ook Facebook Won’t Become E-Commerce Force, Analyst Says

• Article
• Video
• Comments (21)

• Email
• Print
• Permalink
• • Twitter

    

  • Digg

    
  • + More
  close
  • StumbleUpon
  • Yahoo! Buzz
  • MySpace
  • del.icio.us
  • Reddit
  • LinkedIn
  • Fark
  • Viadeo
  • Orkut
• Text

By Stu Woo

All sorts of merchants are experimenting on Facebook. Best Buy has set up a shop on the social-networking site. Home Depot gives special offers to people who “like” its page. Levi’s added a “like” button.

Bloomberg News

Mark Zuckerberg, co-founder and chief executive officer of Facebook

But does this mean Facebook is en route to becoming a major e-commerce player? Forrester Research analyst Sucharita Mulpuru says the answer is a resounding “No.”

Mulpuru lays out her case in a report due out Thursday titled, “Will Facebook Ever Drive eCommerce?” Her firm interviewed nearly two dozen technology vendors, retailers and marketers and found that they received little benefits from Facebook and other social networks.

A social-network presence, she found, was less effective at customer acquisition and retention than e-mail and paid search. The study found that the average Facebook metrics are a 1% click-through rate and a 2% conversion rate. E-mail marketing, by comparison, has an 11% click-through rate and a 4% average conversion rate.

Facebook’s problem, she said, is that few people go there for shopping-related activities. “You go to Facebook to find other people, not to find a product,” Mulpuru said in an interview.

The Forrester report comes as Facebook seeks to assert itself in the online-retail industry, and released some data about its retail partnerships on Wednesday. It said, for example, that when TicketMaster users posts to their friends’ Facebook news feed about a specific event, TicketMaster generates $5.30 of direct ticket sales.

A spokeswoman for Facebook said a company executive was unavailable for comment about the Forrester report.

But Dan Rose, Facebook’s vice president of partnerships and platform marketing, discussed the appeal of its social ads at an event Wednesday in Austin, Texas.

“When I raise my hand and say, I like Einstein (Bros.) bagels, and then one of my friends sees that ad, they’re going to see my name in that ad,” Rose said. Through Facebook’s partnership with the media-research firm Nielsen, “we found that when my friend’s name is in an ad, I’m over 60% more likely to remember the ad, and I’m over four times more likely to purchase the product,” said.

“This is word of mouth. This is word of mouth at scale. This is what, as marketers, we’ve always been trying to bottle up and find a way to take advantage of, and the social web is finally allowing us to do that.”

But Forrester’s Mulpuru said she found that offering promotions in exchange for people to “like” their page were ineffective because most people “liked” companies just for a discount. Though companies theoretically show up on the news feed of their Facebook fans, the analyst said companies are unsure how frequently or prominently their posts do show up on the feeds.

“When retailers put like buttons on their product-detail pages, are they really thinking?” she said. “Your competitors can see what products are more liked than others. Are you exposing your sales information? So why would expose this information?”

Still, Mulpuru said Facebook could help some companies, such as those that sell digital media and goods, such as video-game maker Zynga. Businesses that run on “flash sale,” or limited-time sale, model are also well suited for Facebook, she said.

Others are more bullish on the prospects of Facebook as an online-retailing platform. Scot Wingo, the chief executive of ChannelAdvisor, a company that helps merchants sell across a variety of e-commerce sites, said it’s impossible to ignore a website on which 500 million users spend a substantial amount of time.

Wingo said companies that offer exclusive promotions to only Facebook fans could build a loyal customer base. He also believes that if Facebook could analyst wall posts, they could create a better targeted ad system.

“What Facebook could do is have better product recommendations and wish lists,” he said. “We think that some things that exist today and some things that Facebook will come out with will make it a top channel in three or four years.”