Facebook Commerce

FACEBOOK COMMERCE
Trading Commerce September 2011 1
We live in fast-moving times in which changes happen on a daily basis. Some of these changes demand decisions about the future, and many companies are now confronted by one such challenge, because something is heading their way which could permanently change conventional online retailing. Facebook Commerce has got underway, and we should look carefully to see whether it is a train onto which it is really worth jumping. Up until very recently, Facebook was simply a social network in which friends met in their own communities and kept each other updated about their activities. That has now changed. More and more brands are establishing a presence on Facebook. Nowadays, many Facebook users are friends with numerous brands, which have thus become part of their networks. This kind of direct dialogue within a very private sphere is at the centre of F-Commerce, and it is becoming an effective marketing tool with which products will soon be able to be sold extremely successfully. In this study, BBDO sheds light on the subject from four different angles: Facebook, users, businesses, and service providers. We then draw up some recommended actions for businesses on the basis of these different points of view. One thing, after all, is certain: it is crucial to get firmly to grips with this transformation in retail. If F-Commerce is going to establish itself as a relevant sales channel, then it is important to make use of the opportunities and to occupy vacant ground. So stay tuned. I hope you enjoy reading the study.
Foreword
Michael Schipper COO, BBDO Germany
Contents
6 7 MANAGEMENT SUMMARY | F-COMMERCE 8 11 BACKGROUND AND SETUP | STUDY FOR ACTION 12 19 STATUS QUO | F-COMMERCE IS STILL IN ITS INFANCY 20 27 PLAYER 1: FACEBOOK | FROM FRIENDLY SPACE TO MARKETPLACE 28 41 PLAYER 2: USERS | FANS BECOME BUYERS 42 55 PLAYER 3: COMPANIES | SELLING BY COMMUNICATING 56 65 PLAYER 4: SERVICE PROVIDERS | NEW PLAYERS EMERGE GLOSSARY
MANAGEMENT SUMMARY
F Commerce
The commercialisation of Facebook is moving ahead at full steam. Numerous brands and games have paved the way for commercial offerings on Facebook. Up until recently, most companies used the platform primarily for customer loyalty purposes. Half of the people surveyed as part of this study are friends with at least six brands on Facebook. Two-thirds of those asked consider Facebook a central place for all kinds of interesting themes. This situation has led to products being sold via the platform alongside pure dialogue activities. F-Commerce is currently in a relatively early stage of its evolution. But it is safe to assume that it will be taken up by consumers more quickly than e-commerce was a few years ago, because it is no longer necessary to accept a completely new technology as it was with e-commerce. Furthermore, shopping online is now absolutely normal. F-Commerce, therefore, will expand over several stages. In the first stage, product recommendations will be generated by incorporating Facebook functions, and then disseminated in the social network. In the second stage, products will be presented in Facebook storefronts. In the third stage, complete purchase transactions will be put on offer. Facebook wants to get its foot in the door of online retailing because it can see the enormous potential that lies in retail activities on its platform. The social network already has its own currency, called Credits, and it earns 30% of the turnover generated by social gaming through virtual goods traded in social games. In order to push F-Commerce forward, Facebook set up an internal Commerce Partnership Group at the end of last year which is intended to help retailers to use Facebook as a sales tool. Retailing inside Facebook does not cost companies anything at the moment, but that can change. The question is not whether, but when, Facebook will capitalise on retail within, and using, its platform. Convenience is one of the most important motives for buying on Facebook. It is the clinching argument for 36% of those surveyed. Great offers and discounts come second (32%), followed by exclusive products (30%). Only 8% of those asked have already bought things on Facebook, while twice as many have browsed through an F-Store. One in five people stated that the social component is an advantage. What they mean by that is shopping together with friends and commenting on the purchases they have made. Products that can easily be shared with others and given away are especially well received on Facebook: two-thirds of those asked can definitely imagine buying vouchers and tickets on Facebook.
MANAGEMENT SUMMARY
But F-Commerce is still more suitable for impulse buying. That is because most Facebook users still visit the site without any particular intention to shop. Instead they are more likely to stumble upon product recommendations for interesting products from their Facebook friends or brands they are friends with. Instant rewards as a shopping incentive will play a major role in F-Commerce for this reason. Products requiring a lot of information, on the other hand, are less in demand, and are more suitable for e-commerce channels. For companies, F-Commerce is also a place to try out new concepts. They can experiment there with time- and volume-dependent offers, fan-first and fan-only items, and group purchases. The results from this will give rise to new marketing and sales concepts which will aim at attracting attention and creating relevance. Merging communication and retail in this way will produce unique possibilities which are only feasible on Facebook. Dialogue with the brand will always be at the centre of F-Commerce. At this point, Facebook has not yet fully undergone the transformation into a sales channel. This means that for companies, F-Commerce is currently an investment, and primarily a marketing tool. The monetary benefits are still low. Emphasis is very much on customer loyalty and customer involvement, because there are few buyers, and the ones there are are not very willing to spend. Not until F-Commerce establishes itself fully (stage three) will companies be able to convert these customer relationships into hard cash. The development of F-Commerce will depend very much on Facebook as a platform. If users abandon the social network, then F-Commerce will fail. Half of the people polled expressed reservations about data privacy and security, but only one in five fundamentally distrusts Facebook. For Facebook to establish itself as a retail platform, it will not only need to demonstrate more dependability to businesses, but it will also have to make security and data privacy its priorities.
BACKGROUND AND SETUP
Study for Action

Definition of F-Commerce: F-Commerce describes retailing inside or by means of Facebook. Retailing inside Facebook means that either the products are presented on the platform, or the complete purchase transaction takes place there, while retailing using Facebook enables companies to generate traffic on their own e-commerce sites, or to collect user data. This study focuses on retail inside Facebook. That includes (fully integrated) F-Stores, product presentations (storefronts), group purchases (deals) and trading in virtual goods within Facebook games.
Exciting Commerce is one of the most prominent German e-commerce blogs. One of its authors, Jochen Krisch, deals with themes that include social commerce, and advises e-commerce businesses.
Jochen Krisch, Exciting Commerce
Smatch implemented numerous Facebook Commerce activities for the Otto Group starting in 2010. Stephan Wolk is responsible for marketing and product developing at Smatch.
Stefan Wolk, Smatch
ShopShare is one of the best-known providers of Facebook Store solutions. This Austrian company offers both customised and standardised store concepts.
Hendrik Maat, ShopShare
And in order not to neglect the corporate perspective around this theme, one of the clients of the BBDO Group was interviewed.
HORNBACH has maintained its own successful brand fan page on Facebook since 2009. Christoph Strassburger, its Director of Social Media, is responsible for managing all social media channels.
Christoph Strassburger, HORNBACH
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Method:
ReseaRch step
1 2 3
Desk Research Existing, published knowledge in industry magazines, blogs and surveys on the subject of Facebook Commerce was gathered together, and on that basis hypotheses were formed as the starting point for the next research steps.
ReseaRch step
Interviews Three experts were interviewed in order to gain an understanding of how Facebook Commerce is likely to develop in the future. Each expert embodied a specific perspective of the subject.
ReseaRch step
Online User Questionnaire As part of the study, a representative cross-section of 504 people were polled online. These 504 people were selected according to three criteria: Criterion 1: Facebook users. The people in this category use Facebook at least every two or three days. They are divided up as follows: 64% are heavy users: they use Facebook several times a day. 36% are occasional users: 12% use Facebook every two or three days, 24% use the social network once a day. Criterion 2: brand friends. In this category we only asked people who have made added brands and companies to their list of friends on Facebook. Criterion 3: regular online shoppers. In this category we only asked people who shop online at least once every six months. This is how their shopping behaviour broke down: 75% are heavy online shoppers: 13% of those asked buy things at least once a week online, 32% several times a month and 30% at least once a month. 25% are occasional shoppers: 20% of those asked buy something online every two months, 5% every half a year.
Authors: This study was produced by BBDO Germany in conjunction with Jelden Trend & Transformation Consulting and brand foresight.
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STATUS QUO
F-Commerce is still in its infancy

