Facebook’s importance to nearly every business in the U.S. is quickly evolving beyond the need to have a corporate profile for users to “Like” and “Follow.”
The social network’s role as a promotional tool has quickly evolved from secondary advertising support to a foundation for relevance. Earlier this year, when Yahoo (NASDAQ: YHOO) was doing anything and everything to redefine its brand identity, the first thing it did was integrate Facebook tools with its own memerbship service. Both Audi and Mercedez-Benz’s mutual $24 million dollar Super Bowl advertising campaigns are fueled by Facebook contests encouraging consumers to flood the car manufacturers’ profiles with traffic.
The next evolutionary step in the growing relationship between business and the social network, however, is transforming corporate profiles into proper storefronts. Provided they can convince their would-be partners, Facebook may end up as more than just a social network; it may be the online retail outlet to dethrone Amazon.com (NASDAQ: AMZN).
A Bloomberg report published Monday said Facebook has met with J.C. Penney (NYSE: JCP), Delta Air Lines (NYSE: DAL), and more than 20 other companies looking to convince them to begin using their Facebook pages as e-commerce outlets. David Fisch, the head of a new internal group at Facebook that was formed last November, confirmed these meetings. The new team was built solely to develop new commerce partnerships between Facebook and businesses with the ultimate goal of making Facebook a viable alternative to websites like eBay (NASDAQ: EBAY)and Amazon.
The pitch to businesses is sound: Facebook retail would not only give businesses direct access to ready made consumer base of 500 million Facebook users, but it would also come with the added benefit of new social networking tools that would marry the already popular information sharing of Facebook with bragging about new purchases. Facebook is discussing new software with businesses that would allow users to give instant product reviews and recommendations while browsing in a business’ Facebook storefront.
Fisch also said that Facebook is building new analytics software that would let businesses track why best-selling products or services thrive and which type of customer is seeking them out, cutting spending on market research in the process.
The new e-commerce group at Facebook is getting assistance from startup firm Alvenda, one of a growing number of companies who sell software to businesses looking to sell their wares directly through Facebook. It was Alvenda that helped establish J.C. Penney and Delta Air Lines’ Facebook storefronts.
However, their technology also demonstrates what a small market e-commerce via social networks is at this point. The all-time daily sales record for business through Alvenda’s technology is $100,000, or $1.16 a second. As Bloomberg writer Olga Kharif points out, eBay alone makes around $2,000 in sales every second, so it’s clear that the 500 million-member Facebook community isn’t shopping on the network just yet.
This highlights the inherent risk in trying to build a social network as a major online retail competitor to Amazon and eBay. Both Amazon and eBay owe much of their success to early social networking tools such as user reviews and merchant profiles, but those Web businesses were retailers first and foremost. As Facebook’s services shift from community to business interests, the social network and its partners risk driving away the community that makes the network so appealing in the first place.
Facebook’s longevity is still an unknown factor — News Corp.’s (NYSE: NWS) purchase of MySpace in 2005 seemed like sound business until the community began to migrate to Facebook. Without a community, Facebook’s retail business is unlikely to offer anything that Amazon doesn’t already have.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
