Mounting Evidence Shows Potential of Social Ecommerce, Contradicting Recent Reports


By Josh Constine Comment

A new report by Forrester Research and another by the World Federation of Advertisers and research firm Millward Brown proclaim that Facebook will not play a signficant role in the future of ecommerce. As evidence, the reports cite companies who have tried and failed to generate new sales through Facebook, explaining that “eBusiness professionals in retail collectively report little direct or indirect benefit from Facebook”.

The social network is sharing some data to make the opposite case, providing us with a list of internal and external statistics indicating major increases in traffic, engagement and direct sales for retailers that have deeply integrated with Facebook. For instance, Ticketmaster reports that each share of one of its events to Facebook earns it $5.30 in direct sales.

We’ll get into some of Facebook’s stats below. But first, it is true that e-commerce on Facebook has been a long-heralded yet slow-to-materialize market segment. We remember some industry pundits proclaiming that 2009 would be the year of social shopping — it wasn’t.

However, starting last year, we’ve also seen a steady increase in the number of ecommerce storefronts on Facebook and social plugin integrations on third-party websites, as we detailed in our piece “The Year in Facebook-Powered Shopping“. We discussed how 86% of US retailers had created a Facebook Page by 2010, and that it was the year these brands began experimenting with directly monetizing their audiences. We’ve also heard anecdotal reports from ecommerce startups working on the platform suggesting more sales than before, despite it being natural for experiments by companies unfamiliar with a platform to fail.

Tools to facilitate sales and referrals on Facebook or through Facebook-integrated sites are rapidly proliferating. Page tab applications such as Payvment8thBridgeBeetailer, and Zibaba allow users to add items to a shopping cart and then checkout either directly from Facebook or on a merchant’s website, or even browse products from multiple stores at once in a shopping mall format. Meanwhile, major players including AmazoneBay, and PayPal have begun integrating with Facebook to power recommendation engines and sharing of products.

It may take more time for users to grow accustomed to shopping through Facebook, but early signs indicate that the site’s ability to transmit product recommendations between friends and bring brands within a few clicks of a huge audience will make the site an important part of any ecommerce strategy.

Facebook’s stats today highlight the potential. As of January 2011, Facebook traffic to Amazon grew 328% year-over-year while Google referral traffic dropped 2% in the same period, according to a JP Morgan report. This indicates social’s increasing important relative to search, even though Google is still the market leader. Visitors to clothing retailer American Eagle’s ecommerce site who were referred from Facebook spent 58% more than those referred from elsewhere, and children’s clothing retailer Tea Collection increased its daily revenue by ten times when it added the Like button to sale merchandise. Ticket seller Eventbrite said that each share to Facebook of one of its events generated $2.52 in ticket sales.

Its true that there’s little publicly-available absolute data about dollars earned through Facebook storefronts and integrations, but analysts should expect the shift in user spend away from brick-and-mortar and web 1.0 stores to take a few years, similar to the initial shift of spend to ecommerce. Users may have come to expect an asocial shopping experience on brand sites and web marketplaces, but that is changing — according to other reports. A 2009 Econsultancy study indicated 90% of online consumers trust recommendations from friends, while a late 2010 Marketing Pilgrim report showed that “one in three consumers recently followed-through with a purchasing recommendation made via social media.”

With friends readily available to provide purchase suggestions, easy ways to make or initiate these purchases from brand Pages, and users acclimating to a social shopping experience, we think we’re still at the early stages of social ecommerce, not at the end.