Over the past three years, Facebook has established itself as the worlds biggest and most important social network. Brands and games have discovered Facebook for themselves in a big way, and are helping to drive the commercialisation of the platform. Retailing will be the next step of this commercialisation. More than mere friendship: Facebook is currently approaching the 750-million-user mark (source: Facebook, April 2011). No other social network is anywhere near as successful or far-reaching. All of its rivals are exhausted and are losing users or simply serving niches, while Facebook steadily gains users. Facebook is already much more than just a place to chat with friends. To 65% of the people polled in this study, Facebook is the central place at which they follow all interesting themes. To its users, Facebook has become a real-time newsletter. Facebook is booming thanks to openings: Two revolutionary openings have enabled this ascent. Firstly, Facebook made its own interfaces available to external developers back in 2006. This had a networked effect: the more offerings Facebook users found there, the more attractive the platform became to them, and the more users there were on Facebook, the more attractive it became for external developers and companies to programme applications and set up a brand presence. Secondly, in April 2010 Facebook began to integrate its social elements into external websites. This included features such as Likes, Comments and Shares. It was these two decisions which were the key to Facebooks victory over other social networks.
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STATUS QUO
Most people use Facebook to follow themes they are interested in
65%
To me, Facebook is a place where, as well as exchanging information with friends and relatives, I can follow all kinds of themes.
35%
To me, Facebook is simply a place where I can stay in touch with friends and relatives.
Basis: 504 people polled between 20 and 39 years of age; Facebook users who are friends with brands and who shop online regularly.
First come the brands, then comes the commerce: The current commercialisation of Facebook is based on two key developments. The first is the growing presence of businesses who use their brand communities to build up customer loyalty. This kind of open dialogue with companies has found widespread acceptance among users. Around threequarters of all Facebook users are friends with at least one brand (source: AdAge/Ipsos, February 2011). The second key development is the spread of social gaming inside Facebook. The goods purchased within these games have caused the virtual goods market to grow to 835 million dollars (source: Fast Company, April 2011). In response to this, Facebook has introduced its own virtual currency, Facebook Credits, through which it earns 30% of the turnover generated by social gaming. Around 600 applications currently use these Credits, and 85% of the turnover in those applications is generated through Credits (source: Facebookbiz, May 2011). These developments have laid the foundation for transactions.
13
STATUS QUO
Facebook is now big enough to support further commercialisation.

stefan Wolk, smatch
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STATUS QUO
F-Commerce is the personal version of social commerce: Retail inside or using Facebook makes use of its social components. As in social commerce, F-Commerce is about stimulating sales by means of ratings, reviews and recommendations. The difference is that in F-Commerce, this word-of-mouth propaganda takes place within dedicated networks, which means that product recommendations come from your own Facebook friends. Because we befriend people who are similar to us, and because we trust people more whom we know personally, these recommendations have a much greater effect than recommendations from people we do not know. That is why 90% of Facebook users state that they trust in recommendations received from their Facebook friends (source: ExactTarget, August 2010).
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STATUS QUO
Facebook is becoming Amazons and eBays most dangerous rival: Facebook is now so big that these recommendations and ratings are scalable. But it is not only Facebooks reach which makes it Amazons and eBays most dangerous rival, but it is also its ability to locate users within the zones of their friends, products, places and all of the things that they like. F-Commerce is establishing itself more quickly than e-commerce: Where e-commerce took around ten years to establish itself, F-Commerce will be accepted much more quickly among consumers. There is no new technology that needs to be accepted, since F-Commerce is based upon the already existing components of e-commerce: from shopping, to wrapping up the deal, to payment. People learned to shop online a long time ago. Furthermore, companies have already created the structures required to retail products on the Internet. The main obstacle to F-Commerce is the demand for shopping among Facebook users, without which retail will not be able to assert itself inside Facebook. But the first F-Commerce success stories do seem to indicate that Facebook will be able to support further commercialisation (See chapter Player 3: Companies).
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STATUS QUO
Many websites and online shops belonging to brands and companies (e.g. Amazon) have already integrated Facebook functions. Which of the following functions do you use?
Open Graph features are already being used
65 %
I click on Like on brand or company websites

36 %
I click on Like or Recommend for certain products on websites and online shops
29 %
I click on Share in websites and online stores in order to tell my friends about particular products
19 %
I visit brand and company websites or online shops whose brands or products my friends also Like
20 %
I use the option of logging in to other websites and online shops using Facebook
12 %
I tell my friends using Facebook about what I have bought

12 %
I tell my friends using Facebook about what I want to buy

23 %
I only use the Facebook functions on websites or in online stores in order to obtain discounts or take advantage of special offers
15 %
I do not know about or I do not use these functions
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STATUS QUO
The two spheres of F-Commerce: F-Commerce consists of retail inside Facebook as well as retail using, or by means of, Facebook. Retail inside Facebook is the heart of F-Commerce. It includes all buying activities that are concluded through Facebook such as Facebook Stores and the retail of virtual goods using Credits. The extended sphere of F-Commerce constitutes retail using Facebook as a means. This includes incorporating Facebook mechanisms on e-commerce sites using social plugins such as Likes, Shares and logins. This is known as the Open Graph and is about generating traffic on e-commerce websites and gathering data. This extended sphere is already widespread. Two-thirds of those asked (65%) use the Like button on external websites belonging to brands and companies, and one in three (36%) click Like or Recommend for certain products on websites and online stores. Shopping as a personalised social experience: More than 250 million people use Facebook features on external websites every month (source: Facebook, April 2011). These widespread social plugins enable companies to collect data about their users and generate traffic. This way they can find out which of their offerings are most popular, and which are most frequently shared in user networks. But that is not all. The Open Graph stores all of a users public data, which means all of the interests he or she has listed (and made public) in Facebook, as well as all of the websites, articles, products and many more things which he or she prefers. Facebook currently provides companies with this data free of charge. Evaluating this data not only helps companies to optimise their range of products, but it also helps them to personalise their e-store to comply with user preferences. Visitors to an e-store can also see which of their friends also Like the e-store and products. This makes shopping both more personalised and more social at the same time.
F-Commerce is a variety of social commerce. Companies that have mastered all things social have the potential to become the new eBay or the new Amazon. I see enormous potential turnover in the social arena, because there you can sell very close to your target group. In this respect, Facebook is a very suitable platform with hundreds of millions of users who can be activated.
Facebook Commerce expands step by step: F-Commerce will spread over a number of stages. The first stage is that the use of the Open Graph will make shopping a personalised social experience. Users attention will be drawn to new products by recommendations from their own networks, and they will also learn to share their shopping experiences with others. The second stage is searching for products
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STATUS QUO
and presenting products directly on Facebook. Many brands are beginning to set up storefronts on their Facebook pages, where they can present their products. The purchase itself, however, takes place at the retailers own e-store. P&G, for instance, currently uses its brands F-Stores as a learning platform on which to gather knowledge about the shopping behaviour of its target group, and, as a non-retailer, about e-commerce in general. Users have also yet to experience shopping on Facebook. Once the acceptance of commercial offerings inside Facebook rises, then fully integrated F-Stores will establish themselves in stage three.
F-Commerce is made up of elements which users already know and accept from e-commerce. All users have to learn is that shopping is now possible on Facebook as well. There is no need to build up trust in a new technology, only in Facebook itself, and store-holders. That will not take long: 18 months may be all we need.
Stage 1: Generate and disseminate product recommendations [Open Graph]
Stage 2: Product presentation [Storefronts]
Stage 3: Complete purchase transactions [Fully integrated shops]
The success of F-Commerce depends on all of the players involved: As a multi-faceted market, Facebook must remain an attractive platform to users as well as retailing companies and service providers. But it is up to all of the players involved to shape the future of F-Commerce.
F-Commerce is currently in a trial-and-error phase. Companies are watching to see what others are doing, and how much of that can be adapted.
Stefan Wolk, Smatch
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PLAYER 1: FACEBOOK
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PLAYER 1: FACEBOOK
From friendly space to marketplace

