• What potential does Facebook commerce hold?
• Who do online shoppers engage with brands on Facebook?
• How can retailers and brands leverage Facebook commerce?

eMarketer responds to those questions by espousing its own point of view.

• Facebook commerce is about more than just sales conversions.
• F-commerce is more about discovery and sharing than duplicating an exhaustive catalog online.
• Millennials are the prime audience for Facebook commerce.
• Brands need to understand why they are “liked” and what to do with that information.
• New advertising-friendly developments hold promise for Facebook commerce.
• Privacy concerns will have to be addressed before Facebook commerce can see mainstream adoption.

Retailers are all over the map when it comes to using Facebook for commerce. Options range from product links being posted on the retailer’s Facebook page Wall to the inclusion of interactive catalogs or storefronts. On their own websites retailers are integrating Facebook’s Open Graph and social plug-ins to allow customers to login using Facebook to shop with friends, receive product recommendations or read reviews.

Though most major retailers have some type of presence on Facebook, a consensus has yet to be reached as to the social network’s viability as a sales channel.

The Potential of Facebook Commerce

The report states plainly that Facebook has yet to factor significantly into product sales and cites a Coremetrics survey of retailers that said only 1.6% of sales were driven by social media. However, it also suggests that F-commerce is in a nascent stage and that it is “too soon to predict” any outcomes at this juncture.

As can be seen from the following graph, the report does suggest that people are warming up to the idea of using Facebook for more than just social networking, especially where commerce is concerned. Finding special offers and discounts is the clear leader, followed by sharing experiences with products, seeking product advice and sharing product knowledge.

Facebook and Shopping Behavior

When it comes to Facebook users and shopping behavior eMarketer found this to be true:

• Fans “like” brands primarily for one reason – special discounts and sales promotions.
• Likes influence purchase likelihood among friends of fans.
• Liking a brand’s page or product is often a post-purchase activity.
• Demographic differences play a role, with Millennials being the generation most open to shopping on Facebook.

How Retailers and Brands Can Use Facebook

Facebook commerce takes two forms: on Facebook and off Facebook (i.e.. the retailer’s own website).  Specific approaches by brands include:

• Fan Exclusives – Deals offered only on Facebook and nowhere else; examples of companies that tried this tactic include Diane von Furstenberg and Oscar de la Renta.
• Sampling – “Tryvertising” of CGP products offered on Facebook pages; Burberry and Aveda are examples of retailers who experimented with this approach.
• Gift Recommendations – Wal-Mart’s new Facebook app Shopycat shows products friends have purchased and makes recommendations based on interests.
• Events – Pinning a campaign around an event, celebrity appearance or holiday works well on Facebook to quickly build excitement states the report.
• Shopping with Friends – Levi’s and makeup brand MAC used the social graph as a way to encourage friend-with-friend shopping activity.

Facebook Commerce and Privacy

Privacy concerns related to shopping, particularly when it comes to a brand using personal information, is still on the minds of Facebook users. Yet not all shoppers are resistant to sharing personal information. The report cites an eight-month survey of 42 apps by Sociable Labs, which found that on average a majority (56%) of social media users granted permission when asked to connect to online retailers using their Facebook ID.

Facebook Commerce Best Practices

Based on its research, eMarketer shares what it finds to be Facebook commerce best practices.

• Reproducing an ecommerce site on Facebook is not inherently engaging.
• Igniting passions fosters community naturally.
• Retailers should consider their style of communication.
• Listening is important and brands are encouraged to hear what fans have to say rather than pushing an agenda.
• Brands should match their strategy to the end goal.
• Multi-channel marketing is still essential even with Facebook at the center of the campaign.

The report concludes with these predictions and recommendations.

• Facebook commerce will not see mass adoption overnight.
• Brands of all size can employ select social commerce techniques.
• Give fans what they want, but do not lose sight of strategy.
• Privacy concerns are valid and need to be addressed.

(Note: SCT’s executive editor Dr. Paul Marsden was interviewed for this report.)

But not everyone agrees that f-commerce is a good idea.  Put your profanity filters on and head over to the smart and articulate ecompunk blog to see a demolition job, with attitude, on f-commerce from Magento guru Dr Roman Zenner (BTW it’s worth subscribing to the ecompunk blog; along with exciting commerce and get elastic, it’s the best source of e-commerce insight and inspiration out there).

The anti f-commerce argument goes something like this;

• Facebook is an application, and applications are purposive, they are for something – the Facebook app is for exchanging with friends
• You can use apps to do other things than for what they’re for (say write a letter using Microsoft Excel, or set up a shop with Facebook), but the result is likely to be sup-optimal for two reasons
• 1) that’s not what the app was designed for
• 2) people will ignore the extra functionality, because that’s not what they’re using the app for (exchanging with friends).  To pursue the analogy, setting up shop on Facebook is like adding a letter template to Excel – pointless.

