook. Two-thirds of them consider Facebook a place to follow all

relevant themes centrally (see chapter “Status quo”). With the spread of F-Commerce,

shopping activities and product recommendations are filtering into users’ private realms, and

since they come from users’ own Facebook friends, they carry considerable personal relevance.

Fans become buyers

1–5 BRANDS

6–10 BRANDS

11–20 BRANDS

21–30 BRANDS

31–50 BRANDS

MORE THAN 50 BRANDS

DON’T KNOW

42%

30%

13%

4%

2%

3%

6%


hOw mAny BRAnDS OR COmPAnIES DO yOu FOLLOw On FACEBOOk?

PLAYER 2: USERS

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Seeking relevant content: People who are networked with brands mainly want to

keep up with the latest news. The majority of those asked wish to be informed

about new products (86%), activities (84%) and special offers (77%). Two-thirds of

people (68%) want access to exclusive content which is only available on

Facebook. Three-quarters of those asked (74%) use brands as part of their own

identity, by showing their friends the brands and products that they think are great.

One-third of those asked (37%) seek direct dialogue with brands.

Discrepancy between desire and reality: However, what is revealed is that brands

only succeed in fulfilling their fans’ expectations to a limited extent. What people

want and what actually happens are two very different matters. If you ask users

why they follow the activities of brands and companies, then the discrepancy

emerges. Only 67% of those asked rate the information as interesting; 66% take

note of exciting events that are publicised; and only half (46%) think that they

receive good offers and discounts.

PLAYER 2: USERS

“Facebook is a communication channel and that affects the mode in which members use it. Facebook

is used in a very different way from how people browse e-stores. On Facebook, you mainly want to entertain and be entertained, while in e-stores you’re

looking specifically for products.”Jochen Krisch, Exciting Commerce

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PLAYER 2: USERS


Why do you befriend brands and companies by clicking on “Like”?

I want to find out early about the brand’s or company’s new products

I want to keep up to date with the brand’s or company’s activities on Facebook

I want to take part in special offers and competitions

I want to tell my friends that I like these companies and brands or products

I want access to content which is available only on Facebook

I want to be entertained by the brand or company, and to have fun

I want to be inspired and surprised by the brand or company

I want to contribute actively and comm unicate with the brand or company

86%

84%

77%

74%

68%

61%

59%

37%

PLAYER 2: USERS

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Why do you follow the activities of certain brands and companies?

I receive lots of interesting information from the brands and companies

I am informed about exciting events and campaigns

I always receive good offers and discounts from the brands and companies

I find the activities of the brands and companies entertaining

I find the activities of the brands and companies inspiring

I follow what other users write on these brands’ and companies’ walls

I forward interesting information from these brands and companies to my friends

I myself post things onto the walls of these brands and companies

67%

66%

46%

39%

33%

32%

27%

16%


PLAYER 2: USERS

32

33

Shopping is highly viral: Anyone who supplies relevant or inspiring content will benefit

from Facebook’s highly viral nature. According to a recent ShareThis study, links relating

to entertainment and shopping are especially popular for sharing on Facebook. And

indeed, one in four of those asked passes on interesting information that he or she has

received from brands. Sharing is the new expression of appreciation (source: ShareThis,

June 2010). But for users to share product information, they have to feel genuinely

enthusiastic about the product or the information itself; contentment alone is not

enough. After all, by making these recommendations, users define their own profiles

within their networks.

“Mail-order and long-distance retailers can tap into new customer strata using F-Commerce, but the question is how to achieve and activate that. Much remains unclear, such as

what kind of a market will emerge and how much sales pressure can be built up in a communication channel.

Companies will have to think about what is possible within the scope of their own possibilities, and what suits them best.”


PLAYER 2: USERS

34

The majority of those asked view F-Commerce positively:

55% of those asked expressed an interest in the subject;

yet it is still very much in its early stages. Only 8% of those

asked have ever shopped in an F-Store. Twice as many, 16%,

have browsed in an F-Store but not bought anything. One in

three people did not know that such a thing exists but were

interested. This is where companies need to educate people

and give them a positive taste of F-Commerce.

Sceptics are also many: 45% of those asked are not at

all interested in F-Commerce. This dismissal is in part

fundamental; users wish to keep Facebook a non-commercial

place for friends. But some of it is also due to a lack of

experience and imagination on the part of users. Once people

experience F-Commerce for themselves, or once their friends

experience it, the number of sceptics will drop.

PLAYER 2: USERS

34

35

I have already bought something in a store directly on Facebook

31%

16%8%

45%

I didn’t know it was possible but I find the idea interesting

I have never bought anything from a store directly on Facebook, nor do I intend to


PLAYER 2: USERS

I have browsed in a store on Facebook before, but I have never bought anything

To what extent have you already shopped on Facebook?

36

The benefits of F-Commerce are not yet clear: Convenience is currently the

clinching argument for shopping on Facebook. 36% of users consider it practical

and time-saving not to have to leave Facebook to shop. 32% like to receive great

offers and discounts as direct News Feeds. 30% of those asked view Facebook

as a channel for exclusive products. One in four people expect to receive better

offers than they do at normal online stores.

The social aspect of F-Commerce is far less important by comparison: 19% like

it that others can see and comment on what they have bought, but only one

in ten is motivated to shop together with friends. These relatively low approval

figures point once again at a lack of experience and to users’ security concerns

about F-Commerce (see chapter “Player 1: Facebook”).

