While the social network isn’t doing away with its direct-sale initiative, it is focusing its attention on ads that drive consumers to retailers’ sites.
TV used to be the way to reach the masses, but now it's the world's largest social network. Facebook's intimate knowledge of its members makes it a unique marketing vehicle.
McDonald's Corp.'s three most effective marketing vehicles, CEO Fred Turner explained in 1986, were ABC, CBS and NBC. Back then, the fast food chain could reach practically all U.S. consumers through three TV networks.
But times have changed. Cable fragmented the TV audience, and the Internet lured eyeballs away from TV sets. Today, the way to market to the masses is through Facebook, where 135.7 million U.S. consumers spent time in March, according to market research firm Nielsen Co.
And consumers don't just click on Facebook and leave—they spent on average more than six hours and 35 minutes on the social network in March, nearly five times the one hour and 21 minutes the average web user spent on Google, Nielsen says. What's more, while on Facebook they share information about themselves, interacting with the site 90 times in an average month—posting photos and updates, commenting on friends' posts, Liking products and articles, and more.
In short, millions of shoppers are constantly telling Facebook Inc. about themselves, what interests them, where they live, what they buy and who their friends are. That's a treasure trove of consumer information. And in the last year or so Facebook has regularly been introducing innovations that enable retailers and other marketers to use that detailed information to precisely target the consumers they wish to reach.
Outdoor gear and apparel retailer Giantnerd.com, for example, now can point ads at consumers who mention mountain bikes and similar terms in the personal interests sections of their Facebook profiles, as well at those who Like certain brands that Giantnerd.com sells. Doing so netted a 3,300% jump in traffic to Giantnerd.com from Facebook.com in the first four months of its Facebook ad campaign. "With Facebook we can target our audience in ways that just aren't possible anywhere else," says Randall Weidberg, CEO of the fledgling e-retailer, which launched in May 2010.
What makes that laser-targeting possible is the willingness of many Facebook members to share detailed information about themselves, information that Facebook, in its drive to monetize its huge traffic, is making available to marketers in many new ways. It's a development retailers can hardly ignore, says Patricia Seybold, CEO of the Patricia Seybold Group, a consulting firm.
"Facebook is the virtual place where people are hanging out, sharing information and spending an inordinate amount of time," Seybold says. "That has to make it a major part of a retailer's marketing strategy."
More than just ads
Because Facebook's innovations have come so rapidly over the past year, retailers and consumer goods manufacturers are only beginning to test most of them. For instance, thousands of retailers, including GameStop Corp., J.C. Penney Co. Inc. and HauteLook, have experimented with selling directly on Facebook. And there have been some successes, such as a Facebook-only HauteLook sale of Diane von Furstenberg apparel that netted roughly $100,000 in a single day.
But not many, and most retailers have been coy about sharing Facebook sales data, says Sucharita Mulpuru, Forrester Research Inc.'s senior analyst for e-business. "Everything else on Facebook grows so quickly," she says. "Doesn't it tell you something that shopping hasn't caught on?"
In fact, Facebook itself is setting modest expectations for the storefronts. Direct selling on Facebook is just one of several posts under the social commerce tent, says Ethan Beard, director of the Facebook Developer Network, who oversees a team that works with merchants and other businesses.
"The storefronts are really only one piece, and really a pretty small piece, of the burgeoning area of social commerce," he says. "Our interest isn't in getting people to create tabs where people can shop but allowing consumers to shop wherever they are and helping them discover products through their friends."
That friend-to-friend exchange occurs when a consumer clicks that he Likes a retailer or a product—whether that click occurs on Facebook or on the retailer's site. That information shows up on the consumer's news feed, in effect a Facebook member's home page, which shows posts from his friends and his own updates. The average Facebook member has 130 friends, which means many other consumers will see every Like and comment a Facebook user makes.
The power of that social influence will make the social web a crucial part of e-commerce, Facebook executives say. "We think the Facebook platform can really make every step of the marketing funnel social and, in turn, make it a viral loop," says David Fisch, Facebook's director of strategic partnerships.
What's more, Fisch says, the power of Facebook isn't just about what happens on Facebook.com. That changed in April 2010 with the launch of Facebook's Open Graph, designed to facilitate the sharing of information between Facebook and other web sites through publicly available links known as application programming interfaces, or APIs.
The Open Graph includes a number of social plug-ins, which are single lines of code a retailer can add to its site to incorporate Facebook features like its Like button. When a consumer clicks the Like button on a retail site, or interacts with any other Facebook plug-in, that information is recorded by the retailer and also on Facebook where his friends can see that action mentioned in their news feeds.
In less than a year more than 2.5 million web sites have integrated plug-ins, with an average of 10,000 new sites adding plug-ins every day. And more than 250 million consumers interact with those plug-ins each month by, for instance, clicking the Like button on a news article, blog or retail web site. Each of those interactions tells Facebook—and e-retailers that host those features—something about that consumer.