Business Technology

Friday 15 November 2019

Facebook faces up to a future of e-commerce

IT’S been a tricky few months for Facebook, very tricky indeed. Burned investors, a share price that has halved since its IPO and an over-priced acquisition still to make Facebook a mobile player, the future looks a lot bleaker than it did earlier this year.

At the end of 2011 the company had 845 million active users, and while advertising was responsible for 85 per cent its revenues, such a huge installed base meant that it would only took one leap of innovation for the company to carry on growing.

This quest for innovation hasn't been easy. There is nothing more distracting for a company than when it is raising money or going to IPO. Creativity is pushed aside in favour of due diligence and scrutiny; it takes time to get back on track.

Whatever has happened since the Facebook share price tumbled, one thing is very clear. Facebook went to IPO to raise money and they were successful; recent announcement of Subscriptions and migrating Facebook Credits to local currency pricing proves that the company is still thinking.

The one thing that Facebook has always got right is how it has integrated itself into the web and it may be one of the internet's staples, e-commerce, that may be the way the company evolves.

Facebook's 900 million users contrasts very favourably to the 160 million claimed by Amazon and Ebay's 100 million. Across in Silicon Valley seasoned investors are putting their money into e-commerce start-ups that are producing shopping apps for Facebook.

In the UK other more experienced companies are also optimistic about the opportunities for Facebook and e-commerce. Venda is a privately held and profitable UK company that was founded more than ten years as a cloud-based SaaS commerce pioneer and now increasingly works through Facebook and across mobile.

The company's clients include global retailers such as Tesco, Superdrug, JVC, Urban Outfitters, Condé Nast and Jimmy Choo as well as institutions such as The Metropolitan Museum of Art. Its CEO, Eric Abensur believes that while consumers don't view Facebook as a source of information about products, it is the social conversation that interests his customers.

“With the draw of such large audiences and the wealth of opinion exchanged about products, Facebook presents a highly tempting channel for retailers. Therefore we believe Facebook can become a formidable recommendation engine driving consumers to buy products.

“We do not believe that operating just a Facebook store will deliver growth or address the needs of the consumer. We’ve begun to work with a number of brands on our platform to explore the possibilities of social commerce and how to best approach selling via a channel where people haven’t arrived with the explicit intention to buy,” he said.

According to the Gartner Group, by 2015, companies will generate 50 per cent of web sales via their social presence and mobile applications. A recent report from eConsultancy said 90 per cent of consumers trust recommendations from people they know, and Internet Retailer recently announced that 67 per cent of consumers spend more online after getting advice from their online community of friends... all good news for Facebook.

PageHub is a Brighton-based start-up and one of the few global companies to be awarded Preferred Marketing Developer for Apps status by Facebook. Its cloud platform powers Facebook Apps for leading brands and manages consequent campaigns.

Its founder and CEO James Devonport Wood and believes Facebook will challenge companies such as Amazon by the ability to use credit cards on their Facebook accounts.

“Facebook recently announced the closure of their Credits product, which will be replaced with a new Subscription service similar to those available from Apple and Amazon. This new service allows users to add a credit card to their account and pay for transactions in their local currency using Facebook.

“With this change Facebook has a real opportunity to drive significant revenue from facilitating payments on the web and mobile. Non ad-based revenue will be a crucial component of Facebook's revenue growth over the coming years, with payments having the potential to make up a significant proportion,” he said.

After a summer where Facebook has been under more pressure than ever before, in the short term it may be some time before the share price recovers.

However it is the infinite possibilities of e-commerce that means that future 'sell, sell, sell' cries will not be referring to the company's share price but the volumes of sales that are going through the company's social platform.

Monty Munford

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