To Facebook, the rise of F-Commerce means entry into a new sphere since it opens up additional sources of income. If F-Commerce succeeds, Facebook will be able to extend its influence massively and will finally achieve key player status alongside Google, Apple and Amazon. But Facebook will first need to prove itself to commercial enterprises and users alike as a reliable partner. Facebook is becoming the new online advertising giant next to Google: Facebook already has more users per month than Google. On top of that, Facebook has access to extremely sensitive personal user information, something which the social network is capitalising on by means of advertising. According to eMarketer, Facebook posted a two billion US dollar advertising turnover in 2010 (source: eMarketer, June 2011), a figure which is set to double in 2011. Using Facebook, companies can reach target groups more effectively and efficiently than ever before. The TechCrunch blog predicted back in June that Facebook would soon overtake Google in terms of advertising turnover (source: TechCrunch, June 2011). But Facebook still does not have any data about its users shopping habits. If the social network manages to include a shopping history and product recommendations in its data set, then a completely new range of business possibilities will open up to it.
Facebook is giving F-Commerce a high priority. Positive results in the field of social gaming have motivated Facebook to turn to e-commerce as a source of sales and e-commerce here is very broad, ranging from music all the way to goods retail.
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PLAYER 1: FACEBOOK
Facebook is giving a high priority to commerce: Facebook has identified considerable potential sales in retail activities on its platform, and in providing its data pool from the Open Graph. The company can expect serious profits both as a retailer and as a data aggregator, and it is pushing ahead with both types of F-Commerce. Which of the two will in the end assert itself in the market, and which will be the more profitable, is something we cannot yet foresee. What is most important for Facebook is to get a foot in the door to the retail world. That is why they set up an internal Commerce Partnership Group in November 2010, which is aimed especially at retailers and which will help them to utilise Facebook as a selling tool. At the moment, companies do not have to pay anything to use data from the Open Graph, but this could change if at some point it becomes essential for commercial businesses to access this data. In order not to become dependent upon Facebooks data pool, Amazon has already installed its own Like button. Mobile devices as an F-Commerce driver: 250 million users are already accessing Facebook today using mobile terminal devices. What is more, these users are twice as active as stationary users. F-Commerce is currently unfeasible using existing mobile apps. However, in June 2011 it became apparent that Facebook is to pursue a new app strategy by establishing an HTML5-based platform under the name Project Spartan. In this way Facebook intends to bypass Apple and Google and land its own cross-platform apps on mobile terminal devices. Developers will be able to make and market their own apps, and utilise Facebook instead of Apple or Google as their infrastructure for processes like payment, identification and so on. Facebook Credits would then become the central payment system. It is still unclear exactly what this platform will look like. What is certain is that if Facebook succeeds in integrating mobile terminal devices into F-Commerce, then F-Commerce will take off massively, because so far only very few online retailers have managed to sell anything via mobile devices.
22
PLAYER 1: FACEBOOK
It is still unclear whether Facebook will become a kind of aggregator like Google, or emerge as a retailer like Amazon. As an aggregator Facebook would display products while the purchase transactions would take place on external websites. As a retailer, Facebook would conduct the transactions itself. What is probable is that Facebook will try to keep users on its platform by means of a payment and log-in solution.
Stefan Wolk, Smatch
Growth is not infinite: So far Facebook has enjoyed constant, rapid growth, but lately things have begun to falter. Although the number of global users is still on the rise, user figures in its core markets have for the first time declined for two consecutive months. Six million users left Facebook in the USA in May 2011 alone, and negative figures are also being posted in Canada, the United Kingdom, Norway and Russia. This development does not indicate a general exodus, but it does indicate saturation. After all, Facebook has already reached approximately 60% of the populations of the USA, Canada and the United Kingdom. In any case there is no getting around the fact that F-Commerce will depend for better or worse on Facebook itself. What we can also say is that the half-life of online platforms like AOL and social networks such as Friendster and Myspace tends to be short. An exodus of users, with the concomitant negative network effect, would have colossal consequences for F-Commerce. There are certain preconditions which Facebook will have to establish for both users and businesses if it is to assert itself as a communication and sales platform.
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PLAYER 1: FACEBOOK
What do you or would you dislike about shopping via Facebook?

55% I dont want Facebook to know what I am buying 54% I dont know whether shopping on Facebook is secure 53% I dont want companies or brands to be able to access my personal data 47% I am afraid that companies or brands will be able to access my friends data 41% I dont want to bother my friends with my shopping activities 36% I only want information from Facebook, not shopping 31% I dont want to be disturbed by shopping activities on Facebook 21% I fundamentally distrust Facebook 21% I have no idea where to find stores on Facebook sites ??% I already have enough technical difficulties with Facebook as it is
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PLAYER 1: FACEBOOK
Facebook needs to become dependable: Facebooks unique status allows it to test its limits. New rules, regulations and features appear unannounced, often without companies receiving any notification or warning beforehand. Security and data privacy are further concerns. If Facebook is to establish itself as a retail platform, it will not only have to prove itself to companies as more reliable, but it will also have to prioritise security and data privacy. Facebook must achieve security: Users still feel very uncertain about shopping inside Facebook. Half of those asked do not know whether it is secure to shop there (see chapter Player 2: Users). These security concerns will disappear with time, since only one in five people fundamentally distrust Facebook. At some stage Facebook will introduce securer, i.e. encrypted, data transmission; this will include, for example, the introduction of secure HTTPS sites. But as well as that, retailers will also need to convince their customers that it is safe to buy from them (see chapter Player 3: Companies).
25
PLAYER 1: FACEBOOK
Lessons for companies

Offer high security standards: Security will be a hygiene factor in the still relatively unknown world of F-Commerce. In that world, companies will have to offer the same security standards as they do in their own e-stores. Collaboration with entities such as Trusted Shops will ensure that F-Stores fulfil all of the legal criteria as well. Respect users private sphere: Users are worried about how their and their friends data will be used. They also value Facebook as a medium of information, and are worried that a deluge of additional commercial messages will destroy that experience. Restraint and data privacy should be given the utmost priority. Use F-Commerce as an accompaniment: F-Commerce offers users (and retailers) new benefits over e-commerce. At the moment, F-Commerce has the status of an additional channel through which companies can offer their customers a particular shopping experience; an F-Store can complement an e-store, but not replace it. Since the development of F-Commerce will depend very much upon Facebook itself, companies would be well advised to focus primarily on e-commerce so as to preserve the greatest possible leeway for future decisions. SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF FACEBOOk AS A PLAyER DRIVERS
POSITIVE RESuLTS In SOCIAL GAmInG / FACEBOOk CREDITS POTEnTIAL SOuRCE OF InCOmE GROwInG RETAILER DEmAnD uSERS DO nOT FunDAmEnTALLy DISTRuST FACEBOOk
OBSTACLES
ThE COmmERCIALISATIOn OF FACEBOOk mAy nOT FInD ACCEPTAnCE FACEBOOkS LACk OF CREDIBILITy In FInAnCIAL SERVICES RESERVATIOnS ABOuT DATA PRIVACy AnD SECuRITy
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PLAYER 1: FACEBOOK
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PLAYER 2: USERS
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PLAYER 2: USERS
Fans become buyers

Facebook is among the most private areas of the Internet, and brands and media are gaining increasing access to this area through their fans. Yet this acceptance is something they have to keep earning anew, in return for which they are granted access to their fans personal recommendations. Tact is required to sell things in these zones. The majority of users view F-Commerce favourably at the moment, even though the actual benefits are as yet unclear; users have insufficient experience. Facebook is the new TV: Not being on Facebook is becoming more and more uncomfortable for users. All kinds of social activities are posted on Facebook. Im not on Facebook is the new I
15 BRANDS 610 BRANDS 1120 BRANDS 2130 BRANDS 3150 BRANDS MORE THAN 50 BRANDS DONT KNOW 42% 30% 13% 4% 2% 3% 6%
hOw mAny BRAnDS OR COmPAnIES DO yOu FOLLOw On FACEBOOk?
dont have a TV. The adaptation speed around Facebook is however quite different from that of television. Two-thirds of all users have not even been members of the social network for two years (source: Pew Research Center, June 2011). As a result, users general experience of Facebook is quite scant, and since the platform is in continual change, the Facebook experience itself is also in flux for its users.
From interaction to transaction: Facebook was originally used to stay in touch with friends and relatives and to keep up to date with what they are doing. Like emails, Facebook dealt with a very private sphere. This is now changing massively on account of the growing presence of media and brands. Half of those asked in this study (52%) are friends with at least six brands on Facebook. Two-thirds of them consider Facebook a place to follow all relevant themes centrally (see chapter Status quo). With the spread of F-Commerce, shopping activities and product recommendations are filtering into users private realms, and since they come from users own Facebook friends, they carry considerable personal relevance.
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PLAYER 2: USERS
Facebook is a communication channel and that affects the mode in which members use it. Facebook is used in a very different way from how people browse e-stores. On Facebook, you mainly want to entertain and be entertained, while in e-stores youre looking specifically for products.
Seeking relevant content: People who are networked with brands mainly want to keep up with the latest news. The majority of those asked wish to be informed about new products (86%), activities (84%) and special offers (77%). Two-thirds of people (68%) want access to exclusive content which is only available on Facebook. Three-quarters of those asked (74%) use brands as part of their own identity, by showing their friends the brands and products that they think are great. One-third of those asked (37%) seek direct dialogue with brands.
Discrepancy between desire and reality: However, what is revealed is that brands only succeed in fulfilling their fans expectations to a limited extent. What people want and what actually happens are two very different matters. If you ask users why they follow the activities of brands and companies, then the discrepancy emerges. Only 67% of those asked rate the information as interesting; 66% take note of exciting events that are publicised; and only half (46%) think that they receive good offers and discounts.
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PLAYER 2: USERS
Why do you befriend brands and companies by clicking on Like?

