On May 19th Facebook sent out a press release detailing the future of shopping on their platforms Facebook, Instagram, WhatsApp and Facebook Messenger. As soon as the words “Facebook Shops” got out, it was shared extensively on social media. But it was also striking to notice that almost no one was expressing an actual opinion about it, it’s been more like “something’s coming”. Discussing the news with colleagues at Star Republic, neither of us was sure what to think either. Almost all had a different view about what it is, who it’s for and what role it will play in the e-commerce universe. The differing opinions seemed to orbit an—for Facebook, that is—inconvenient truth: in the year 2020 e-commerce professionals are not entirely sure what to use Facebook for, other than as an advertising platform.
Don’t get us wrong, we all have Facebook accounts – as do most of our clients. But it has been a long time since Facebook was the obvious campfire that gathers everyone you know, to hear what you have to say. We are turning into readers rather than contributors. The overpopulation that is Facebook and the Edge Rank algorithm that was the inevitable result has resulted in a cluttered environment where content from brands and pages are killing the spontaneous dialogue in favor of news and branded content. And won’t that only get worse as more product and advertising features are added?
Today, Facebook has morphed into more of an advertising/influencer platform than a social one. Moreover, Facebook is now a conglomerate of many digital services, from other social medias such as Instagram, to instant messaging services such as Facebook Messenger and WhatsApp. And recently a giant rebranding effort was done in order to, for the first time, really try to bring the sprawling empire together. Because in reality Facebook has, as of today, turned into the worlds largest CRM. The equity that Facebook has is people. A giant, potential audience for sale to whoever wants to get a message (or product) across.
And this is a source of revenue that has been tapped masterfully over the years via advertising features. But the combined, recent decline in user activity, loyalty and the ever-increasing expectations of the stock market has put pressure on the company to deliver new revenue opportunities. Enter Facebook Shops.
Facebook Shops is essentially nothing new. In fact, Facebook added similar functionality for companies as early as 2015, and Instagram Shopping was released in 2017 (with checkout added in 2019). But this was only for a handful of selected mega-brands such as Nike, H&M, Adidas and Prada. Besides the release on more platforms than Instagram, the news in the Facebook press release is that the target group now are small, up-and-coming eCommerce actors. It’s being marketed almost as an alternative to Etsy rather than a new eCom funnel for the biggest brands of the world. In other words - almost a 180 degree strategy turn.
Facebook Shops is also being marketed as a helping hand to the small businesses that are suffering from the current COVID-19 pandemic. But to us, this seems a rather convenient marketing strategy. Instagram Shopping was only the first step on a longer eCommerce roadmap presented by Mark Zuckerberg and the timing of the pandemic seems only coincidental.
As Wall Street Journal has pointed out, the small-business-platform Etsy has doubled their revenue over the last three years and as success is building for the platform’s users, some of them are not that small anymore. In short – a true grass-root strategy that builds revenue over time, rather than trying to establish yet another funnel for the world’s already largest commerce giants. Instagram Shopping has yet to make a big impact for the everyday eCommerce retailer, but the potential seems to be there. In fact, in a 2019 survey Facebook discovered that 54% of the respondents had bought a product after having seen it on Instagram. And it’s that potential that Facebook now is looking to harness. A potential obviously not limited to only the worlds largest brands or only one medium in the Facebook portfolio.
Instagram Shopping has been around a while and it doesn’t really get our juices flowing. It’s a nice feature, but has yet to make a large impact. What gets us intrigued is that Facebook now will finally let all of their mediums in on the fun. Not only will Facebook itself provide a vast user base for sales, but also the (up until now) untapped possibilities of WhatsApp. WhatsApp is, on the contrary to the other mediums in the family, still on a growth journey with over 2 billion users in 2020. And with an average time spent on the platform being 195 minutes per week, the possibilities of reaching new audiences are huge. We have, for a long time, been wondering what Facebook has in store for WhatsApp. It’s been owned by Facebook since 2014 and many of us have been waiting for the service to be merged into, or at least integrated with, Facebook Messenger. With the news emerging last week, this seems to be finally happening. The new shopping features will work cross-platform, and hopefully also bring the decisive USPs needed for Facebook to finally, really make an impact on the eCommerce market. What is also really intriguing is the promise to “seamlessly” integrate several of the major eCommerce platforms out there, not at least Shopify+ (with whom we are partners) who are rapidly gaining marketing shares thanks to their user-friendly approach to eCommerce.
So, the larger discussion to have is rather the one of timing. Undoubtedly, the features in itself shows a lot of promise. But in the later years there have been many examples of the big FAANG companies (Facebook, Amazon, Apple, Netflix and Google) trying to invade each other's home turf, and rather seldom with any major success. Amazon, Google and Facebook are all converging on the eCommerce market and they are not only challenging each other, but also the established habits of the modern consumer.
Is it too late to establish a new, major, global marketplace? Or have Facebook finally found the key to what they call “social commerce” – an area where they could prove to be absolutely dominant considering their user base? To us, it’s all about the users habits. And it seems Facebook has finally understood that in order for a feature like this to take off, a purchase button can not be a rare novelty from a few, select brands. Only when it’s a widely accepted commodity will it enter the realm of the ordinary behaviour of the masses.
One thing is sure – if one is to make a considerable mark at this highly competitive and crowded market, you better have a lot of conviction. If they have not already, Facebook will soon realize that this race is a marathon - not a sprint.
Ola Linder, Strategic Project Manager by Star Republic, SQLI group