IT’S PRACTICAL AnD IT SAVES TImE BECAuSE I Am On FACEBOOk AnywAy

IT SAVES TImE LOOkInG, GREAT OFFERS AnD DISCOunTS ARE SEnT TO

mE DIRECT By nEwS FEED

BRAnDS’ AnD COmPAnIES’ FACEBOOk STORES GIVE mE PRODuCTS

ThAT ARE OnLy AVAILABLE FOR A LImITED PERIOD

I’m nOT InTERESTED In ShOPPInG VIA FACEBOOk SITES

whEn I ShOP AT BRAnDS’ AnD COmPAnIES’ FACEBOOk STORES,

I GET BETTER OFFERS ThAn I DO AT ThEIR OnLInE STORES

BRAnDS’ AnD COmPAnIES’ FACEBOOk STORES LET mE Buy PRODuCTS

ThAT I CAn’T GET AnywhERE ELSE

my FRIEnDS COmmEnT On AnD RESPOnD TO my PuRChASES

I ShOP whERE I CAn mEET LIkE-mInDED PEOPLE ASSOCIATED wITh

BRAnDS OR COmPAnIES

IT’S mORE Fun ShOPPInG VIA FACEBOOk

I CAn GO ShOPPInG TOGEThER wITh my FRIEnDS

36%

32%

30%

29%

26%

22%

19%

12%

12%

9%

whAT mOTIVATES OR EXCITES yOu ABOuT ShOPPInG AT BRAnDS’ AnD COmPAnIES’ FACEBOOk SITES?


PLAYER 2: USERS

38

Intangible goods have the greatest potential: Although the social aspect is less commonly named

as a benefit of F-Commerce, immaterial goods are currently among the most popular. These

are things that can be given easily to others or shared. Providers like Ticketmaster generate an

additional 5.30 US dollars of turnover for every ticket they sell via Facebook. Starbucks allows its

customers to manage their customer cards on Facebook, by topping up their bonus cards and

iPhone payment cards in the company’s F-Store. When users were asked which areas they can

imagine shopping in using Facebook , the top two answers were tickets for events and travel (64%),

and vouchers of all kinds (62%). Further down the list come media such as books, magazines, films

and music (57%), and fashion (46%). In view of this, the deals being pushed by Facebook (online

discount coupons) have a good prospect of success, since everything seems to indicate that

trading on Facebook using coupons will work.

ALL kInDS OF VOuChERS

TICkETS FOR EVEnTS AnD TRAVEL

BOOkS, mAGAzInES, FILmS AnD muSIC

CLOThES, ShOES AnD FAShIOn ACCESSORIES

ELECTROnIC EquIPmEnT AnD ACCESSORIES

TRAVEL AnD hOTEL ACCOmmODATIOn

GAmES AnD VIRTuAL GOODS (E.G. FOR FARmVILLE, mAFIA wARS)

COSmETICS AnD BODyCARE PRODuCTS

SPORTS EquIPmEnT AnD PRODuCTS

FuRnITuRE AnD hOuSEhOLD ACCESSORIES

FOOD AnD DRInk

mEDICInES AnD mEDICAL PRODuCTS

DIy PRODuCTS AnD ACCESSORIES

CARS, mOTORCyCLES AnD ACCESSORIES

72%

71%

65%

55%

45%

42%

44%

38%

32%

28%

25%

22%

20%

18%

62%

64%

57%

46%

38%

39%

36%

32%

27%

24%

21%

18%

17%

15%

10%

7%

8%

9%

7%

3%

8%

6%

5%

4%

4%

4%

3%

3%


TOTAL ALREADy PuRChASED

CAn ImAGInE PuRChASInG

yOu CAn nOw ShOP On FACEBOOk AS wELL. whAT hAVE yOu BOuGhT SO FAR AT FACEBOOk STORES BELOnGInG TO BRAnDS AnD COmPAnIES, OR In whICh AREAS CAn yOu ImAGInE DOInG SO?

Spontaneous buying dominates F-Commerce: User behaviour still varies widely between the

fields of e-commerce and F-Commerce. Users browse Facebook initially without any particular

intention to buy. The shopping process tends to begin coincidentally when they receive Trusted

Discoveries via News Feed. Users tend to skip searching, researching and comparing sellers

PLAYER 2: USERS

39

PLAYER 2: USERS

“Exclusive offerings on Facebook, such as the Joop pop-up store, attract attention and therefore alert consumers to F-Stores in

general. Sooner or later people will go to Facebook just to look for an F-Store, in the knowledge that they can obtain better offers there. This will change what people expect from Facebook.”


Users are optimistic about the future of F-Commerce: Even though 45% of users cannot yet

imagine shopping on Facebook, the majority of them do believe that shopping will become a

permanent feature of the Facebook experience in the future. 70% of those asked state that

shopping on F-Stores will at some point become normality.

IN A FEW YEARS, SHOPPING ON FACEBOOK OR USING FACEBOOK TO SHOP

ONLINE WILL BECOME NORMALITY

I WOULD BE MORE LIKELY TO SHOP IN FACEBOOK STORES BELONGING TO

SMALLER BUSINESSES THAT I KNOW WELL THAN I WOULD IN THOSE BELON-

GING TO BRANDS AND BIG COMPANIES

I WOULD BE MORE LIKELY TO SHOP IN FACEBOOK STORES BELONGING TO

STARS, CELEBRITIES, MUSICIANS, SPORTS CLUBS AND SO ON THAN I WOULD IN

THOSE BELONGING TO BRANDS AND COMPANIES

I WOULD BE MORE LIKELY TO SHOP IN FACEBOOK GAMES (E.G. FARMVILLE)

THAN I WOULD IN FACEBOOK STORES BELONGING TO BRANDS AND COMPANIES

NO RESPONSE

70%

41%

21%

21%

18%

AGREEmEnT wITh STATEmEnTS (Top two answers: agree completely / basically agree)


if they receive a recommendation from within their personal networks. They see something, like

it – and grab it. Products that do not require detailed research and which offer immediate rewards

will sell more easily on Facebook than products that require a lot of information. Traditional

e-commerce channels are more suited to intensive research, price comparisons and so on. But

with the growing number of commercial offerings, Facebook users will gradually change modes:

they will visit F-Stores specifically to look for exclusive products and special offers.