Roman adds that of course there’s more to f-commerce than setting up shop in Facebook (you can integrate your e-commerce site with Facebook, or simply use Facebook as a blog to drive e-commerce traffic).  But integrating your external e-commerce site with Facebook to enable automatic sharing of what customers do on your site or elective sharing of stuff they like is crass; it creates social spam and is only likely to attract the desperate, lonely and compulsive. No future in it.

Well, we agree wholeheartedly with Roman – but with three caveats (two of which Roman makes himself)

This new customer rewards program is the brainchild of startup company Plink, which, according to the website, is the “first-ever Facebook Credits-based loyalty program that rewards members with Facebook Credits for dining and shopping at their favorite restaurants and offline retailers.”

Risk: Credit Card Data Required

To use the program, new members create an account, then register a credit or debit card of their choice. Plink members then earn Facebook Credits by using their registered card when dining-out or shopping at participating restaurants and offline retailers.

Registering a credit or debit card requires that Plink be given access to sensitive bank account information. For users who are squeamish about risking such data, Plink ensures its security protocols are locked down tight. The site is verified by VeriSign and Truste and uses bank-level data encryption.

Reward: Convenience, Instant Credits, and Low-Cost

Once users register, any time they make a purchase at any of the participating retailers they earn instant Facebook Credits, which can be used to buy premium stuff on social games like Farmville, Cityville, TheSims, or any other game that accepts them.

An additional benefit, one that applies both to retailers and customers, is convenience. Customers no longer have to carry cards or keychain fobs, print out coupons, or use a code to get rewards. For retailers, the program requires no POS (Point-of-Sale) integration, paper coupons don’t have to be collected, or staff trained. There are no set-up fees, print costs or merchandise to purchase either. Participating retailers simply pay Plink a percentage of each sale that occurs from registered members.

Another benefit, especially to retailers, is the low-cost involved with using virtual currency. “The reason virtual currency microincentives work is because they are so cheap to distribute, and users perceive their value as higher than their cost,” said Techcrunch, which added, “Since it essentially costs nothing to drop Credits into someone’s Facebook account, businesses can cost-effectively reward users with just a few Credits, which typically cost $0.10 each.”

Social Games a Growth Industry

While I’ve never been a fan of social games, it is an industry that is experiencing phenomenal growth. A recent study from Juniper Research said that the amount of money being spent on virtual currency via in-game mobile apps will jump from $2.1 billion in 2011 to $4.8 billion by 2016.

This appears to be a win-win-win for all concerned. Customers are rewarded with Facebook Credits they can use on social games. In return, retailers are rewarded with greater loyalty from those customers. And, finally, Plink is rewarded with a portion of each transaction that results from this fast food meets Farmville love fest.

“Facebook Credits is the missing ingredient that’s been needed to connect social media to offline sales,” said Plink founder Pete Vogel. “Now with the ‘glue’ of Facebook Credits our national restaurant and offline retailer partners have a way to tap into the nearly 800 million users on Facebook, motivate them to become loyal customers, and reward them.”

To build your brand. Yep.

That’s the approach that CPG giant Unilever is taking to launch a brand extension to its billion-dollar mega-brand Axe (‘Lynx’ in the UK) in the UK, ‘Lynx Attract for Her’.  A first 100 cans of the hither-to men-only brand went on sale to the brands 700K+ fans on a pop-up Facebook fan-store.

100 cans at £3.25 ($5.11) netted the brand all of £325 ($511) when they went on sale at 4pm, January 23, 2012 – and sold out pretty much immediately.  Why bother?

Cynics will call it a PR stunt. Unilever can claim “launched on Facebook” credibility for the youth-oriented Lynx Attract for Her. And in the trade press, the stunt has captured headlines.  Good for Unilever sales teams negotiating shelf space in supermarkets and drug stores, and good resumé fodder for the digital team too.

But we think launching products with pop-up stores on Facebook, and more generally brand-building with pop-up f-commerce is smart branding.

Why? Because word of mouth is critical to branding, particularly at product launch, when adoption rates can be accelerated by word of mouth. And Facebook is essentially a word of mouth platform. Ultimately, a brand – a trademark imbued with value – exists in the mind and on the lips of customers, not as a label on a product.  So the more positive word of mouth you can stimulate at product launch the bigger and better your brand.  So from a branding perspective, it makes good sense to launch on Facebook.

