Measuring the Impact of Facebook on Sales

There's been a lot of talk about Facebook's impact on commerce from industry pundits. “Will it be retail’s next Google?” asked one report from a leading analyst's firm. While we're still very much in the early stages of social media marketing, one thing is certain: In a world where people are increasingly turning to others for opinions and recommendations on the things they need, social commerce, specifically Facebook commerce (f-commerce), is something worthy of additional exploration. But before we jump into the numbers and opportunities, let’s examine what’s required to build a successful f-commerce effort. First off, I’m a believer. (So much so that I recently joined the marketing advisory board of an f-commerce provider, Milyoni.) Some of the examples below, including Warner Brother’s experimentation with Facebook as an alternative digital distribution platform, are powered by Milyoni’s technology. Having said that, f-commerce doesn’t just happen. I believe that all successful f-commerce programs start with creating engaging conversations and communities. Trust and advocacy flourish over time, allowing brands to develop programs that harness the power of the social graph. If done well, brands have the opportunity to build a commerce platform that not only stands on its own, but ultimately supports and amplifies existing marketing and sales efforts. If you’ve spent time building your Facebook community and implementing channel tracking for promotions, you’ve probably already witnessed the growing influence social networks are having on your overall promotional efforts. For one of my clients, Facebook is now second to email in terms of rebate form completions and conversions. That's a testament to the power of building a highly engaged community and its impact on sales. Now for the data. If you’re still a skeptic, consider the following: Sales: A recent report from consulting firm Booz & Company titled Turning "Like" to "Buy" estimates social commerce sales will reach $5 billion worldwide this year, with $1 billion coming from the U.S. This is expected to grow sixfold to more than $30 billion worldwide ($15 billion in the U.S.) by 2015. Consumer acceptance: Booz & Company reports 27 percent of consumers said they'd be willing to purchase physical goods through social networking sites. Brand acceptance — diversified and growing: Some of the most recognizable brands on Facebook (e.g., Coca-Cola, Starbucks and Disney) are already selling direct. Retailers including J.C. Penney, 1-800-Flowers.com, Nine West, Equator Coffees and Teas and more are integrating commerce into their Facebook pages. More recently, Wal-Mart's purchase of social media commerce startup Kosmix serves as a signal that social commerce is a reality. Sports figures and franchises — e.g., the NBA, Boston Celtics, Miami Heat, Oklahoma Sooners, John Elway — are facilitating transactions for tickets and memorabilia alike via Facebook. Nonprofits are tapping fans and the social graph to connect and expand their donor bases (e.g., Juvenile Diabetes Research Foundation, International Rett Syndrome Foundation). Leading entertainment companies and TV shows — e.g., The Discovery Channel, "Dexter," "Paranormal State," "DOG The Bounty Hunter," "The Bad Girls Club" and "Pawn Stars" — are building fan communities and generating additional revenue opportunities for their franchises via Facebook. More recently, movie studios like Warner Brothers have shaken up the industry by experimenting with Facebook as an alternative digital distribution platform by offering five movies — "Harry Potter and the Sorcerer’s Stone," "Harry Potter and the Chamber of Secrets," "Inception," "Life As We Know It" and "Yogi Bear" — for rental using Facebook Credits. In fact, news of the test sent shares of Netflix tumbling by more than 6 percent or $650 milllion. Why? One, social networks offer studios a way to bypass services like Netflix, whose streaming digital influence continues to grow. Two, the ability to post comments and interact with friends opens up a host of new opportunities to not only tap into the social graph to create a unique experience, but to inform the studio and influence future development efforts. In today’s world, brands need to be everywhere their customers are. So why not facilitate the ability to transact there as well? No doubt social commerce has arrived, but its definition will continue to evolve and expand. From traditional retail stores to an innovative digital media distribution platform, the power of Facebook as a viable social commerce platform is one of the big opportunities of the decade.

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Measuring the Impact of Facebook on Sales

Michael Della Penna

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Michael Della Penna