40

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41

Lessons for CompaniesOffer special benefits: Users expect a special shopping experience on Facebook. As fans

they want to enjoy exclusive offers, unique products and generous discounts. Shopping on

Facebook should offer immediate rewards that motivate users to talk about their purchases.

This includes, for instance, dynamic group shopping experiences. Companies can also use

group purchases to reach new consumer strata.

Sell by communicating: Commerce must adapt to Facebook’s communicative mode of use.

Communication and networking will continue to play a major role. Selling must be perceived

as an enrichment and not a disturbance. Products whose purchase does not require a lot of

research are especially suitable.

Generate positive experiences: For Facebook to establish itself as a sales channel, it is

crucial that users get a positive taste of F-Commerce. This includes products being depicted

in the right way, and a good overall user experience. The products themselves should also

generate enthusiasm and should be unique.

Gain entry using intangible products: Immaterial things such as vouchers, discount codes and

coupons are especially suitable for gaining entry into F-Commerce; they are particularly easy to

buy. Giving them away generates word-of-mouth propaganda. This way companies can acquire

experience in F-Commerce, and try out products to see which ones create a lot of buzz.

PLAYER 2: USERS

SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF uSERS

DRIVERS

OBSTACLES

DECISIVE BENEFIT NOW: TIME-SAVING AND PRACTICALITY

DECISIVE BENEFIT TOMORROW: SHOPPING AS A SHARED ExPERIENCE

SPECIAL, ExCLUSIVE OR PERSONALISED OFFERS

A SPECIAL SHOPPING ExPERIENCE THAT IS FUN AND ENTERTAINING

TRUSTWORTHY PRODUCT RECOMMENDATIONS PROVIDE ORIENTATION

SHARE ExPERTISE AND BUILD UP A PROFILE THROUGH RECOMMENDATIONS

CONCERN ABOUT PERSONAL DATA

FEAR OF SPAM

BENEFITS OVER ONLINE STORES NOT YET CLEAR


42

PLAYER 3: COMPANIES

PLAYER 3: COMPANIES

43

PLAYER 3: COMPANIES

Selling by CommunicatingWhat was previously a communication channel is becoming a sales channel. To

companies this means new ways of capitalising on their customer relationships. Unique

communication and sales concepts are appearing which are only feasible on Facebook.

Companies already active in the field of F-Commerce can profit from their head start and

from the profiles they have built up.

Facebook site vs. brand website: Facebook is gradually evolving into a mini-Internet all

of its own, with all the possibilities and features which the World Wide Web has to offer.

Brands’ and companies’ Facebook sites are competing for attention with their own

websites. Half of the people asked in this study visit brand and company Facebook sites

more often than their official websites, although a slight majority (54%) still spends more

time on the latter. Some companies have even gone as far as replacing their brand or

company websites with Facebook pages. Despite this it does seem that websites and

Facebook sites each have their own raisons d’être. Seven out of ten of those asked

believe that Facebook sites aim especially at fans (70%), while websites are intended for

anyone who is interested (75%). Facebook sites are considered more up to date than

websites (71%), and 57% of those polled consider it more fun to follow the activities of

brands and companies on Facebook than it is to visit their regular sites.

News Feed vs. Facebook site: As a fan of a brand or company there are two ways of

receiving information within Facebook: via News Feed or on the brand’s Facebook site.

Since the News Feed is the heart of Facebook usage, activities publicised that way

attract a lot more attention than a Facebook site on its own. Not only can you

communicate by News Feed, you can also sell. For example, flower delivery company

1-800-Flowers offers selling options directly by News Feed. But there are also good

reasons to visit the site itself: one in two (50%) people visit Facebook sites to look for

information. One in three (34%) post their questions directly on the Wall in order to

obtain information. These different access methods must all be taken into consideration

by any company planning an F-Store.

44

PLAYER 3: COMPANIES


Comparing the websites of brands and companies with their Facebook pages, to what extent would you agree with the following statements?

Top two answers: agree completely / basically agree

I visit the Facebook sites of brands and companies more often than their websites

I spend more time on the Facebook sites of brands and companies than on their websites

It is more fun to follow the Facebook activities of brands and companies than it is to visit their websites

The Facebook sites of brands and companies are aimed directly at fans

The websites of brands and companies are directed at anyone who is interested in them

The Facebook sites of brands and companies are more up to date than their websites

I post questions directly on brands’ walls in order to find things out

I use the Facebook pages of brands and companies to look for information

53%

46%

57%

70%

75%

71%

34%

50%

44

45

Designing a dedicated F-Store: F-Stores can be categorised

according to three aspects: their level of implementation, the

duration of what is offered and the type of things that are offered.

These three dimensions can be combined with one another in very

different ways.

Low level of implementation: storefronts. These are product

presentations with a link to an external store. Brands like P&G,

Nivea and Mexx use their F-Stores for presenting products. The

shopping itself takes place either in the brand’s own e-store

(Nivea) or in e-stores belonging to retailers (P&G). In this way,

companies investigate whether Facebook users are interested in

their products within the social network. Storefronts represent the

second stage of F-Commerce, and we can assume that they will

gradually be replaced by fully integrated shop solutions.

High level of implementation: fully integrated shops. The entire

shopping procedure including payment takes place on Facebook.

