Facebook & E-Commerce: Forrester Gets It Wrong?
I just finished reading the WSJ’s write-up of the Forrester Report by analyst Sucharita Mulpuru, “Will Facebook Ever Drive eCommerce?”
Following extensive interviews with e-commerce vendors with fanpages on FB, according to the WSJ article Mulpuru’s convinced that a Facebook-driven commerce strategy is a dead end.
I hate to disagree with someone smarter and better-researched than me, especially at Forrester, an organization I hold in high regard … but this strikes me as a short-sighted and unimaginative conclusion.
A social-network presence, (Mulpuru) found, was less effective at customer acquisition and retention than e-mail and paid search. The study found that the average Facebook metrics are a 1% click-through rate and a 2% conversion rate. E-mail marketing, by comparison, has an 11% click-through rate and a 4% average conversion rate.
Facebook’s problem, she said, is that few people go there for shopping-related activities. “You go to Facebook to find other people, not to find a product,” Mulpuru said in an interview.
Here’s why I think Ms. Mulpuru is off-base:
There are over 500 million Facebook users, spending about 15 minutes per day (on average) on this site, presumably to a) connect with friends and b) connect with brands, albeit often for the sake of “getting deals.” Forgetting about the statistics for a sec, let’s face it: there’s an opportunity here.
Comparing the e-commerce results of a 5ish–year old social network with the much more established and sophisticated E-Mail Marketing industry seems ill-conceived. Show me a comparison of Facebook vs. E-Mail Marketing when the latter was 5 years out of the crib, and you’ve got a more realistic comparison. Even accounting for the cleverness of today’s marketers, it’s safe to say that “best practices” in Facebook Marketing are just beginning to emerge, whereas the best tactics in E-Mail Marketing are pretty well known by now.
As Facebook matures, and as marketers’ ability to understand and tap its datastreams advance, it doesn’t take much imagination to see the opportunity.
Today I visit Yelp to gain insights into restaurants; I peruse Amazon reviews before buying a book (or a toaster, for that matter): in such cases I am relying on the kindness of strangers. But if I could tap into my own social network’s intelligence, i.e., “10 of your friends liked this restaurant,” it would be far more valuable and would guarantee a visit.
Likewise, today if I see that my friend Erin (an extraordinary foodie) “liked” a restaurant, and/or the restaurant targets me in a Facebook advertisement that mentions Erin’s favor, i.e., “Hey Todd, did you know Erin likes us? Next time you’re nearby, stop in!” — well, yea, okay, I’m there.
Meanwhile the targeting capabilities for Facebook advertising are mind-blowing. Ultimately, in Facebook you have a parallel Internet, in which every websurfer’s identity and affiliations are KNOWN, vs. anonymous.
So, for example, if a high-end men’s clothing retailer wants to target a promotion “only for one week, and only to men who work at Goldman Sachs in New York City,” they can not only do that, but can track the results: all click-throughs, by definition, will be from male GS employees – a fact that can subsequently be compared to sales results in that one week of the promotion.
I dunno. Seems pretty powerful to me. Maybe “Facebook is not the e-commerce goliath we assume it to be” — but I don’t think it would be off-base to append that statement with the word, “yet.”
Posted on: April 12, 2011 at 9:01 am By Todd Defren
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This is a good thing to think about. Through facebook I have found out about many different products and services through friend’s “likes”, that I otherwise would not have been privy to.
I agree with Todd that WSJ got it wrong. With the new iframes design on Facebook tabs, I wholeheartedly believe that Facebook will become a new driver for social-based ecommerce.
In the studies I’ve done on conversion for landing pages for Facebook ads, every time, the conversion rates have been higher for pages based within Facebook (tabs) vs. those on a separate website. My theory on this is that when people are in Facebook, similar to what others have said here, those people are focused on something personal — photos, friends, etc. So when they respond to a Facebook ad, they aren’t looking to necessarily end that Facebook session, but rather just to respond to the ad and go back to what they were previously doing in Facebook.
However, if I am a fan of a company and I see a special, AND I can check out the deal WITHOUT LEAVING FACEBOOK via iframe-based tabs, it could be a potential ecommerce windfall for retailers. And the iframe tabs can even take someone completely through the checkout process. I’m excited to see where this goes in the coming months. I think it’s going to be HUGE!