86%
I want to find out early about the brands or companys new products
84%
I want to keep up to date with the brands or companys activities on Facebook
77%
I want to take part in special offers and competitions
74%
I want to tell my friends that I like these companies and brands or products
68%
I want access to content which is available only on Facebook
61%
I want to be entertained by the brand or company, and to have fun
59%
I want to be inspired and surprised by the brand or company
37%
I want to contribute actively and comm unicate with the brand or company
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PLAYER 2: USERS
Why do you follow the activities of certain brands and companies?

67% I receive lots of interesting information from the brands and companies 66% I am informed about exciting events and campaigns 46% I always receive good offers and discounts from the brands and companies 39% I find the activities of the brands and companies entertaining 33% I find the activities of the brands and companies inspiring 32% I follow what other users write on these brands and companies walls 27% I forward interesting information from these brands and companies to my friends 16% I myself post things onto the walls of these brands and companies
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PLAYER 2: USERS
Shopping is highly viral: Anyone who supplies relevant or inspiring content will benefit from Facebooks highly viral nature. According to a recent ShareThis study, links relating to entertainment and shopping are especially popular for sharing on Facebook. And indeed, one in four of those asked passes on interesting information that he or she has received from brands. Sharing is the new expression of appreciation (source: ShareThis, June 2010). But for users to share product information, they have to feel genuinely enthusiastic about the product or the information itself; contentment alone is not enough. After all, by making these recommendations, users define their own profiles within their networks.
Mail-order and long-distance retailers can tap into new customer strata using F-Commerce, but the question is how to achieve and activate that. Much remains unclear, such as what kind of a market will emerge and how much sales pressure can be built up in a communication channel. Companies will have to think about what is possible within the scope of their own possibilities, and what suits them best.
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PLAYER 2: USERS
The majority of those asked view F-Commerce positively: 55% of those asked expressed an interest in the subject; yet it is still very much in its early stages. Only 8% of those asked have ever shopped in an F-Store. Twice as many, 16%, have browsed in an F-Store but not bought anything. One in three people did not know that such a thing exists but were interested. This is where companies need to educate people and give them a positive taste of F-Commerce. Sceptics are also many: 45% of those asked are not at all interested in F-Commerce. This dismissal is in part fundamental; users wish to keep Facebook a non-commercial place for friends. But some of it is also due to a lack of experience and imagination on the part of users. Once people experience F-Commerce for themselves, or once their friends experience it, the number of sceptics will drop.
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PLAYER 2: USERS
To what extent have you already shopped on Facebook?
45% 31%
I didnt know it was possible but I find the idea interesting I have never bought anything from a store directly on Facebook, nor do I intend to
16%
I have browsed in a store on Facebook before, but I have never bought anything
8%
I have already bought something in a store directly on Facebook
35
PLAYER 2: USERS
The benefits of F-Commerce are not yet clear: Convenience is currently the clinching argument for shopping on Facebook. 36% of users consider it practical and time-saving not to have to leave Facebook to shop. 32% like to receive great offers and discounts as direct News Feeds. 30% of those asked view Facebook as a channel for exclusive products. One in four people expect to receive better offers than they do at normal online stores. The social aspect of F-Commerce is far less important by comparison: 19% like it that others can see and comment on what they have bought, but only one in ten is motivated to shop together with friends. These relatively low approval figures point once again at a lack of experience and to users security concerns about F-Commerce (see chapter Player 1: Facebook).
whAT mOTIVATES OR EXCITES yOu ABOuT ShOPPInG AT BRAnDS AnD COmPAnIES FACEBOOk SITES?
ITS PRACTICAL AnD IT SAVES TImE BECAuSE I Am On FACEBOOk AnywAy IT SAVES TImE LOOkInG, GREAT OFFERS AnD DISCOunTS ARE SEnT TO mE DIRECT By nEwS FEED BRAnDS AnD COmPAnIES FACEBOOk STORES GIVE mE PRODuCTS ThAT ARE OnLy AVAILABLE FOR A LImITED PERIOD Im nOT InTERESTED In ShOPPInG VIA FACEBOOk SITES whEn I ShOP AT BRAnDS AnD COmPAnIES FACEBOOk STORES, I GET BETTER OFFERS ThAn I DO AT ThEIR OnLInE STORES BRAnDS AnD COmPAnIES FACEBOOk STORES LET mE Buy PRODuCTS ThAT I CAnT GET AnywhERE ELSE my FRIEnDS COmmEnT On AnD RESPOnD TO my PuRChASES I ShOP whERE I CAn mEET LIkE-mInDED PEOPLE ASSOCIATED wITh BRAnDS OR COmPAnIES ITS mORE Fun ShOPPInG VIA FACEBOOk I CAn GO ShOPPInG TOGEThER wITh my FRIEnDS
36% 32% 30% 29% 26% 22% 19% 12% 12% 9%
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PLAYER 2: USERS
Intangible goods have the greatest potential: Although the social aspect is less commonly named as a benefit of F-Commerce, immaterial goods are currently among the most popular. These are things that can be given easily to others or shared. Providers like Ticketmaster generate an additional 5.30 US dollars of turnover for every ticket they sell via Facebook. Starbucks allows its customers to manage their customer cards on Facebook, by topping up their bonus cards and iPhone payment cards in the companys F-Store. When users were asked which areas they can imagine shopping in using Facebook , the top two answers were tickets for events and travel (64%), and vouchers of all kinds (62%). Further down the list come media such as books, magazines, films and music (57%), and fashion (46%). In view of this, the deals being pushed by Facebook (online discount coupons) have a good prospect of success, since everything seems to indicate that trading on Facebook using coupons will work.
yOu CAn nOw ShOP On FACEBOOk AS wELL. whAT hAVE yOu BOuGhT SO FAR AT FACEBOOk STORES BELOnGInG TO BRAnDS AnD COmPAnIES, OR In whICh AREAS CAn yOu ImAGInE DOInG SO?
TOTAL ALL kInDS OF VOuChERS TICkETS FOR EVEnTS AnD TRAVEL BOOkS, mAGAzInES, FILmS AnD muSIC CLOThES, ShOES AnD FAShIOn ACCESSORIES ELECTROnIC EquIPmEnT AnD ACCESSORIES TRAVEL AnD hOTEL ACCOmmODATIOn GAmES AnD VIRTuAL GOODS (E.G. FOR FARmVILLE, mAFIA wARS) COSmETICS AnD BODyCARE PRODuCTS SPORTS EquIPmEnT AnD PRODuCTS FuRnITuRE AnD hOuSEhOLD ACCESSORIES FOOD AnD DRInk mEDICInES AnD mEDICAL PRODuCTS DIy PRODuCTS AnD ACCESSORIES CARS, mOTORCyCLES AnD ACCESSORIES
ALREADy CAn ImAGInE PuRChASED PuRChASInG 10% 7% 8% 9% 7% 3% 8% 6% 5% 4% 4% 4% 3% 3% 62% 64% 57% 46% 38% 39% 36% 32% 27% 24% 21% 18% 17% 15%
72% 71% 65% 55% 45% 42% 44% 38% 32% 28% 25% 22% 20% 18%
Spontaneous buying dominates F-Commerce: User behaviour still varies widely between the fields of e-commerce and F-Commerce. Users browse Facebook initially without any particular intention to buy. The shopping process tends to begin coincidentally when they receive Trusted Discoveries via News Feed. Users tend to skip searching, researching and comparing sellers
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PLAYER 2: USERS
if they receive a recommendation from within their personal networks. They see something, like it and grab it. Products that do not require detailed research and which offer immediate rewards will sell more easily on Facebook than products that require a lot of information. Traditional e-commerce channels are more suited to intensive research, price comparisons and so on. But with the growing number of commercial offerings, Facebook users will gradually change modes: they will visit F-Stores specifically to look for exclusive products and special offers.
Exclusive offerings on Facebook, such as the Joop pop-up store, attract attention and therefore alert consumers to F-Stores in general. Sooner or later people will go to Facebook just to look for an F-Store, in the knowledge that they can obtain better offers there. This will change what people expect from Facebook.
Users are optimistic about the future of F-Commerce: Even though 45% of users cannot yet imagine shopping on Facebook, the majority of them do believe that shopping will become a permanent feature of the Facebook experience in the future. 70% of those asked state that shopping on F-Stores will at some point become normality.
AGREEmEnT wITh STATEmEnTS (Top two answers: agree completely / basically agree)
IN A FEW YEARS, SHOPPING ON FACEBOOK OR USING FACEBOOK TO SHOP ONLINE WILL BECOME NORMALITY I WOULD BE MORE LIKELY TO SHOP IN FACEBOOK STORES BELONGING TO SMALLER BUSINESSES THAT I KNOW WELL THAN I WOULD IN THOSE BELONGING TO BRANDS AND BIG COMPANIES I WOULD BE MORE LIKELY TO SHOP IN FACEBOOK STORES BELONGING TO STARS, CELEBRITIES, MUSICIANS, SPORTS CLUBS AND SO ON THAN I WOULD IN THOSE BELONGING TO BRANDS AND COMPANIES I WOULD BE MORE LIKELY TO SHOP IN FACEBOOK GAMES (E.G. FARMVILLE) THAN I WOULD IN FACEBOOK STORES BELONGING TO BRANDS AND COMPANIES NO RESPONSE
70%
41%
21% 21% 18%
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C A N A D I A N E D I T I O N / M OM T H O 1 , 2 0 1 0 N AY 3 O 07
Justice:
How to prove innocence
Elections:
Is the Party over?
Arts:
Our best picks for summer
TIME writer Dan Fletcher
Facebook CEO Mark Zuckerberg
With nearly 500 million users, Facebook is connecting us in new (and scary) ways
BY DAN FLETCHER
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PM40110178
...and how its redening privacy