British clothing mail order company ASOS, porcelain manufacturer

Kahla and Fahrrad.de offer fully integrated solutions of this kind

on Facebook.

Permanent stores: The F-Store is built up and established long-

term as a sales channel. The F-Store becomes a rival to the e-store.

PLAYER 3: COMPANIES

46

“The entertainment factor is very important in F-Commerce at the moment. In the

long term it will also be possible to accommodate whole ranges of products inside Facebook,

while the advantage is that you can show users only those products that really interest them. The Open Graph gathers demographic and

psychographic data which enables this kind of personalised preselection.”

Stefan Wolk, Smatch

Standard tools vs. customised F-Stores: When implementing

their F-Stores, companies have the choice between

prefabricated tools (shop applications) and customised solutions

(canvas pages).

Shop applications: Shop pages can be integrated directly into

Facebook in the form of prefabricated solutions. Users do not

have to leave Facebook in order to visit an F-Store. Images,

however, are limited to a size of 520 pixels.

PLAYER 3: COMPANIES

Pop-up stores: This version offers its fans limited-duration sales.

For instance, in June 2011 Joop offered exclusive, limited-edition

products for a period of ten days on its pop-up store. Campaigns

of this kind are suitable for drawing attention to special offers

and activities, and for generating interest. They can be used for

discounts, product launches and exclusive products.

Standard range: Users can buy products in the F-Store which

are also available elsewhere. ASOS, for example, offers all of

its 150,000 products for sale on Facebook just as it does on

its regular online store. In this approach the F-Store competes

directly with the e-store.

Exclusive offers: The F-Store is used to offer products just for

fans. These products are available only on the F-Store. This

approach serves to deepen relationships with fans. Pantene

(P&G) was one of the first brands to enable its fans to buy new

products which were not yet available in the shops.

47

Canvas pages: These individually designed sites are implemented in external applications.

A canvas page can be designed in a company’s corporate design, but it does not have as

many features as a shop application. Another drawback is that to get to a canvas page you

have to leave Facebook.

Using Facebook to personalise stores and websites: Facebook uses its Open Graph to

collect a lot of personal information from users and provide it to companies. Levi’s and Etsy

(a marketplace for handmade products), are well-known examples of companies who use

Facebook’s data pool to personalise their websites. People who use these websites receive

personalised product recommendations and gift ideas. However, the Levi’s Friends Store

is a case in point of how the Open Graph protocol does not yet reflect reality. Despite Levi’s

2.9 million fans, no more than 500 people have clicked on Like for its 501 Stonewashed

Jeans. Users are accustomed to clicking Like for brands, but not yet for products.

Brands as retailers: F-Commerce offers companies the possibility of setting up their own

branded F-Stores. P&G has set up channels for buying seven of its brands (including Tide,

Gillette and Febreze) via a number of retailers. Users decide whether they would prefer to

buy the selected products from Amazon or from Wal-Mart. Nivea, on the other hand, directs

users to its own online brand shop. A new era is approaching for pure retailers: they will

have to come up with good marketing concepts to counter stiffer competition.

“Facebook is made not for companies but for users. That’s why F-Commerce will suit companies who are able to adjust to

Facebook. The only approach which promises to succeed in F-Commerce is that of conventional market orientation: you adjust your range to the target group who are on Facebook

or who are following you on Facebook.”Jochen Krisch , Exciting Commerce

Companies experiment with communication strategies: F-Commerce is a testing ground for

varying communication and marketing approaches. In place of microsites, more and more

companies are utilising Facebook applications for promotions and product launches. Three

types of F-Commerce offerings have so far emerged.

Promotions: Fans expect special treatment and exclusive access to offers and information.

There are various ways in which companies can reward their fans. As part of a fan-first

campaign, Heinz Ketchup sold a new product to its fans before the official launch. Fans-

only offers are directed at fans and nobody else. Coca-Cola successfully sells merchandise

products in its F-Store.

PLAYER 3: COMPANIES

48

Deals and group purchases: Depending on the number of fans a company has,

vouchers and group discounts can be offered in a dedicated channel or on an external

platform. Wal-Mart, for example, has its own Crowd Savers scheme. ShopShare offers

a Deals feature on its Facebook page. This allows offerings from smaller suppliers to

be scattered over various channels and therefore reach more prospective customers.

Gamification: Facebook has already proven itself as a platform for social games.

Retailers are now attempting to combine gaming mechanisms with their trade. On

the Facebook page of fashion brand Wet Seal, users can put together outfits from

the F-Store and compete against one another, which the retailer hopes will attract

attention and generate extra sales.

“Retailers will have to master all things social. You have to know how to handle recommendation mechanisms and how to build up relationships. The challenge is customer loyalty – continually binding people to the things you have to offer.”


Dialogue and interaction required: F-Commerce is fundamentally changing the role of

social media. Its aim is to convert Likes into Buys. Clicking on Like to indicate brand

preference is something which precedes actual sales, which is why dialogue with fans

is at the heart of F-Commerce. Purely sales-based or advertising approaches will not

succeed in a social network.

