In its second-largest acquisition, Amazon buys the company for $970 million.
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The how-to guy
The thinking is similar at home improvement products e-retailer Build.com. Home repair merchandise isn't necessarily going to generate the viral-type sharing of the quirky design products of Fab.com. But Build.com is finding a way to drive a measurable amount of traffic and sales from social networks.
Build.com posts how-to videos on YouTube, runs contests and suggests home improvement project ideas on Facebook, and sends holiday greetings to fans and followers across all social networks. These tactics help drive approximately 1.25% of its total web traffic from social networks, says Brandon Proctor, vice president of marketing.
And while the $582,521 in sales the merchant will bring in directly from social networks in 2012 is only 0.2% of its total sales in 2011, Build.com says customers who engage with it on social networks have a lifetime value to the retailer 10% greater than other shoppers. Lifetime value is a marketing metric that predicts the net profit attributable to a customer over the entire relationship the retailer has with the customer. Moreover, Proctor anticipates that value will rise further when the retailer this year launches a loyalty program that rewards shoppers for interacting with the retailer on social networks, such as by sharing a product or review.
"Social media keeps us in people's minds," he says. That is, it makes shoppers more likely to buy from Build.com again.
Build.com, which is active on Facebook, Twitter, Google+, YouTube and Pinterest, beat out its much larger home improvement competitors Lowe's Cos. Inc. and The Home Depot Inc. in appearing in the Social Media 300. According to Kantar Media Compete, Lowe's brings in 0.2% of its total traffic from social networks and Home Depot gets 0.0003%, which brought them both below the cutoff of 0.33% for the Guide.
Build.com is an example of a web-only retailer substituting social creativity for pay-per-click spending as a way to attract online shoppers. Lowe's spent an average of $2.76 million monthly on paid search ads in 2011 and Home Depot $2.67 million, while Build.com spent $167,000, according to ROI Revolution. Lowe's and Home Depot did not respond to a request for comment on their social strategies.
The retail leaders in social media marketing know that it doesn't cost a lot to put a human face on a brand. Fab.com did that this fall when Hurricane Sandy flooded the company's lower Manhattan headquarters, and the retailer used Facebook to report on how staffers were keeping the site running at Goldberg's apartment. The retailer's Facebook page received a deluge of supportive comments from its fans in response.
Goldberg says social media allows Fab.com to touch consumers in a personal way and to build a lasting relationship. "We sign out just about everything with 'Smile. You're designed to,'" he says. "We are really true to that tagline and try to make people smile in everything that we do. We're really trying to build customers for a lifetime, and social is a way for us to do that."
Facebook focuses on e-commerce
Facebook Inc. is getting serious about e-commerce.
That's clear from the social network's recent moves, such as its launch of Facebook Gifts, which enables U.S. shoppers to buy presents for friends on the social network, and Collections, which offers a new way for retailers to showcase their products to Facebook users.
Gifts went live to all Facebook users in December. Collections, which launched as a test before being "paused" in late October after only a few weeks, relaunched in mid-December, according to a spokesman for the social network.
Facebook's newfound focus on e-commerce is also clear from its April hiring of eBay Inc. executive Nicolas Franchet to head up its e-commerce global vertical marketing team. The move is part of a broader effort by Facebook to focus on the specific needs of marketers in a variety of verticals, including e-commerce, automotive, consumer products and gaming.
Because of Facebook's wide-ranging ad offerings, marketers often need direction, Franchet says. In particular, they need guidance understanding how others have successfully used Facebook to achieve their goals, be they acquiring new customers, driving sales or building loyalty.
Franchet—who has held a number of positions at eBay and sits on the board of Shop.org, the digital division of the National Retail Federation trade group—has close connections to the e-commerce industry. That enables him to understand its needs, he says.
Take retailers' most basic goal: driving sales. Many analysts say retailers' efforts at social media haven't yet been effective at spurring shoppers to make purchases, and for many retailers—even some of those in the Social Media 300—that's true. Franchet and his colleagues, though, are developing tools designed to leverage tried-and-true tactics for inducing shoppers to purchase, such as offering a good deal.
That's the idea behind Offers, which Facebook launched earlier this year as a tool that marketers can use to create promotions that appear in consumers' news feeds. Originally free, the social network in September began requiring businesses using Offers to buy ads that increase the prominence of the Offers.
The tool has helped retailers acquire customers. Coastal Contacts, for instance, in May 2012 ran an Offer for a free pair of eyeglasses that more than 433,000 consumers claimed. When a consumer claims an Offer, that information is shared on many of her friends' news feeds, which includes the latest posts from friends and companies that a consumer has Liked. The news feed placement explains why 74% of shoppers who took the Offer were friends of the retailer's fans, not fans of the retailer itself. "The claims they got went viral," says Franchet. And the deal drove sales: shoppers claiming the free glasses paid shipping and handling fees, as well as for upgrades such as scratch coating or bifocals.
The tools Facebook has recently rolled out stand as the social network's initial foray into e-commerce, Franchet says. "What we need to do, what we want to do, and what we are doing is building new products that map well to retailers' objectives," he says.