PM40110178
One of the 1,295 people on this cover picked from our Facebook group I Want to Be in TIME
w w w.time.com
PLAYER 2: USERS
Lessons for Companies

Offer special benefits: Users expect a special shopping experience on Facebook. As fans they want to enjoy exclusive offers, unique products and generous discounts. Shopping on Facebook should offer immediate rewards that motivate users to talk about their purchases. This includes, for instance, dynamic group shopping experiences. Companies can also use group purchases to reach new consumer strata. Sell by communicating: Commerce must adapt to Facebooks communicative mode of use. Communication and networking will continue to play a major role. Selling must be perceived as an enrichment and not a disturbance. Products whose purchase does not require a lot of research are especially suitable. Generate positive experiences: For Facebook to establish itself as a sales channel, it is crucial that users get a positive taste of F-Commerce. This includes products being depicted in the right way, and a good overall user experience. The products themselves should also generate enthusiasm and should be unique. Gain entry using intangible products: Immaterial things such as vouchers, discount codes and coupons are especially suitable for gaining entry into F-Commerce; they are particularly easy to buy. Giving them away generates word-of-mouth propaganda. This way companies can acquire experience in F-Commerce, and try out products to see which ones create a lot of buzz.
SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF uSERS DRIVERS
DECISIVE BENEFIT NOW: TIME-SAVING AND PRACTICALITY DECISIVE BENEFIT TOMORROW: SHOPPING AS A SHARED ExPERIENCE SPECIAL, ExCLUSIVE OR PERSONALISED OFFERS A SPECIAL SHOPPING ExPERIENCE THAT IS FUN AND ENTERTAINING TRUSTWORTHY PRODUCT RECOMMENDATIONS PROVIDE ORIENTATION SHARE ExPERTISE AND BUILD UP A PROFILE THROUGH RECOMMENDATIONS
OBSTACLES
CONCERN ABOUT PERSONAL DATA FEAR OF SPAM BENEFITS OVER ONLINE STORES NOT YET CLEAR
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PLAYER 3: COMPANIES
PLAYER 3: COMPANIES
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PLAYER 3: COMPANIES
Selling by Communicating
What was previously a communication channel is becoming a sales channel. To companies this means new ways of capitalising on their customer relationships. Unique communication and sales concepts are appearing which are only feasible on Facebook. Companies already active in the field of F-Commerce can profit from their head start and from the profiles they have built up. Facebook site vs. brand website: Facebook is gradually evolving into a mini-Internet all of its own, with all the possibilities and features which the World Wide Web has to offer. Brands and companies Facebook sites are competing for attention with their own websites. Half of the people asked in this study visit brand and company Facebook sites more often than their official websites, although a slight majority (54%) still spends more time on the latter. Some companies have even gone as far as replacing their brand or company websites with Facebook pages. Despite this it does seem that websites and Facebook sites each have their own raisons dtre. Seven out of ten of those asked believe that Facebook sites aim especially at fans (70%), while websites are intended for anyone who is interested (75%). Facebook sites are considered more up to date than websites (71%), and 57% of those polled consider it more fun to follow the activities of brands and companies on Facebook than it is to visit their regular sites. News Feed vs. Facebook site: As a fan of a brand or company there are two ways of receiving information within Facebook: via News Feed or on the brands Facebook site. Since the News Feed is the heart of Facebook usage, activities publicised that way attract a lot more attention than a Facebook site on its own. Not only can you communicate by News Feed, you can also sell. For example, flower delivery company 1-800-Flowers offers selling options directly by News Feed. But there are also good reasons to visit the site itself: one in two (50%) people visit Facebook sites to look for information. One in three (34%) post their questions directly on the Wall in order to obtain information. These different access methods must all be taken into consideration by any company planning an F-Store.
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PLAYER 3: COMPANIES
Comparing the websites of brands and companies with their Facebook pages, to what extent would you agree with the following statements?
Top two answers: agree completely / basically agree
53%
I visit the Facebook sites of brands and companies more often than their websites
46%
I spend more time on the Facebook sites of brands and companies than on their websites
57%
It is more fun to follow the Facebook activities of brands and companies than it is to visit their websites
70%
The Facebook sites of brands and companies are aimed directly at fans
75%
The websites of brands and companies are directed at anyone who is interested in them
71%
The Facebook sites of brands and companies are more up to date than their websites
34%
I post questions directly on brands walls in order to find things out