PLAYER 3: COMPANIES

Jury still out on efficiency: The effectiveness of F-Commerce remains low in

comparison with other channels. Click-through rates fluctuate between 1% (source:

Forrester Research, April 2011) and 6.5% (source: Fluid, April 2010). Only 2% of these

become actual sales. By comparison, email campaigns generate a click-through rate

of 11% and a purchase conversion rate of 4%. In the early stages of F-Commerce it

will be up to companies to establish their own soft and hard success criteria and set

benchmarks. Referrals, Comments,

48

49

PLAYER 3: COMPANIES

“Interactivity is the primary precondition for F-Commerce, and to succeed in it, retailers will have to think up a good mix, preferably of news, competitions, and feedback campaigns. Product can also be presented, but not too many or too often. Presenting products every day like clockwork does not work. The exception is a dedicated page for products at which users who become fans expect frequent, purely product-related information.”

stefan Wolk, smatch

50

PLAYER 3: COMPANIES

Likes and Shares are parameters

which are just as important as the

actual sales themselves. New statistics such as

“sales per Like” and “sales per Share”

are emerging.50

51

“Facebook is a marketing tool and not a sales channel. This of course has implications for the F-Store and the things presented there for sale. These sites therefore need adapting accordingly. That begins with the

choice of shops and ends at the products sold there. Especially suitable for selling on Facebook are products that are new, particularly suited to

fans, and liable to bring fans benefits.”Hendrik Maat, ShopShare

Battle for channels: So far Facebook has been used as a platform for building up brands

and communicating brand personalities. Social media activities fall within the remit of

marketing and communication departments, whereas e-commerce is normally the precinct

of sales. The rise of F-Commerce will fuel the fundamental conflict between marketing

and communication on the one hand and sales on the other, and the question of whom

Facebook belongs to as a channel – and whom the fans belong to – will have to be

renegotiated. While marketing and communication organisations build up relationships

with fans and are measured in terms of their satisfaction, it is the logic of selling which

dominates sales departments. This will demand some new thinking.

Security is a hygiene factor: In terms of security, retailing companies must apply the

same security standards to their F-Stores as they do to their e-stores. Security seals from

Trusted Shops and McAfee Secure guarantee the same high standards as they do in online

shops. There are however black sheep in the field of F-Commerce whose behaviour could

discredit F-Commerce and slow its growth.

PLAYER 3: COMPANIES

“F-Stores must comply with German law. Sadly there are providers, some of them well-known companies, who have

ignored this and who are risking disciplinary action. This threatens the general acceptance of F-Stores. Collaboration with companies like Trusted Shops guarantees that an F-Store

fulfils all of the legal criteria.”Hendrik Maat, ShopShare

Monetary benefits for companies remain low: Companies are still viewing F-Commerce

as an investment. Although some F-Stores are attracting a lot of customers, large-scale

monetary success is still a rarity. According to ShopShare, its customers generate with

their F-Stores approximately 2 to 5% of what they sell on their e-stores. At its current

stage, F-Commerce functions more as a marketing tool than a sales channel. The focus

is primarily on customer loyalty and customer involvement. The number of customers

is as low as their willingness to spend money. More lucrative market opportunities will

open up as F-Commerce continues to establish itself.

52

Lessons for CompaniesDefine your own benchmarks: You can’t apply the same quantifying criteria to all channels.

The rate of conversion from visitors to buyers is lower on Facebook because people do not

visit Facebook intending to buy things – at least not yet. Companies will have to look behind

the figures and establish their own benchmarks. “Sales per Like” and “sales per Share”

define the quality of customer relationships on Facebook. The number of repeat buyers and

recommendations expresses the satisfaction of fans.

Do not replicate e-stores: Instead of producing carbon copies of their e-stores, companies

should attract attention and create relevance by means of new concepts. Facebook is highly

suited to experimenting with unique communication approaches. Time- and volume-linked

offers, as well as fan-first and fan-only products, increase desirability and promote word-of-

mouth propaganda.

Observe user behaviour: Facebook Insights offers a series of standard criteria which companies

can track, such as the growth of fan numbers, interactions between fans and migration rates.

Evaluating these figures allows you to determine whether your Facebook site is delivering

relevant content. Companies can also use these figures to learn which incentives are

successfully converting fans into customers.

Wall as shop window: Facebook is still not a platform for searching for products. Users are

more likely to happen upon recommendations from their friends, or receive information about

interesting products as a News Feed. Companies’ own Walls and News Feeds function as a

kind of shop window that offers inspiration and ideas. Companies should try to design their Walls

like shop windows that carry attractive offers.

53

Fulfil new expectations: On Facebook, users are learning that their status as fans gives them

access to exclusive information and offers and that they do not receive this special treatment

anywhere else. Companies should always take this reward aspect into account in order to

encourage further recommendations and word-of-mouth publicity.

Utilise personalisation: Access to Facebook’s data pool gives companies the opportunity

to personalise their offerings by doing things like providing users with personal product

recommendations. Facebook also offers a series of social components. Companies can set

up wish lists in their F-Stores, which are then activated for friends (e.g. Bulgari).

PLAYER 3: COMPANIES

SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF COmPAnIES

F-COMMERCE OFFERS AN ADDITIONAL CHANNEL

PLATFORM FOR UNIQUE COMMUNICATION CONCEPTS

HIGH VIRALITY ALLOWS NEW CUSTOMER STRATA TO BE OPENED UP

FREE TO USE DATA POOL

DRIVERS

OBSTACLES

ADDITIONAL INVESTMENTS

EFFECTIVENESS NOT YET PROVEN

LACK OF BENCHMARKS

POTENTIAL FOR DEPENDENCY ON FACEBOOK AND ITS DATA POOL

USER ANxIETIES ABOUT DATA PRIVACY AND SECURITY

54

There is nothing more social than going shoppingInterview with Christoph Strassburger, Director of Social Media and Web TV at HORNBACH Baumarkt AG

It seems as if for companies, Facebook is transforming from a communication channel into a sales channel. How do you view that?

I do think there is a certain danger of people leaving Facebook if commercialisation goes too far, especially heavy users. But the big benefit of Facebook as a platform for exchange is that more and more aspects of life are taking place there, and that includes shopping.

