As mobile continues to grow, Facebook announced that it is testing two new ways for merchants to market their products on the social network, including a new Amazon-lite shopping marketplace for mobile and more “shoppable” mobile ads.
Facebook didn’t simply put the shopping feature in its news feed, but created a “shopping” tab, placed right along the “group” and “pages” tab (see Exhibit 1).
Exhibit 1: Facebook’s Shopping Tab
Here is a list of Facebook’s shopping features:
- "Shopping" feed/search bar
- In-feed Buy Button
- Shop section on Pages
- Instant Ads with product catalogues
Facebook is trying to solve consumers’ pain point by creating a more seamless shopping experience, allowing users “to more easily discover, share and purchase products," according to a company blog. Facebook says it’s not taking a cut of sales that happen on the app (YET), but the shopping feature is a good step for Facebook to further tap its advertising potential and bring new revenue sources in the future.
People have shifted to mobile and Facebook has almost everything ready for shopping within Facebook: Facebook enterprise page, Facebook users’ likes, Facebook payment system and messenger. Facebook has everything ready, but will consumers simply move from online retailers like Amazon to Facebook? If Facebook can make discovering products a less interruptive, more seamless part of the browsing experience on mobile, users will be less hesitant to shop while they network.
Creating the platform and optimizing the user experience is not enough to attract users to shop on Facebook; it’s vital for Facebook to incorporate the social elements (interest graph, geolocation, contextual data and etc.) with differentiated products. In this way, Facebook will have the potential to take a bite out of Google’s search advertising revenue as people switch to search products or brands on Facebook instead of Google.
In addition, this move will improve ad value per user. Although Facebook’s user growth becomes stagnant, the social media giant has seen a growth in ad revenue per user (see Exhibit 2).
Exhibit 2: Facebook Ad Revenue per User Worldwide
When it was first founded, Facebook was a place where people shared their life events, and post photos and videos. Today, Facebook has expanded to include the online presence of business and users’ interaction with them. Facebook wants to become a conduit for its users to engage in e-commerce, all within the wall of Facebook. The rationale of shopping within Facebook is the same as consuming news on Facebook. (Check Strategy Analytics report Facebook, Apple and Google Shake Up News Publishing for more information).
The demographic data combined with consumer behavior data will further improve Facebook’s advertising targeting capacity and bring added value to brands. In theory, this will allow Facebook to charge a premium for it ads.