Todd, you hit on a couple of things. One, Forrester protects all of its data for its members only, so it’s tough to read the experimental designs. As an old sociology major, I like to see that stuff.
I think FB is huge marketing opportunity, but it’s still being held back by privacy concerns. Facebook has been very unconvincing in its quest to keep data private. In fact, it’s been a miserable failure. But, when I intentionally misspell my name on the opt-ins for email marketers who will “never, ever” share my information with anyone, and then three months later get a catalog mailed to me with the name misspelled the same way, I have my doubts about traditional marketers as well.
Also, since Gen Y almost totally gets its daily communication needs meet by social networks and shuns email, I think its pretty easy to see FB’s future potential.
Facebook created a new way but wil eventually decline and at the end dissapear, this in favour of focussed (niche) networking sites. People already starting to get facebook tired, people see the marketeers taking facebook over, people see always the same sort of likes and manipulation of likes. Facebook is over rated.. and it wont take long before this will show in the figures.
She absolutely did not say Facebook was a ‘dead end’, she is saying not to bet the farm on it and I have to agree. Brands should absolutely pay attention to Facebook and have a presence. Perhaps even enabling commerce transactions to occur within the site somehow linking a ‘like’ to a product page and then driving the consumer to purchase, all while staying in Facebook. But you cannot have a 100% Facebook commerce strategy – it doesnt make sense. Not everyone is on Facebook (even though 500 million have an account) and not everyone wants to transact there. Brands should be there to provide the option if consumers want to. But they should not ignore traditional ecommerce or even mobile commerce. Fcommerce is just 1 part of an overall channel strategy and that’s what Forrester was saying.
You can read my take on this here: http://www.zmags.com/blog/ecommerce-and-facebook
As noted, I based my post on the WSJ article, as I don’t have access to the report. In any event, though, I don’t think my post (or these other comments) ever meant to imply that *anyone* was suggesting a 100% Fcommerce approach…?
Good input either way, though, thanks Christina!
Questioning in the title ‘Forrester Gets it Wrong’ seems to imply that the research is off and I agree, the converage of this report is pointing towards an assumption that Sucharita is discounting the power of commerce + Facebook. She is simply trying to disuade brands from putting all their efforts here when the value is not present – yet. Mobile commerce and social commerce is going to reach a major inflection point and its going to be vital for brands to really consider how they are spending their budgets in these areas. Jumping at ‘shiny balls’ like Facebook is not going to help make intelligient budget decisions for anyone.
I don’t agree with that point about shiny objects, but, with all due respect, based on the PR buzz alone it’s pretty clear that Forrester was hoping to stir the pot with this report. Mission accomplished.
So, I feel few regrets for having openly questioned their approach or conclusions. An honest debate is what we’ve got here, is all. The fact that Forrester does not make the report publicly available forces me to make conclusions based on their PR results, i.e., in the WSJ article.
(Lastly, fwiw, the title of the post was “Forrester Gets It Wrong?” and that li’l question mark is there for a reason: I am wondering aloud whether they are wrong, and purposefully leaving myself open to be convinced otherwise.)
I definitely agree with Todd that Facebook makes a huge impact on people. When I go on facebook, I am usually on it for a long time reading what my friends are up to. I always check out to see what they are “liking.” In fact, I have gone to a store solely based on the fact that one of my good friends “liked” it. If a complete stranger would have liked the same thing, I probably would not have paid any attention to it. Facebook is a great advertising tool.
Yes, Forrester got it wrong, or if they didn’t, at a minimum the logic is very flawed. Friend recommendations, as you point out, can be critical, and getting recommendations should be EASY for your audience. That means on your site, your Facebook page, your LinkedIn page (less relevant to retail, but if someone is already there, let them recommend you!).
Where Forrester’s argument really falls down here is the focus on response and conversion rates. Email and facebook are very different platforms for promotion, and a key difference is frequency. I will QUICKLY unsubscribe or block any retailer that sends me daily promotional emails. Once a week is about my limit for most retailers. However, a retailer can post content, offers, reviews from satisfied customers, questions for feedback, etc, multiple times a day on Facebook. Using Forrester’s numbers, the difference in frequency actually puts Facebook, today, nearly on par with email. At three posts a day versus one email a week, apply Forrester’s click and conversion rates, and if you start with the same size audience, you get same number of sales.
Great post, and I wholeheartedly agree, Facebook got it wrong.