50%
I use the Facebook pages of brands and companies to look for information
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PLAYER 3: COMPANIES
Designing a dedicated F-Store: F-Stores can be categorised according to three aspects: their level of implementation, the duration of what is offered and the type of things that are offered. These three dimensions can be combined with one another in very different ways. Low level of implementation: storefronts. These are product presentations with a link to an external store. Brands like P&G, Nivea and Mexx use their F-Stores for presenting products. The shopping itself takes place either in the brands own e-store (Nivea) or in e-stores belonging to retailers (P&G). In this way, companies investigate whether Facebook users are interested in their products within the social network. Storefronts represent the second stage of F-Commerce, and we can assume that they will gradually be replaced by fully integrated shop solutions. High level of implementation: fully integrated shops. The entire shopping procedure including payment takes place on Facebook. British clothing mail order company ASOS, porcelain manufacturer Kahla and Fahrrad.de offer fully integrated solutions of this kind on Facebook. Permanent stores: The F-Store is built up and established longterm as a sales channel. The F-Store becomes a rival to the e-store.
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PLAYER 3: COMPANIES
Pop-up stores: This version offers its fans limited-duration sales. For instance, in June 2011 Joop offered exclusive, limited-edition products for a period of ten days on its pop-up store. Campaigns of this kind are suitable for drawing attention to special offers and activities, and for generating interest. They can be used for discounts, product launches and exclusive products. Standard range: Users can buy products in the F-Store which are also available elsewhere. ASOS, for example, offers all of its 150,000 products for sale on Facebook just as it does on its regular online store. In this approach the F-Store competes directly with the e-store. Exclusive offers: The F-Store is used to offer products just for fans. These products are available only on the F-Store. This approach serves to deepen relationships with fans. Pantene (P&G) was one of the first brands to enable its fans to buy new products which were not yet available in the shops.
The entertainment factor is very important in F-Commerce at the moment. In the long term it will also be possible to accommodate whole ranges of products inside Facebook, while the advantage is that you can show users only those products that really interest them. The Open Graph gathers demographic and psychographic data which enables this kind of personalised preselection.
Stefan Wolk, Smatch
Standard tools vs. customised F-Stores: When implementing their F-Stores, companies have the choice between prefabricated tools (shop applications) and customised solutions (canvas pages). Shop applications: Shop pages can be integrated directly into Facebook in the form of prefabricated solutions. Users do not have to leave Facebook in order to visit an F-Store. Images, however, are limited to a size of 520 pixels.
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PLAYER 3: COMPANIES
Canvas pages: These individually designed sites are implemented in external applications. A canvas page can be designed in a companys corporate design, but it does not have as many features as a shop application. Another drawback is that to get to a canvas page you have to leave Facebook. Using Facebook to personalise stores and websites: Facebook uses its Open Graph to collect a lot of personal information from users and provide it to companies. Levis and Etsy (a marketplace for handmade products), are well-known examples of companies who use Facebooks data pool to personalise their websites. People who use these websites receive personalised product recommendations and gift ideas. However, the Levis Friends Store is a case in point of how the Open Graph protocol does not yet reflect reality. Despite Levis 2.9 million fans, no more than 500 people have clicked on Like for its 501 Stonewashed Jeans. Users are accustomed to clicking Like for brands, but not yet for products. Brands as retailers: F-Commerce offers companies the possibility of setting up their own branded F-Stores. P&G has set up channels for buying seven of its brands (including Tide, Gillette and Febreze) via a number of retailers. Users decide whether they would prefer to buy the selected products from Amazon or from Wal-Mart. Nivea, on the other hand, directs users to its own online brand shop. A new era is approaching for pure retailers: they will have to come up with good marketing concepts to counter stiffer competition.
Facebook is made not for companies but for users. Thats why F-Commerce will suit companies who are able to adjust to Facebook. The only approach which promises to succeed in F-Commerce is that of conventional market orientation: you adjust your range to the target group who are on Facebook or who are following you on Facebook.
Jochen Krisch , Exciting Commerce
Companies experiment with communication strategies: F-Commerce is a testing ground for varying communication and marketing approaches. In place of microsites, more and more companies are utilising Facebook applications for promotions and product launches. Three types of F-Commerce offerings have so far emerged. Promotions: Fans expect special treatment and exclusive access to offers and information. There are various ways in which companies can reward their fans. As part of a fan-first campaign, Heinz Ketchup sold a new product to its fans before the official launch. Fansonly offers are directed at fans and nobody else. Coca-Cola successfully sells merchandise products in its F-Store.
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PLAYER 3: COMPANIES
Deals and group purchases: Depending on the number of fans a company has, vouchers and group discounts can be offered in a dedicated channel or on an external platform. Wal-Mart, for example, has its own Crowd Savers scheme. ShopShare offers a Deals feature on its Facebook page. This allows offerings from smaller suppliers to be scattered over various channels and therefore reach more prospective customers. Gamification: Facebook has already proven itself as a platform for social games. Retailers are now attempting to combine gaming mechanisms with their trade. On the Facebook page of fashion brand Wet Seal, users can put together outfits from the F-Store and compete against one another, which the retailer hopes will attract attention and generate extra sales.
Retailers will have to master all things social. You have to know how to handle recommendation mechanisms and how to build up relationships. The challenge is customer loyalty continually binding people to the things you have to offer.
Dialogue and interaction required: F-Commerce is fundamentally changing the role of social media. Its aim is to convert Likes into Buys. Clicking on Like to indicate brand preference is something which precedes actual sales, which is why dialogue with fans is at the heart of F-Commerce. Purely sales-based or advertising approaches will not succeed in a social network. Jury still out on efficiency: The effectiveness of F-Commerce remains low in comparison with other channels. Click-through rates fluctuate between 1% (source: Forrester Research, April 2011) and 6.5% (source: Fluid, April 2010). Only 2% of these become actual sales. By comparison, email campaigns generate a click-through rate of 11% and a purchase conversion rate of 4%. In the early stages of F-Commerce it will be up to companies to establish their own soft and hard success criteria and set benchmarks. Referrals, Comments,
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PLAYER 3: COMPANIES
Interactivity is the primary precondition for F-Commerce, and to succeed in it, retailers will have to think up a good mix, preferably of news, competitions, and feedback campaigns. Product can also be presented, but not too many or too often. Presenting products every day like clockwork does not work. The exception is a dedicated page for products at which users who become fans expect frequent, purely product-related information.
stefan Wolk, smatch
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PLAYER 3: COMPANIES
Likes and Shares are parameters which are just as important as the actual sales themselves. New statistics such as sales per Like and sales per Share are emerging.
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PLAYER 3: COMPANIES
Monetary benefits for companies remain low: Companies are still viewing F-Commerce as an investment. Although some F-Stores are attracting a lot of customers, large-scale monetary success is still a rarity. According to ShopShare, its customers generate with their F-Stores approximately 2 to 5% of what they sell on their e-stores. At its current stage, F-Commerce functions more as a marketing tool than a sales channel. The focus is primarily on customer loyalty and customer involvement. The number of customers is as low as their willingness to spend money. More lucrative market opportunities will open up as F-Commerce continues to establish itself.
Facebook is a marketing tool and not a sales channel. This of course has implications for the F-Store and the things presented there for sale. These sites therefore need adapting accordingly. That begins with the choice of shops and ends at the products sold there. Especially suitable for selling on Facebook are products that are new, particularly suited to fans, and liable to bring fans benefits.
Battle for channels: So far Facebook has been used as a platform for building up brands and communicating brand personalities. Social media activities fall within the remit of marketing and communication departments, whereas e-commerce is normally the precinct of sales. The rise of F-Commerce will fuel the fundamental conflict between marketing and communication on the one hand and sales on the other, and the question of whom Facebook belongs to as a channel and whom the fans belong to will have to be renegotiated. While marketing and communication organisations build up relationships with fans and are measured in terms of their satisfaction, it is the logic of selling which dominates sales departments. This will demand some new thinking. Security is a hygiene factor: In terms of security, retailing companies must apply the same security standards to their F-Stores as they do to their e-stores. Security seals from Trusted Shops and McAfee Secure guarantee the same high standards as they do in online shops. There are however black sheep in the field of F-Commerce whose behaviour could discredit F-Commerce and slow its growth.
F-Stores must comply with German law. Sadly there are providers, some of them well-known companies, who have ignored this and who are risking disciplinary action. This threatens the general acceptance of F-Stores. Collaboration with companies like Trusted Shops guarantees that an F-Store fulfils all of the legal criteria.
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Define your own benchmarks: You cant apply the same quantifying criteria to all channels. The rate of conversion from visitors to buyers is lower on Facebook because people do not visit Facebook intending to buy things at least not yet. Companies will have to look behind the figures and establish their own benchmarks. Sales per Like and sales per Share define the quality of customer relationships on Facebook. The number of repeat buyers and recommendations expresses the satisfaction of fans. Do not replicate e-stores: Instead of producing carbon copies of their e-stores, companies should attract attention and create relevance by means of new concepts. Facebook is highly suited to experimenting with unique communication approaches. Time- and volume-linked offers, as well as fan-first and fan-only products, increase desirability and promote word-ofmouth propaganda. Observe user behaviour: Facebook Insights offers a series of standard criteria which companies can track, such as the growth of fan numbers, interactions between fans and migration rates. Evaluating these figures allows you to determine whether your Facebook site is delivering relevant content. Companies can also use these figures to learn which incentives are successfully converting fans into customers. Wall as shop window: Facebook is still not a platform for searching for products. Users are more likely to happen upon recommendations from their friends, or receive information about interesting products as a News Feed. Companies own Walls and News Feeds function as a kind of shop window that offers inspiration and ideas. Companies should try to design their Walls like shop windows that carry attractive offers.
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PLAYER 3: COMPANIES
Fulfil new expectations: On Facebook, users are learning that their status as fans gives them access to exclusive information and offers and that they do not receive this special treatment anywhere else. Companies should always take this reward aspect into account in order to encourage further recommendations and word-of-mouth publicity. Utilise personalisation: Access to Facebooks data pool gives companies the opportunity to personalise their offerings by doing things like providing users with personal product recommendations. Facebook also offers a series of social components. Companies can set up wish lists in their F-Stores, which are then activated for friends (e.g. Bulgari).
SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF COmPAnIES DRIVERS
F-COMMERCE OFFERS AN ADDITIONAL CHANNEL PLATFORM FOR UNIQUE COMMUNICATION CONCEPTS HIGH VIRALITY ALLOWS NEW CUSTOMER STRATA TO BE OPENED UP FREE TO USE DATA POOL
OBSTACLES
ADDITIONAL INVESTMENTS EFFECTIVENESS NOT YET PROVEN LACK OF BENCHMARKS POTENTIAL FOR DEPENDENCY ON FACEBOOK AND ITS DATA POOL USER ANxIETIES ABOUT DATA PRIVACY AND SECURITY
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There is nothing more social than going shopping