Moreover, research shows that word of mouth makes brand advertising more effective (essentially because it adds source credibility to advertising messages), and with Unilever throwing a multi-million pound advertising campaign behind the Axe/Lynx for women launch, the pop-up fan-store will help with advertising effectiveness.  Essentially the Axe fan-store will build brand value by activating brand fans (700K+ registered on Facebook) through fan-first exclusivity.

Another advantage of using a temporary pop-up fan-store (as opposed to an Asos style permanent store) is that Unilever neatly sidesteps the politics of a brand selling direct to consumer and risking the wrath of retail partners; Joey Kau, e-commerce manager at Unilever, said, “There are no plans to move away from our current distribution channel and we’ll continue to distribute products in the way that we have been doing.”

There’s often a disconnect between the worlds of sales and branding, but ultimately branding is all about sales – specifically your ability to extract margin.  From a commercial point of view, brand building is all about increasing your ability to extract margin by imbuing your brand name with value.  By imbuing a brand with word of mouth value, pop-up fan-stores in social media can have a powerful brand-building effect. Kudos Unilever.

That’s quite a shift away from how f-commerce has been conducted up to now. For the most part, brands engaging with the platform have done so through Facebook Pages. From what the article suggests, that is about to change. Wade Gerten, CEO of social commerce platform provider 8thBridge, went so far as to say that “the days of fan pages are dead.”

The culprit mandating this change is the new Facebook Timeline, a scrapbook-like replacement for personal profiles, which will be rolled out to everyone next week. Brands can create apps designed to fit within the Timeline and, to date, about 80 have.

A related article at Internet Retailer explains how these apps work. For example, Facebook users can go beyond the “Like” to a whole new level of interaction in that they can now choose to “Love, Want or Own” a product. When a consumer interacts with these features that information gets shared in their Timeline, on friend’s newsfeeds and via the Ticker.

The apps promise a greater degree of integration with ecommerce websites, as well. Wade Gerten says, “These tools allow us to add social features to web sites, which is where everyone is shopping, instead of doing so on a Facebook fan page, where not that many people go.”

Does this mean that, with the introduction of Timeline, apps are in and Facebook Pages are out? I won’t go that far, but it does mean that sharing of brand-related information becomes more natural. Again, to quote Gerten, ““Brands can literally be woven into a consumer’s life. Billions of Facebook users use the site for the same reason they buy brands – they want to be loved and they want to belong.”

Based on my own experience, Facebook Pages do seem like a third leg. Once I Like a page, there is often very little incentive to revisit it, so I can see Gerten’s point. Conversely, because these new apps tie directly into a user’s Timeline, it stands to reason they will warrant more attention.

Another question to be considered is, will Pages also take on a Timeline-type structure? Though no word has come from Facebook suggesting that will be the case, I can see no reason not to make a change. That’s been Facebook’s practice in the past and it makes sense to maintain symmetry between Pages and user profiles (er, Timelines, that is). Also, with the much richer graphic appeal of Timelines, Facebook Pages look passé and archaic.

Even though they may have very active fan pages, my advice to smart brands is to jump on the app bandwagon sooner than later before the gold rush hits. With the mandatory rollout of Timeline coming next week, this seems like the perfect time.

Following suit, social commerce company 8thBridge just announced a partnership with Ticketmaster to share their plans to attend concerts, concert attendance itself, and ticket buying with their friends. Users can purchase tickets in the app without leaving Facebook, said the announcement.

“[P]eople will discover artists, events, and venues that are new to them using the incredible discovery opportunity social shopping creates while connecting them with friends, favorite artists, tickets friends purchase, and so much more in Ticketmaster’s app for Facebook Timeline,” stated 8thBridge.

Apps can be found in a variety of categories: entertainment, fitness, food, giving, music, news, shopping and fashion and others.

Of particular interest to us is shopping and fashion, which contains many of the usual suspects as the aforementioned Pinterest, Payvment, LivingSocial and Fab.com. Noticeably absent are companies like Groupon, Gilt and Beachmint. One has to believe they can’t be far behind in developing apps of their own, however.

I added several apps, but have yet to see them appear in my Timeline (perhaps because I’ve not done anything with them as of yet), but the following screenshot from a Facebook blog post about the topic shows how they will look.

Interestingly, not every app works in the same manner. For example, TripAdvisor’s app (seen below) is housed within Facebook itself, while Pinterest’s kicks the user back to its website. One is an example of placing the cash register next to the water cooler and the other bringing the water cooler to the cash register. Or, as we like to put it here at SCT, “helping people buy where they connect and conntect where they buy.”

Considering how popular apps became in the previous version of profiles - more than 500 million people use an app on Facebook or experience Facebook Platform on other websites every month – no doubt we’ll see the same craze occur with Timeline, as well.

What’s your favorite app so far? What companies would you like to see develop an app?