There is nothing more social than going shopping. To us as a company, F-Commerce means an opportunity to place our products precisely where dialogue is taking place with our target group.

How much involvement has HORNBACH had so far with F-Commerce?

None yet. But what we have learned is that simply plonking products from our e-store onto our Facebook page does not elicit good feedback. If, however, we package the items appropriately, such as incorporating them into a story or combining them with a survey, then this kind of link-scattering functions well. We have not yet sold anything via Facebook itself, but sooner or later we are bound to try it out.

Companies are often advised not to place their whole product range on Facebook, but instead to think up deals and special offers. Do you agree with that advice?

We too believe that you shouldn’t replicate your e-store on Facebook. You have to offer users something else of benefit aside from what e-stores offer, over and above the fact that you don’t have to leave the platform to buy on Facebook. Other benefits might include exclusivity and individually tailored products or packages (e.g. for students). Full product ranges are already working in the USA, but over here it will be a couple of years or so before we get to that.

US experts are the ones who are forecasting that F-Commerce could be bigger than Amazon or eBay. Do you share that view?

Facebook could potentially outdo them all, yes. The biggest advantage of Facebook is that it doesn’t originate in commerce. Facebook offers a large spectrum of features and possibilities; you can do on Facebook all the things you do in real life. At the moment there is no other platform that offers that. Maybe one day we will differentiate between the World Wide Web and Facebook because a parallel world will have established itself there.

But commercialisation could cause users to leave…

Facebook mustn’t switch over immediately, it should introduce users gradually to the concept. It should be a flowing transition. If users always order their books from Amazon, then one day they might well try out Amazon’s F-Store. Once that has happened, retailers that are not so deeply involved in the online world (like DIY markets) will begin to try out F-Commerce. Just as Amazon and OTTO paved the way for us into e-commerce, so they will also be the pioneers of F-Commerce. If it is done cleverly and not too pushily, then users will accept F-Commerce and will tend to see the benefits rather than the drawbacks.

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PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE

PROVIDERS

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“The providers with the greatest potential are those who specialise in F-Commerce and who can

combine the functions and features of Facebook with other successful e-commerce elements.”



New Players EmergeF-Commerce means combining communication with trade. This will require different

fields of expertise to be brought together and new approaches to be tested.

Intermediaries will fill in the gaps in expertise that emerge. New business models are

arising in the fields of shop software and F-Commerce consulting.

Demand for new services: The rapid growth of F-Commerce is thanks not least to its

openness to external developers. New applications are enriching what is on offer but

they are also making things complex. The myriad possibilities which the new sales

channel is unveiling bring with them new challenges for companies: how do you sell

things in social media? Which shop solution suits our brand and our products best? How

much selling pressure can we build up? The combining of communication and trade on

Facebook is resulting in new fields of business.

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Selling by communicating: In F-Commerce, the products have to find their way to the buyer

and not the other way around. That is why it is not enough simply to place your products on

your Facebook page. High-profile campaigns should not only reach potential customers, but

they should also stimulate interaction between users and the brand, and between the users

themselves. The phases before and after purchase in which the product is shared and

recommended are just as important as the sales transaction itself. A seamless transition

from interaction to transaction will be the future aim of marketing campaigns on Facebook.

The new challenge facing social media specialists will be to combine storytelling with

product selling.

Finding a shop solution: There are various ways in which companies can incorporate their

products into Facebook, ranging from pure product presentations all the way to purchase

transactions. The different manifestations of the F-Store are listed in the “Companies”

chapter. The main factor which will determine the choice of service provider – aside from

the level of implementation of a company’s products – is the technical implementation

itself. Companies can choose between prefabricated and customised shop solutions.


Automation: An automatically produced storefront offers the quickest way to enter

F-Commerce. This storefront is often linked to products in a company’s own e-store or

their Amazon or eBay shop, and then integrated into the Facebook page as a shop

application. The shopping platform Tradoria and shop supplier ShopShare are currently

busy implementing a feature which, at the click of a button, will create storefronts for the

platform’s 4,000 shop customers and integrate these in Facebook. Payvment is one of the

best-known providers of shop solutions alongside ShopShare. It offers a special application

which enables customers to place products into a central shopping basket, and take them

with them to other fan pages that support Payvment Shops, where they can then add

more products.

Customisation: Companies that opt for a customised solution enjoy more ways of designing

their store visually and giving it different features. The “Companies” chapter provides an

overview of this. Service providers like ShopShare and Adgregate can assist with the relatively

complex conceptual and technical implementation processes.

Reaching potential customers: Getting people to find you and your products on Facebook

is one of the biggest challenges facing retailers. One solution is offered by marketplaces

which aggregate products, thus simplifying search and comparison processes. Examples

of these are:

Payvment Shopping Mall enables cross-shop buying inside Facebook. The platform

encompasses approximately 1.2 million products. (Source: Facebookbiz, February 2011).

Smatch is a centralised platform enabling comprehensive product searches and

comparisons inside Facebook. Users will find around 2.5 million products

offered by 700 partner shops.

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Soap is a Facebook application from Amazon. This marketplace for drugstore products

offers complete purchase transactions.

Facebook is evolving into a central location for products enriched with social information. In

the future users will look to Facebook for presents for their friends, or to find out what their

friends are recommending before purchasing. This means that the actual benefit of these

marketplaces is not just the aggregation of products but also the intelligent incorporation of

user data from the Open Graph.

Creating a special shopping experience: Aside from shop solutions, a series of standardised

applications and features is emerging that can be incorporated into companies’ marketing

concepts. The foremost of these include Deals, in-feed sales and commerce widgets.

