The Industry Standard - Facebook's e-commerce conundrum - Comments

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Cristiano — Sun, 24 Aug 2008 15:26:40 -0700

However, when it comes to getting these same members to engage in more lucrative online shopping activities, the company has faced an uphill climb. If Facebook is going to shift their perceptions, it is going to have to make a concerted effort to bring the outside world of e-commerce into its highly social (and relatively untested) ecosystem.
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"Even though Facebook has an

Scott Sambucci — Thu, 21 Feb 2008 20:46:32 -0800

"Even though Facebook has an enormous amount of potential in many areas, millions of members still see it primarily as a social hub, and are unwilling to be pulled too far away from this purpose. "

In my opinion, this is the key element that Facebook will need to overcome. Social activity does not necessarily equate to direct business activity for Facebook. Facebook is already delivering its core product to its members - a social network. It appears that after creating a tremendously successful social structure, Facebook is now trying to re-build the foundation of the house. Not an easy thing to do.

http://scottsambucci.blogspot.com/2008/02/facebook-multiplier-economic-v...

Facebook's e-commerce conundrum

Terrence Russell — Thu, 07 Feb 2008 06:30:42 -0800

Let's face it -- Facebook and e-commerce haven't been the greatest bedfellows.

The relationship started out promising enough. With the launch of its developer platform last year, Facebook flung its doors wide open and transformed the site's versatility. Since then, the developer community has created a virtual ecosystem of applications in categories as varied as casual gaming, photo sharing, and travel. With the average user visit stretching out longer and longer, it's been clear that getting full-fledged e-commerce to work within Facebook could be very lucrative.

But for reasons that are only now becoming clear, users haven't been biting.

Dave McClure, Stanford's "Creating Engaging Facebook Apps" instructor, tells me that a lot of the problem lies in members' expectations, which he believes are "primarily leisure and entertainment-focused." Therefore, one solution to getting e-commerce off the ground will involve bridging the gap between recreation and monetization.

Facebook has been aware of the leisure approach since opening up the platform. Sensing the potential of socially leveraged e-commerce, Facebook's first (and relatively tepid) attempt required members to submit credit card information for micro-transactions, in order to perform actions like sending $1 virtual martinis between friends.

In terms of the other pieces that are required for success, a key element is a streamlined payment system. Altura Ventures CEO Lee Lorenzen has told me that success for Facebook not only lies in its e-commerce partnerships but also in a purchasing system that's simple, flexible, and reliable for everyone from high schoolers on up. From there, he envisions "coupons and frequent buyer programs" will attract Facebook members and encourage repeat shopping.

Lorenzen's view touches on a number of points that relate to the importance of usability, but the overriding issue for members relates to something else entirely. For many of them, Facebook is now ingrained as a social entertainment hub, and altering or even breaking that role may be tricky, even with a slick new payment system. Facebook faced an enormous backlash when it broadcast members' transactions from online retailers into their news feeds via the Beacon program. Users not only felt that Beacon's slippery opt-out notifications invaded privacy, but also that the program deviated from the site's core social function.

Therein lies the rub. Even though Facebook has an enormous amount of potential in many areas, millions of members still see it primarily as a social hub, and are unwilling to be pulled too far away from this purpose.

Facebook has learned a lot of lessons from its experiments with e-commerce. For instance, the micro-transactions model kept social interaction (i.e., virtual gift giving) at the forefront, and can be viewed as a healthy start -- Lorenzen points out that there are between six and eight million credit card numbers in Facebook today, thanks to the feature. On the other hand, Beacon had a far more self-interested and exploitive feel to it, and was shunned. There's undoubtedly a sweet spot with e-commerce, but Facebook isn't going to find it until it realizes that it has to enhance the social graph rather than just cashing in on it.

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