Facebook certainly has its eyes set on becoming an entertainment hub as well as an distributed app platform; it has effectively rewritten its Open Graph to allow app developers to enable frictionless sharing  (read auto-share) from entertainment apps into the Facebook ticker and timeline with a limitless number of ‘gestures’ added to the now so-passé ‘like’.  Ticketmaster, Netflix, Hulu, Spotify, StubHub and DailyMotion apps are already on board.

And movie studios have already experimented with Facebook as a movie rental platform by making back-catalogues available for rent from Facebook fan pages.  But Lionsgate is the first studio to make a movie available on Facebook from day 1 of its home-release.

So could it work?

Technically, yes.  From the Abduction movie Facebook page ‘fans’ can pay $3.99 by PayPal (which bizarrely rounds up the transaction to $4) to stream  Twilighter Taylor Lautner for 48 hours, powered by Milyoni social streaming software. And it works.  Alas no amount of Milyoni magic, including social tagging of quotes and scenes, chat and in-movie quizzes, can make a 4% Metacritic movie better.

Experientially, possibly. Social widgets notwithstanding, Facebook is not going to compete head-on anytime soon with Apple or Netflix on user experience, but it could win by offering a unique fan experience that monetizes the considerable number of fans that movie pages on Facebook rack up. Lionsgate and Milyoni seem to have ‘got’ this, by bundling an exclusive fan-only interview with the movie rental.  Smart. We think that this fan-focus has a whole lot more potential than social features that can arguably interrupt immersive audience experiences.

What else could movie and TV studios do to monetize fans? Here are some ideas for quick wins;

Greed demands results, and right now e-commerce apps for Facebook, despite all the hype and hutzpah – seem yet to deliver.  Online trade mag MarketingVOX is unimpressed, and Baynote gives Facebook a derisory C+ for shopping (vs A for e-commerce website, and B- for mobile and tablets) (see infographic below).

But speculative – greed-driven – investment continues to pour into Facebook commerce. Social commerce app developer Moontoast, has just secured a $6m investment, whilst zmags, specialist app developer for e-commerce enabled catalogues on Facebook and elsewhere - has received $7m. Greed is driving these investments – but will they pay off?  Only if the apps themselves deliver for their business users.

As long as companies only use these e-commerce apps on Facebook to sell what they’re already selling elsewhere – in store or on their e-commerce sites, we think Facebook stores are fairly futile.  If greed is your motive, we’d recommend that you ‘sell different’ on Facebook – using Facebook as a dedicated platform for fan-sales - offering fan-first exclusives and exclusive fan-merchandise with a view to driving fan loyalty (lifetime value) and advocacy (referral value).

Just as the secret to successful e-commerce is to sell something that can’t be purchased on Amazon, the secret to successful Facebook commerce is to sell something that can’t be purchased on your website (yet).

Thoughts?

The first study by ThreatMetrix and The Ponemon Institute found that consumers believe Google is more effective than Facebook when it comes to shopping security; 53% of consumers do not believe Facebook storefronts are committed to protecting them against fraudsters and a quarter of respondents (23%) were unsure about Facebook’s fraud prevention tactics.

The second study by The Media Kitchen looked at online retailers’ willingness to integrate with Facebook  or Google +1 social plugins, and found that Google +1 appears to be winning the hearts, minds and tech departments of these brands (45% vs 35%).

Wrapping the studies up in an interesting narrative, Forbes magazine suggests that whilst Google is better placed than Facebook to win in the social shopping wars, the big winner this holiday season – after so many false dawns – is neither f-commerce or g-commerce (selling with Facebook or Google), but m-commerce (mobile e-commerce). Shopping via mobile handsets has tipped  this holiday season from Silicon Valley hype to Main St. reality, whilst that the younger f-commerce – that Forbes defines narrowly as” making Facebook fan-pages shoppable” – has yet to go mainstream.

With more news and innovation in t-commerce (e-commerce with Twitter “Twitter is going to be huge for e-commerce, probably even more so than Facebook,” says Christian Taylor, CEO and co-founder of Payvment) what’s our take on all this alphabet soup commerce comparison?

Comparing shopping with Facebook or Google to shopping on a mobile handset is like comparing apple and pears, software platforms vs hardware platforms – like Intel with Windows.  On the race between g-commerce and f-commerce, we think different niches will evolve – f-commerce, like TV shopping, will remain a niche channel, albeit – in our view – an important one for fan-commerce that locks in fan-loyalty and activates fan-advocacy, whilst shopping with Google will evolve towards transactional advertising.

What do you think – which would you invest in – f-commerce, g-commerce, m-commerce or t-commerce?

As Robin Grant, global managing director from the agency We Are Social behind the Heinz initiative points out in the clip, the primary goal of the fan-store is to activate advocates.