Deals: group purchases have a big future on Facebook. Established suppliers like Groupon

are harnessing the viral nature of Facebook by publicising deals using referrals. Numerous

other platforms and concepts are springing up as well. ShopShare offers a deals feature

which, unlike Groupon and others, is especially suited to offerings that are fixed in location.

Group purchases are scattered across different platforms in order to reach as many potential

customers as possible.

In-feed sales: Sales that take place directly inside News Feeds are especially suitable for

impulse buying. This kind of selling has already been tested for the sale of virtual goods in

social games. Flower delivery company 1-800-Flowers has also used it successfully.

(Source: Internet Retailer, February 2010). 8thBridge is another company offering this

feature.

Commerce widgets: Widgets are mini-shops that can be placed anywhere where the target

group spends time. They are able to present products and also support a payment system.

Commerce widgets can be integrated into a Facebook page and also scattered in the Web,

e.g. on Facebook, Twitter and blogs. Sellaround and Moontoast offer this feature.

Innovation is slowing at Facebook: Facebook is now so large that it takes a lot of time to roll

out new features and functions. It took many months before Facebook email came onto the

market, for example. This means there is an opportunity for smaller, more agile companies

to occupy new areas of business with innovative concepts, ranging from entertaining,

group-dynamic concepts like deals and social games all the way to applications enabling

personalised product ranges and highly individualised marketing, such as in-feed sales.


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“The first one or two years of growth in F-Commerce will be initiated above all by campaign and deal providers because it is they who lean most heavily on the buzz and communication aspect. After that, F-Commerce will establish itself more broadly. We should however assume that it will tend to be newer companies who conquer this territory for themselves.” Jochen Krisch, exciting commerce

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Lessons for CompaniesGather empirical data: F-Commerce is

not yet a sales channel. Turnover generated

by an F-Store is currently only around

2–5% of that of an e-store. Exaggerated

sales forecasts should therefore be eyed

with suspicion. Serious consultants can

offer benchmarks and supply dependable

empirical data.

Consider certification: F-Stores must

comply with the law. When you choose

a shop software supplier, remember that

security seals from Trusted Shops or McAfee

Secure guarantee that this is the case.

Fill in gaps in expertise: F-Commerce

demands an interdisciplinary approach.

In order to develop high-profile

campaigns, companies will be turning to

intermediaries who can offer combined

skills such as digital brand management,

marketing (CRM), data analysis, software

development and game development.


SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF SERVICE PROVIDERS

DRIVERS

OBSTACLES

OPEN INTERFACES FACILITATE FREE FACEBOOK

INTEGRATION

TRIAL-AND-ERROR PHASE: COMPANIES ExPERIMENT

WITH DIFFERENT FEATURES AND APPROACHES

NEED FOR INFORMATION: SERVICE PRO-VIDERS CAN

GIVE THEMSELVES A PROFILE WITH BENCHMARKS

AND EMPIRICAL

VALUES, THUS ATTRACTING ATTENTION TO THEIR

PRODUCTS AND SERVICES

FACEBOOK IS DRIVING THE COMMERCIAL-ISATION

OF ITS PLATFORM WITH ITS OWN FEATURES (DEALS)

AND ITS OWN CURRENCY (CREDITS)

PROFITS STILL RELATIVELY LOW

THE MAJORITY OF COMPANIES STILL TEND TO LOOK

DOWN ON F-COMMERCE

BASING YOUR BUSINESS MODEL ON FACEBOOK COULD

BE RISKY BECAUSE F-COMMERCE MAY FLOP, AND

FACEBOOK MAY BEGIN TO CHARGE MONEY

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Buzz

Buzz refers to the viral propagation of

information – in other words, fast

communication from one person to another.

Many of the Facebook platform’s features

are viral in nature because they are

designed to introduce information quickly

into a user’s network.

Click-through rate

The click-through rate is a statistic which

measures the efficiency of online

campaigns. In the case of Facebook

Commerce it refers to the ratio between the

number of people who visit a Facebook

page containing products and the number

of people who then go on to visit the

retailer’s online shop.

Commerce widget

This is a small application that can be

integrated into websites, blogs and social

networks in order to present products for

sale. Within Facebook, presenting products

using a commerce widget provides more

possibilities than presenting them in the

conventional way within the supplier’s News

Feed.

Comments

The Comments function is a social plugin

which can be integrated into websites

outside of Facebook by means of a

comments box. If somebody comments on

the content of a page, then this comment

appears on the user’s Wall, and therefore

automatically in the News Feed supplied to

his or her friends.

Facebook apps

Facebook apps are small applications that

can be integrated within the platform on

users’ profile pages or on companies’

pages. Aside from the applications which

Facebook has developed itself, many others

are provided by external suppliers.

Facebook apps can take the form of games

or communication applications of many

different kinds.

Facebook storefront

A Facebook storefront refers to the way a

supplier presents its products on its

Facebook page. If a user wants to buy a

product on the page, then he or she is

diverted to an external online shop in order

to make the purchase.

Fan-first/fan-only items

These are products supplied by a

manufacturer or retailer which either appear

earlier than in regular shops or online stores,

or which are sold exclusively to the fans of a

particular page on Facebook.

HTML5

HTML is a text-based markup language

used to define the structure and look of

Glossary

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content such as text, images and hyperlinks

in Internet documents. Its latest version,

HTML5, offers extended functionalities for

doing things such as incorporating audio and

video elements.

HTTPS

HTTPS is a network protocol used to encrypt

and authenticate communication between

web servers and browsers in the World Wide

Web. This protocol can be used to protect

data from being spied on by third parties.

In-feed sales

In-feed sales refers to presenting and

selling products within the News Feed of

a Facebook user.

