F-commerce: Facebook takes on Amazon – 14428

1st October 2012

Once these accounts are eradicated, Facebook can more easily target users with specific presents they might want to purchase on its marketplace, and how handy that it already notifies us of friend's birthdays and specific events.

As for making sure accounts are real, the site wants to be targeting genuine users rather than accounts used either for spam, marketing, stalking or users' pets.

And given the slump in share price since the troubled IPO the site is coming under pressure to find new sources of profit and reduce its reliance on advertising, which accounted for 85% of last year's revenue.  But  it will have to rely heavily on display advertising for some time yet.

The rise of f-commerce

Some investors have termed "f-commerce" – e-commerce on Facebook – the solution to the plummeting share price. Could this be the boost the site needs for future profitability?

It's an obvious and proven idea, and one Facebook acquired when it bought year-old mobile gifting startup Karma earlier this year.

Facebook vs. Amazon

This news pushes it onto the turf of e-commerce powerhouse Amazon. And it appears a good time for Facebook to be making this move – given Amazon seems focused on other ventures with cloud computing services, movie making, and other markets aside from its core business being the current focus.

After all, it's all about innovation in the ever-shifting world of the online marketplace.

Facebook already has the tools at its disposal to make a success of this, so could it fuel the next generation of e-commerce?

Amazon shifted online shopping forwards through relevant, personalised recommendations. Now, Facebook is already targeting ads at its users, so why not ads that might want us get out the credit card out given we see a friend's birthday coming up on our news feed?

Meanwhile, the statistics look promising. Facebook had 845 million monthly active users at the end of last year, far higher than Amazon's 164 million active accounts or the eBay online marketplace's 100 million active users.

So how will it work?

Visitors to the site will be able to buy items such as clothes and homeware, and even cupcakes and Starbucks vouchers.

However, at present the new scheme is only available in the US. But as we all know, if it's in the US, it's bound to pitch up on UK shores soon enough.

So far, the service is only available on Android and the web, although it's expected to roll out to iOS users in the next few weeks.

Here's the clever bit. You don't even need to know your friend's address, as Facebook organises delivery for you. If recipients don't like your choice of gift, they can change it for something of equal value. Facebook plans to collect the credit card details of members and then allow both the sender and the receiver to track the progress of the delivery.

Could f-commerce be the future?

Facebook isn't attempting to push Amazon off the throne just yet. But it is focusing on profiting from social behaviour on its network.

This is unsurprising given the IPO has been described as the worst major flotation in a decade.

Since then, investors have obsessed over the position of the stock price and the future of this social network. Meanwhile, the user base continues to grow and we all keep going back to keep track of our friends' lives – so the potential for success is still there.

If this gifting practice becomes a standard activity for users, we could see the entire strategy of Facebook shift. And the use of this service doesn't even need to become common for the company to do extremely well.

So what new line of business will we see next, and is the site the heir to Amazon, Apple, Microsoft and Google? Could Facebook shares still soar?

 

More on Mindful Money:

Apple – To buy or not to buy

Supermarket wars

New Statesman fails macroeconomics 101

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