Not so long ago, in a Harvard dorm room not so far away, Facebook was born. In record time, Facebook has graduated to the big time.
Today’s announcement of Facebook Deals is very significant, as it shows Facebook is looking beyond contextual advertising and toward the power of mobile “social experiences” to drive purchases and tracked point of sale interaction. Fueled by special deals offered by the legions of businesses who already use Facebook as their primary social media engagement platform, Facebook Deals tips their m-Commerce strategy hand and, as such, is a big deal.
While college students certainly still use Facebook, it seems a broader audience that includes 500 million active users also see the appeal. Facebook has capitalized on this user traffic to the tune of an estimated $600M in contextual advertising last year. This is small beans compared to the close to $30 Billion in annual revenue Google is generating, 97% of which comes from advertising.
While this gap between Facebook and Google is one indicator the size of the advertising opportunity in front of Facebook, they also have the unique ability to capitalize on something perhaps even bigger, by driving tracked proven m-Commerce revenue linked to a specific location-based marketing campaign for small businesses and large brands alike. Google has been trying to back itself into this powerful social interaction value proposition but, to-date, has failed.
200 Million people now access their Facebook accounts via mobile. If Facebook can provide a secure, customizable revenue engine, reporting dashboard, and accounting system that users and businesses both trust, they could be in a unique position to capitalize as m-Commerce finally emerges from uncertainty and takes center stage.
Facebook Well-Positioned With SMBs
The rapid adoption of Facebook by consumers and businesses alike has changed the very nature of marketing. The new two-way street norm of required engagement with consumers has evened the playing field between small and large brands – and has fueled Facebook’s growth and popularity via an ever-increasing stream of relevant content at the same time.
As location-enabled smartphone user ranks swell, connectivity issues improve, and data costs fall, Facebook hopes the day is not far off when all businesses will need a live dashboard that controls a branded mobile Facebook page. This could become more important than having a “standard” website. For many, it already is.
The Check-In Craze: Watching And Learning
As the Foursquare and Gowalla-lead “Check-In” LBS craze swept in last year, Facebook watched and waited. User numbers climbed even without an LBS play and advertisers lined up. Facebook watched and waited, and learned.
When Facebook finally launched check-ins via Facebook Places “way back” in August of 2010 and embraced the unique location-awareness capability of mobile, it was a sparse affair that simply answered the Foursquare and Gowalla challenge. Even if basic, checking in directly on Facebook sped up the process by cutting out the middle man, since Foursquare and Gowalla piggybacked on the users Facebook graph.
Lately and perhaps not coincidentally, the initial novelty of “checking in” via a function-specific platform/app like Foursquare and Gowalla has waned. Even though each company is adding functionality as fast as possible, they simply do not have the local reach to add real consumer rewards fast enough to please most of the people most of the time. Facebook, if nothing else, has this reach, and this add to the power of the timing of the launch of Facebook Deals (yesterday).
Tapping The Power Of The Private Sale
Another location-based force that has rapidly re-shaped consumer interaction with products and services is the “private sale” phenomenon. While it’s long been accepted that consumers will act based on opinions from a trusted network of peers, there are finally ways these actions to translate into real, tracked mobile sales that have the tangible and impactful side benefit of driving live bodies into a retail point of sale.
In the last 6 months, “private sale personalized shopping” companies like Groupon, Living Social, and RueLaLa have been printing money by tapping into the desire for small and mid-sized businesses to drive new customers into their storefronts by offering special loss-leader deals via mobile.
It is interesting to note that CEO Mark Zuckerberg focused in on the “if you get three friends to check-in with you, you get something free” element yesterday. If you use Living Social, you know that this exact model provides the viral, turbo-charged boost they use to spread their deals among the interlocking social graphs of their subscribers.
I heard recently that Groupon is only able to process 1 in 7 deals proposed to them by small businesses and is generating an estimated $50 Million a month in revenue. Worth an estimated $1.3 Billion while taking in only 135 Million in funding, Groupon is proof that small businesses will share a generous portion of the incremental gross sales, in order to have a shot at winning over new potential long-term customers that they know came in and redeemed the loss-leader offer. If this $50M a month figure is accurate, by the way, it means that the Chicago start-up is roughly matching behemoth Facebook in annual revenue.
Again Facebook has watched and waited, as (literally) hundreds of “daily deals for you” copycat (and well-funded) companies have sprung up and, as such, have proved the viability of the “opt-in daily deal” model on a massive scale.
Since almost 70% of US businesses have a Facebook page right now, Facebook could blow past these”check in for a personalized deal” companies that all must compete with each other and sell-in their solution to one small business at a time (or, more importantly, one giant brand’s “gatekeeper” agency at a time). The latter, in my opinion, is the harder row to hoe.
Into The Path Of The M-Commerce Parade
M-Commerce is a hot topic and, finally, there are real metrics to back up the years of wild expectations and predictions. With Deals, Facebook has stepped off the sidewalk and jumped out into the middle of the street, just as the location-based “special offer” m-commerce parade is poised to sweep over them.
These “daily offers” are nothing more than a new, location-based (mobile) way to promote the same tried and true “chalkboard” restaurant/bar specials or “sale bin” store items you see every day. The difference is that they are discoverable, BEFORE you enter the location/point of sale, when a consumer is in actual real-time physical proximity to that same location and have volunteered their location to the platform that is displaying the deal.
Think mobile is not ready to handle for the volume of potential commerce? eBay will more than double m-Commerce this year, from $600M last year to an-expected 1.5 Billion in 2010.
With the launch of Deals, Facebook is now playing in this hot space and can offer richer and richer solutions for businesses and consumers alike that can scale very quickly. They can capitalize on what has worked for other players with far-less reach that have conveniently prepped the landing zone before them, and avoid what has not.
A Single Solution?
By positioning the mobile Facebook app as the “login” solution that can also serve as an authentication engine, Facebook hints at their intent to solve the problem of “app option overload” for consumers and the “financial backside fragmentation” issue that has long-plagued the e-Commerce world. These elements will be especially interesting to watch.
While consumers do not all enjoy having to open a different app every time they walk into a business, the more important reason Facebook is poised to solidify the opportunity like no other is due to the fact that small town small businesses are generally already familiar with managing the backside page interface. Again, a whopping 70% have a Facebook page.
With so many social media options that may or may not include a customizable LBS m-Commerce element, big national brands (and their agencies) are also seeking a single solution. If Facebook simply can add the “check-in” and related special offers and m-commerce redemption tools they need to what they already provide, the barrier to entry becomes very small across all adoption fronts.
What’s The Big Deal
If mobile Facebook users can act upon a proprietor’s customizable call to action by being directed to the location near them, debit an account on the same mobile platform that showed them the offer, and link it to trusted input from their social graph, Facebook will be linking the power of social marketing and m-commerce.
If Facebook can prove that consumers will not react adversely to special offers being “pushed” toward them when they are out and about, based on actual location and other algorithmically calculated variables like time, weather, and past behavior, well that would be something.
What if they could prove that consumers will volunteer “personal preference profiles” including what brands they like most, in exchange for real savings linked to location-based local or regional deals personalized for them? Not so far-fetched.
With m-commerce predicted to explode from $1.9 Billion in 2009 to almost $24 Billion by 2015 (see above), Facebook Deals might be just the beginning for the social network. Yes, Facebook Deals is a big deal.
Wilson Kerr (@WLLK) is a former Tele Atlas exec and started Location Based Strategy, LLC in 2007 to help clients harness the power of location-based social media marketing. Contact him today to learn more.