Like button

The Like button is a Facebook social plugin

which can be integrated into external

websites. Clicking on the Like button

publishes the content of an external website

on the user’s own Wall in the form of a link

referral, and thus places it in the News Feed

going out to their friends. It also creates an

entry on the user’s profile under “Activities

and Interests”.

McAfee Secure

McAfee Secure is a service which examines

online shops daily for gaps in their security,

and can even rectify them in some cases.

This reduces the danger of hacker attacks,

and of unauthorised access to the site, and

therefore makes the online shop more secure.

Mobile apps

Mobile apps are applications for smart

phones and tablet PCs which are usually

purchased via a sales portal integrated into

the operating system, allowing them to be

installed directly.

News Feed

The News Feed is integrated into the

homepage of every Facebook user. It is here

that all of the news and interactions issuing

from that user’s friends or from pages which

he or she “Likes” are fed in by means of an

algorithm in the form of news.

Open Graph

The Open Graph protocol is one of the core

functions of the Facebook platform. This

interface offers developers the possibility of

accessing data associated with the users of

the Facebook platform. The various social

plugins such as Likes and the login and

Comments functions enable the content of

external websites to be integrated into the

social graph of any given user – which means

his or her friends, interests and activities.

Conversely, the content of Facebook can be

integrated into external websites, and the

way those websites display, thus customising

these websites for particular users.

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Opt-out principle

The opt-out principle assumes by

default that every user agrees with

processes requiring consent. To decline

something you have to opt out actively.

For example, changes to the Facebook

platform are adopted automatically for

every user profile. Users can only

prevent this from happening by changing

their settings so that the change does

not take effect.

Pop-up store

Pop-up stores are Facebook shops which

appear on a user’s homepage at particular

times if the user is a fan of the shop

provider. Pop-up stores are suitable for

targeted campaigns such as the launch of

a new product.

Share function

The Share function is a social plugin

which can be integrated into websites

outside Facebook using the Share

button. When you click on the Share

button, content from the external

website is posted on your own Wall in

the form of link referral, or in the News

Feeds sent to a friend, including

commentary. Facebook itself no longer

communicates the Share button, since

its function is now fulfilled by the Like

and Send buttons.

Social commerce

Social commerce refers to a specific

version of e-commerce in which the active

participation of customers, and

communication between them, supports

the buying process. Familiar elements of

social commerce are product

recommendations and customer reviews.

Social games

Social games are gaming applications,

usually free, that are offered on social

network platforms. Users can play with

or against their online friends, and

measure themselves against each other.

The best known social game at present

is Zynga’s FarmVille development game.

Social plugins

Social plugins are elements that are

integrated into external websites, thus

enabling their content to be passed on

or shared on social media platforms. The

most familiar social plugin is Facebook’s

Like button.

Trusted Shops

Trusted Shops is a company which

certifies online shops. Its seal of quality

certifies that the online shop fulfils

certain criteria relating to security,

seriousness and data privacy and can

thus be considered trustworthy by

customers.

Trusted Discovery

This refers to products discovered in the

News Feed of a Facebook user and

recommended or forwarded by friends.

User backlash

User backlash is when members of a

social media platform reject and protest

about measures implemented by the

platform’s operator.

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SourcesStatus quo

Inside Facebook Gold: “Audience growth on Facebook“, June 2011, http://bit.ly/fvt3j7

AdAge/Ipsos survey: “What consumers want from brands online“, February 2011, http://bit.ly/fqCGGT

Fast Company: “The business of Facebook“, April 2011, http://bit.ly/dO5vrr

Facebookbiz: “Facebook, Social Gaming & $24 Mio. für Wooga“, May 2011, http://bit.ly/lsU6xO

Exacttarget: “Facebook x-factors report #5“, August 2010, http://scr.bi/czvlYJ

Facebook: “Statistics“, April 2011, http://on.fb.me/bsoxWp

Player 1: Facebook

eMarketer: “Facebook passes Yahoo! in display advertising“, June 2011, http://bit.ly/itR9YB

TechCrunch: “Prediction: Facebook will surpass Google in advertising revenues“,

June 2011, http://tcrn.ch/kxybmO

Player 2: Users

ShareThis: “Study: Where, why and how people do share content“, June 2011, http://bit.ly/lKnAEs

Pew Research Center: “Social networking sites and our lives“, June 2011, http://bit.ly/iOFR7n

Player 3: Companies

Forrester Research: “Will Facebook ever drive E-Commerce?“, April 2011, http://bit.ly/fbI1M1

Fluid: “Brands and Facebook: Will “like” make it love?“, April 2010, http://bit.ly/cwm7xQ

Player 4: Service Providers

Facebookbiz: “Social Commerce: Payvment startet Einkaufszentrum auf Facebook“,

February 2011, http://bit.ly/gwWOVJ

Internet-Retailer: “1-800-Flowers.com shifts its Facebook store strategy“, February 2010,

http://bit.ly/gQk2G4

Contact:Michael SchipperCOO, BBDO Germany+49 (0)40 [email protected]

Authors:Christian KohlhaseEnrico PoegeJörg JeldenKatharina MichalskiMechthild BroensTim Keller

Project management:Jessica Merkle

Concept and design:Lars Borker

Publication details

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WWW.BBDO.COMWWW.PROXIMITYWORLD.COMWWW.DIGITALLABBLOG.COM

WRITTEN BY HRISTIAN KOHLHASE

ENRICO POEGEJÖRG JELDEN

KATHARINA MICHALSKIMECHTHILD BROENS

TIM KELLER

Facebook Commerce

Technology

Transcript of Facebook Commerce