Interview with Christoph Strassburger, Director of Social Media and Web TV at HORNBACH Baumarkt AG It seems as if for companies, Facebook is transforming from a communication channel into a sales channel. How do you view that? I do think there is a certain danger of people leaving Facebook if commercialisation goes too far, especially heavy users. But the big benefit of Facebook as a platform for exchange is that more and more aspects of life are taking place there, and that includes shopping. There is nothing more social than going shopping. To us as a company, F-Commerce means an opportunity to place our products precisely where dialogue is taking place with our target group. How much involvement has HORNBACH had so far with F-Commerce? None yet. But what we have learned is that simply plonking products from our e-store onto our Facebook page does not elicit good feedback. If, however, we package the items appropriately, such as incorporating them into a story or combining them with a survey, then this kind of linkscattering functions well. We have not yet sold anything via Facebook itself, but sooner or later we are bound to try it out. Companies are often advised not to place their whole product range on Facebook, but instead to think up deals and special offers. Do you agree with that advice? We too believe that you shouldnt replicate your e-store on Facebook. You have to offer users something else of benefit aside from what e-stores offer, over and above the fact that you dont have to leave the platform to buy on Facebook. Other benefits might include exclusivity and individually tailored products or packages (e.g. for students). Full product ranges are already working in the USA, but over here it will be a couple of years or so before we get to that. US experts are the ones who are forecasting that F-Commerce could be bigger than Amazon or eBay. Do you share that view? Facebook could potentially outdo them all, yes. The biggest advantage of Facebook is that it doesnt originate in commerce. Facebook offers a large spectrum of features and possibilities; you can do on Facebook all the things you do in real life. At the moment there is no other platform that offers that. Maybe one day we will differentiate between the World Wide Web and Facebook because a parallel world will have established itself there. But commercialisation could cause users to leave Facebook mustnt switch over immediately, it should introduce users gradually to the concept. It should be a flowing transition. If users always order their books from Amazon, then one day they might well try out Amazons F-Store. Once that has happened, retailers that are not so deeply involved in the online world (like DIY markets) will begin to try out F-Commerce. Just as Amazon and OTTO paved the way for us into e-commerce, so they will also be the pioneers of F-Commerce. If it is done cleverly and not too pushily, then users will accept F-Commerce and will tend to see the benefits rather than the drawbacks.
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PLAYER 4: SERVICE PROVIDERS