– @wittlake
Great article… I feel most FB pages devalue the brand they have, offering discounts, coupons, etc. Anytime I want something, I first hit FB to see if they’ve given any discounts – if not I don’t buy it until I find one. FB (and many other services) have killed the value out of brands.
With mail, I don’t have to hit them with the brand or ever show it to them, I can actually make it my own, very easily. People don’t look for much social proof, if they’ve opt-ed in.
Before modern mail (with something to market) was 2 years old, it was crushing FB… In 98 you could hand mail people and make sales, by 2000 bulk mail was a snap. Hundreds of sales, per list, happened every day for years. I’ve never heard of that with FB.
FB simply can’t compete with then in your in face mass marketing that mail can do. You can’t twist your brands on FB and become someone new, you can’t split test a series of offers, for sure as a different brand.
What you can do with FB is get leads. You can rip them straight from the brands directly, then turn around and sell people the items they already told you they like… all you have to do is play the savvy cool guy with something to ‘give’ and FB users will eat you up.
Anyway, they’re both vastly different – not really fair to compare the two. But money wise, FB’s entire value doesn’t cover 1/1000 of what mailers make.
~tribalNerd
Tribal – While this may be true now, I’m not too sure I’d bank my business on relying on mailings that a large portion of people toss in the garbage can.
As more people continue to shop online, a mailing doesn’t necessarily hit me when I’m online. It also requires me to physically have that coupon in hand if I visit a physical location. With Facebook, I’m already online and it’s a lot more convenient for me to visit your e-store. You also have a lot less cost involved than mass mailing people ala AOL in the late 90s.
Don’t think about what’s happening right now, think about what the future looks like. Behaviors are changing.
Mail is still the #1 way to communicate online, but it’s not about the ‘email’ – it’s the direct contact info in your own hands!
With both FB, eMail or any communcation online, very few people ignore anything they expect to get, such as opt-in mailings or a brand they love or a bill in snail mail. It doesn’t make a diff if it comes through fb, email, a feed or whatever. Everyone else, is a dice role no matter how you reach them.
I’m not sure how email doesn’t reach you while you’re online. My email comes to my pc, phone and ipod as I get them, even my FB messages hit my email. Any brand/product that sells on FB can sell online through many methods, I’m not sure I follow you.
An active brand doing anything ‘mass’ on FB has costs, just like a mass mailer would. At the smaller level, it probably is cheaper to do FB, but low scale email solutions are cheaper than hosting a domain.
I feel the future is using tools like FB and all social networks, to leverage your OWN lists…in any form, but your own either way – so you own the contact info and can add to the details.
I don’t know if FB is going to become the next myspace or close my account without reason… but I do know if I own the peoples contact details, I can reach them forever.
~tribalNerd
Tribal – For some reason, it won’t allow me to reply to your response…In your original comment, you mentioned “mail.” I assumed you meant physical snail mail. A lot different than email, obviously.
Email…yes, still highly effective.
What the research fails to realize is Facebook is changing and users are changing the reasoning behind their time spent on Facebook. Facebook is no longer a platform to simply talk to people. It’s evolving and attemping to become a one-stop shop.
The problem I see is that far too many businesses simply think slapping an e-store on their Facebook page will magically bring a huge increase in sales. Afterall, people spend a lot of time on Facebook, right? Businesses are failing to realize that how we interact is also changing and that how one interacts on Facebook is vastly different from an in-store visit. I would also argue that it’s different than how we interact with a traditional online store from the same brand.
As scary as it is, and as much as I try to not want it to happen, Facebook is slowly evolving into something much bigger than connecting with friends and family. Understand it, and your brand can find success. Even in an e-commerce fashion.
You write about people and brands. Which is Facebook best for?
“Best” for people but that doesn’t mean that it’s not a big oppty for brands, imho.
In the end, people win. But like Todd mentioned, it provides tremendous value for brands as well.
Good points, TD. People forget how young Facebook is and that there is still plenty of room to grow. The other problem I have with a study like this is how narrow a viewpoint it takes of e-commerce. It’s not JUST about clickthroughs. And definitely not JUST about clickthroughs on ads.
Will we see more brands actually try to sell via their Facebook fan pages? Some already have. And might the conversation in a social network actually drive behavior more than advertisements since conversation is what a social network is all about? Just sayin…
Where there is community, there is commerce. Simple as that. Ridiculous that an analyst at one of the top firms doesn’t get that.