56
New Players Emerge

F-Commerce means combining communication with trade. This will require different fields of expertise to be brought together and new approaches to be tested. Intermediaries will fill in the gaps in expertise that emerge. New business models are arising in the fields of shop software and F-Commerce consulting. Demand for new services: The rapid growth of F-Commerce is thanks not least to its openness to external developers. New applications are enriching what is on offer but they are also making things complex. The myriad possibilities which the new sales channel is unveiling bring with them new challenges for companies: how do you sell things in social media? Which shop solution suits our brand and our products best? How much selling pressure can we build up? The combining of communication and trade on Facebook is resulting in new fields of business.
The providers with the greatest potential are those who specialise in F-Commerce and who can combine the functions and features of Facebook with other successful e-commerce elements.
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Selling by communicating: In F-Commerce, the products have to find their way to the buyer and not the other way around. That is why it is not enough simply to place your products on your Facebook page. High-profile campaigns should not only reach potential customers, but they should also stimulate interaction between users and the brand, and between the users themselves. The phases before and after purchase in which the product is shared and recommended are just as important as the sales transaction itself. A seamless transition from interaction to transaction will be the future aim of marketing campaigns on Facebook. The new challenge facing social media specialists will be to combine storytelling with product selling. Finding a shop solution: There are various ways in which companies can incorporate their products into Facebook, ranging from pure product presentations all the way to purchase transactions. The different manifestations of the F-Store are listed in the Companies chapter. The main factor which will determine the choice of service provider aside from the level of implementation of a companys products is the technical implementation itself. Companies can choose between prefabricated and customised shop solutions. Automation: An automatically produced storefront offers the quickest way to enter F-Commerce. This storefront is often linked to products in a companys own e-store or their Amazon or eBay shop, and then integrated into the Facebook page as a shop application. The shopping platform Tradoria and shop supplier ShopShare are currently busy implementing a feature which, at the click of a button, will create storefronts for the platforms 4,000 shop customers and integrate these in Facebook. Payvment is one of the best-known providers of shop solutions alongside ShopShare. It offers a special application which enables customers to place products into a central shopping basket, and take them with them to other fan pages that support Payvment Shops, where they can then add more products. Customisation: Companies that opt for a customised solution enjoy more ways of designing their store visually and giving it different features. The Companies chapter provides an overview of this. Service providers like ShopShare and Adgregate can assist with the relatively complex conceptual and technical implementation processes. Reaching potential customers: Getting people to find you and your products on Facebook is one of the biggest challenges facing retailers. One solution is offered by marketplaces which aggregate products, thus simplifying search and comparison processes. Examples of these are: Payvment Shopping Mall enables cross-shop buying inside Facebook. The platform encompasses approximately 1.2 million products. (Source: Facebookbiz, February 2011). Smatch is a centralised platform enabling comprehensive product searches and comparisons inside Facebook. Users will find around 2.5 million products offered by 700 partner shops.
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Soap is a Facebook application from Amazon. This marketplace for drugstore products offers complete purchase transactions. Facebook is evolving into a central location for products enriched with social information. In the future users will look to Facebook for presents for their friends, or to find out what their friends are recommending before purchasing. This means that the actual benefit of these marketplaces is not just the aggregation of products but also the intelligent incorporation of user data from the Open Graph. Creating a special shopping experience: Aside from shop solutions, a series of standardised applications and features is emerging that can be incorporated into companies marketing concepts. The foremost of these include Deals, in-feed sales and commerce widgets. Deals: group purchases have a big future on Facebook. Established suppliers like Groupon are harnessing the viral nature of Facebook by publicising deals using referrals. Numerous other platforms and concepts are springing up as well. ShopShare offers a deals feature which, unlike Groupon and others, is especially suited to offerings that are fixed in location. Group purchases are scattered across different platforms in order to reach as many potential customers as possible. In-feed sales: Sales that take place directly inside News Feeds are especially suitable for impulse buying. This kind of selling has already been tested for the sale of virtual goods in social games. Flower delivery company 1-800-Flowers has also used it successfully. (Source: Internet Retailer, February 2010). 8thBridge is another company offering this feature. Commerce widgets: Widgets are mini-shops that can be placed anywhere where the target group spends time. They are able to present products and also support a payment system. Commerce widgets can be integrated into a Facebook page and also scattered in the Web, e.g. on Facebook, Twitter and blogs. Sellaround and Moontoast offer this feature. Innovation is slowing at Facebook: Facebook is now so large that it takes a lot of time to roll out new features and functions. It took many months before Facebook email came onto the market, for example. This means there is an opportunity for smaller, more agile companies to occupy new areas of business with innovative concepts, ranging from entertaining, group-dynamic concepts like deals and social games all the way to applications enabling personalised product ranges and highly individualised marketing, such as in-feed sales.
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The first one or two years of growth in F-Commerce will be initiated above all by campaign and deal providers because it is they who lean most heavily on the buzz and communication aspect. After that, F-Commerce will establish itself more broadly. We should however assume that it will tend to be newer companies who conquer this territory for themselves.
Jochen Krisch, exciting commerce
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SummARy: DRIVERS AnD OBSTACLES FROm ThE POInT OF VIEw OF SERVICE PROVIDERS DRIVERS
OPEN INTERFACES FACILITATE FREE FACEBOOK INTEGRATION TRIAL-AND-ERROR PHASE: COMPANIES ExPERIMENT WITH DIFFERENT FEATURES AND APPROACHES NEED FOR INFORMATION: SERVICE PRO-VIDERS CAN GIVE THEMSELVES A PROFILE WITH BENCHMARKS AND EMPIRICAL VALUES, THUS ATTRACTING ATTENTION TO THEIR PRODUCTS AND SERVICES FACEBOOK IS DRIVING THE COMMERCIAL-ISATION OF ITS PLATFORM WITH ITS OWN FEATURES (DEALS) AND ITS OWN CURRENCY (CREDITS)
Gather empirical data: F-Commerce is not yet a sales channel. Turnover generated by an F-Store is currently only around 25% of that of an e-store. Exaggerated sales forecasts should therefore be eyed with suspicion. Serious consultants can offer benchmarks and supply dependable empirical data. Consider certification: F-Stores must comply with the law. When you choose a shop software supplier, remember that security seals from Trusted Shops or McAfee Secure guarantee that this is the case. Fill in gaps in expertise: F-Commerce demands an interdisciplinary approach. In order to develop high-profile campaigns, companies will be turning to intermediaries who can offer combined skills such as digital brand management, marketing (CRM), data analysis, software development and game development.
OBSTACLES
PROFITS STILL RELATIVELY LOW THE MAJORITY OF COMPANIES STILL TEND TO LOOK DOWN ON F-COMMERCE BASING YOUR BUSINESS MODEL ON FACEBOOK COULD BE RISKY BECAUSE F-COMMERCE MAY FLOP, AND FACEBOOK MAY BEGIN TO CHARGE MONEY
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Glossary
Buzz Buzz refers to the viral propagation of information in other words, fast communication from one person to another. Many of the Facebook platforms features are viral in nature because they are designed to introduce information quickly into a users network. Click-through rate The click-through rate is a statistic which measures the efficiency of online campaigns. In the case of Facebook Commerce it refers to the ratio between the number of people who visit a Facebook page containing products and the number of people who then go on to visit the retailers online shop. Commerce widget This is a small application that can be integrated into websites, blogs and social networks in order to present products for sale. Within Facebook, presenting products using a commerce widget provides more possibilities than presenting them in the conventional way within the suppliers News Feed. Comments The Comments function is a social plugin which can be integrated into websites outside of Facebook by means of a comments box. If somebody comments on HTML5 HTML is a text-based markup language used to define the structure and look of Fan-first/fan-only items These are products supplied by a manufacturer or retailer which either appear earlier than in regular shops or online stores, or which are sold exclusively to the fans of a particular page on Facebook. Facebook storefront A Facebook storefront refers to the way a supplier presents its products on its Facebook page. If a user wants to buy a product on the page, then he or she is diverted to an external online shop in order to make the purchase. Facebook apps Facebook apps are small applications that can be integrated within the platform on users profile pages or on companies pages. Aside from the applications which Facebook has developed itself, many others are provided by external suppliers. Facebook apps can take the form of games or communication applications of many different kinds. the content of a page, then this comment appears on the users Wall, and therefore automatically in the News Feed supplied to his or her friends.
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content such as text, images and hyperlinks in Internet documents. Its latest version, HTML5, offers extended functionalities for doing things such as incorporating audio and video elements. HTTPS HTTPS is a network protocol used to encrypt and authenticate communication between web servers and browsers in the World Wide Web. This protocol can be used to protect data from being spied on by third parties. In-feed sales In-feed sales refers to presenting and selling products within the News Feed of a Facebook user. Like button The Like button is a Facebook social plugin which can be integrated into external websites. Clicking on the Like button publishes the content of an external website on the users own Wall in the form of a link referral, and thus places it in the News Feed going out to their friends. It also creates an entry on the users profile under Activities and Interests. McAfee Secure McAfee Secure is a service which examines online shops daily for gaps in their security, and can even rectify them in some cases. This reduces the danger of hacker attacks,
and of unauthorised access to the site, and therefore makes the online shop more secure. Mobile apps Mobile apps are applications for smart phones and tablet PCs which are usually purchased via a sales portal integrated into the operating system, allowing them to be installed directly. News Feed The News Feed is integrated into the homepage of every Facebook user. It is here that all of the news and interactions issuing from that users friends or from pages which he or she Likes are fed in by means of an algorithm in the form of news. Open Graph The Open Graph protocol is one of the core functions of the Facebook platform. This interface offers developers the possibility of accessing data associated with the users of the Facebook platform. The various social plugins such as Likes and the login and Comments functions enable the content of external websites to be integrated into the social graph of any given user which means his or her friends, interests and activities. Conversely, the content of Facebook can be integrated into external websites, and the way those websites display, thus customising these websites for particular users.
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Opt-out principle The opt-out principle assumes by default that every user agrees with processes requiring consent. To decline something you have to opt out actively. For example, changes to the Facebook platform are adopted automatically for every user profile. Users can only prevent this from happening by changing their settings so that the change does not take effect. Pop-up store Pop-up stores are Facebook shops which appear on a users homepage at particular times if the user is a fan of the shop provider. Pop-up stores are suitable for targeted campaigns such as the launch of a new product. Share function The Share function is a social plugin which can be integrated into websites outside Facebook using the Share button. When you click on the Share button, content from the external website is posted on your own Wall in the form of link referral, or in the News Feeds sent to a friend, including commentary. Facebook itself no longer communicates the Share button, since its function is now fulfilled by the Like and Send buttons. Social commerce Social commerce refers to a specific version of e-commerce in which the active participation of customers, and communication between them, supports the buying process. Familiar elements of
social commerce are product recommendations and customer reviews. Social games Social games are gaming applications, usually free, that are offered on social network platforms. Users can play with or against their online friends, and measure themselves against each other. The best known social game at present is Zyngas FarmVille development game. Social plugins Social plugins are elements that are integrated into external websites, thus enabling their content to be passed on or shared on social media platforms. The most familiar social plugin is Facebooks Like button. Trusted Shops Trusted Shops is a company which certifies online shops. Its seal of quality certifies that the online shop fulfils certain criteria relating to security, seriousness and data privacy and can thus be considered trustworthy by customers. Trusted Discovery This refers to products discovered in the News Feed of a Facebook user and recommended or forwarded by friends. User backlash User backlash is when members of a social media platform reject and protest about measures implemented by the platforms operator.
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Sources
Status quo Inside Facebook Gold: Audience growth on Facebook, June 2011, http://bit.ly/fvt3j7 AdAge/Ipsos survey: What consumers want from brands online, February 2011, http://bit.ly/fqCGGT Fast Company: The business of Facebook, April 2011, http://bit.ly/dO5vrr Facebookbiz: Facebook, Social Gaming & $24 Mio. fr Wooga, May 2011, http://bit.ly/lsU6xO Exacttarget: Facebook x-factors report #5, August 2010, http://scr.bi/czvlYJ Facebook: Statistics, April 2011, http://on.fb.me/bsoxWp Player 1: Facebook eMarketer: Facebook passes Yahoo! in display advertising, June 2011, http://bit.ly/itR9YB TechCrunch: Prediction: Facebook will surpass Google in advertising revenues, June 2011, http://tcrn.ch/kxybmO Player 2: Users ShareThis: Study: Where, why and how people do share content, June 2011, http://bit.ly/lKnAEs Pew Research Center: Social networking sites and our lives, June 2011, http://bit.ly/iOFR7n Player 3: Companies Forrester Research: Will Facebook ever drive E-Commerce?, April 2011, http://bit.ly/fbI1M1 Fluid: Brands and Facebook: Will like make it love?, April 2010, http://bit.ly/cwm7xQ Player 4: Service Providers Facebookbiz: Social Commerce: Payvment startet Einkaufszentrum auf Facebook, February 2011, http://bit.ly/gwWOVJ Internet-Retailer: 1-800-Flowers.com shifts its Facebook store strategy, February 2010, http://bit.ly/gQk2G4
Publication details
Contact: Michael Schipper COO, BBDO Germany +49 (0)40 27852-4102 michael.schipper@bbdo.de Authors: Christian Kohlhase Enrico Poege Jrg Jelden Katharina Michalski Mechthild Broens Tim Keller Project management: Jessica Merkle Concept and design: Lars Borker
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WRITTEN BY HRISTIAN KOHLHASE ENRICO POEGE JRG JELDEN KATHARINA MICHALSKI MECHTHILD BROENS TIM KELLER
WWW.BBDO.COM WWW.PROXIMITYWORLD.COM WWW.DIGITALLABBLOG.COM
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Facebook Commerce

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FACEBOOK COMMERCE

Trading Commerce September 2011 1

Michael Schipper COO, BBDO Germany

BACKGROUND AND SETUP

Study for Action

BACKGROUND AND SETUP

BACKGROUND AND SETUP

BACKGROUND AND SETUP

F-Commerce is still in its infancy

Most people use Facebook to follow themes they are interested in

Facebook is now big enough to support further commercialisation.

I click on Like on brand or company websites

I tell my friends using Facebook about what I have bought

I tell my friends using Facebook about what I want to buy

I do not know about or I do not use these functions

Stage 1: Generate and disseminate product recommendations [Open Graph]

Stage 2: Product presentation [Storefronts]

Stage 3: Complete purchase transactions [Fully integrated shops]

From friendly space to marketplace

What do you or would you dislike about shopping via Facebook?

Lessons for companies

Fans become buyers

hOw mAny BRAnDS OR COmPAnIES DO yOu FOLLOw On FACEBOOk?

Why do you befriend brands and companies by clicking on Like?

Why do you follow the activities of certain brands and companies?

To what extent have you already shopped on Facebook?

36% 32% 30% 29% 26% 22% 19% 12% 12% 9%

21% 21% 18%

How to prove innocence

Is the Party over?

Our best picks for summer

TIME writer Dan Fletcher

Facebook CEO Mark Zuckerberg

...and how its redening privacy

Lessons for Companies

I post questions directly on brands walls in order to find things out

Lessons for Companies

There is nothing more social than going shopping

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

New Players Emerge

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

PLAYER 4: SERVICE PROVIDERS

Lessons for Companies

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