Tag Archives: Facebook

A Look at Facebook’s ‘Buy Button’ for SMBs

Facebook hasn’t really been a player in ecommerce –Facebook Credits, its games-oriented initiative, was shut down in 2012 after three years of experimentation with virtual currencies. But it continues to test the waters — which is not surprising, given its volume and huge edge in social media and native advertising.

Last year, Facebook began to allow consumers to add credit card information to profiles in order to enable ecommerce transactions. Now, Facebook says it is testing a “Buy Button” with “some” SMBs.

During the test, consumers are providing Facebook with credit/debit card info for PayPal-like purchases on a one-time-only basis. Neither the SMB or Facebook ever get to see the info – all payments are being handled by a third party processor. Consumers could then opt to allow Facebook to make the credit/debit card info part of their permanent profile, using the cards for convenience.

If Facebook expands the effort – which Reuters reports is currently free for merchants — the implications could be significant. For starters, Facebook’s enhancement of its anonymous consumer profile would put Facebook on a collision with Amazon and its one-click purchase system. By focusing on the under-served SMB market for ecommerce – and likely offering a blend of virtual and physical goods — Facebook would also be breaking new ground.

Facebook’s Joseph Devoy is discussing a wide range of SMB initiatives at Leading in Local: SMB Digital Marketing Sept. 22-24. You can register here.

IAB Leadership Meeting: Facebook, NY Times Defend Native Advertising

Native advertising — the insertion of contextually relevant advertising amidst other content — is viewed with suspicion by much of the ad community, which sees it as unscaleable, and perhaps the opposite of its drive towards programmatic (automated) sales.

During the Summary Panel today at the IAB’s Annual Leadership Meeting in Palm Desert, one hypothesis by moderator Terry Kawaja, CEO, LUMA Partners, playing devil’s advocate, was that “agencies cannot create the volume and quality of native content necessary to populate every native ad.”

New York Times Executive VP of Advertising Meredith Levien, rising to the bait, strongly disagreed. “Good native advertising puts the onus on the reader to decide whether to engage or not,” she said, noting that The Times, Buzzfeed, Forbes (her former employer) and others have set up native ad areas that are clearly differentiated from other content, and highly successful. “It’s not like we have (columnist) Thomas Friedman writing for Pepsi,” she said.

Facebook VP of Ad Products, Monetization and Atlas Brian Boland, a keynoter at BIA/Kelsey’s ILM show in December, vigorously defended native advertising – not surprisingly, since Facebook is banking heavily on it. Native advertising, when combined with personalization, provides unprecedented value, he said. “People are going to a place where they want to discover what is important to them. It creates an opportunity for people to be excited about what they see.”

Boland noted that Facebook has recently been criticized for pushing the envelope with native advertising by having video ads. But critics should have done their homework, like Facebook has, Boland said. He noted that it did reams of testing and research, and the feedback has shown that the video ads are totally engaging viewers.

Going forward, Facebook is developing a set of formats to enable people and advertisers to express themselves via native advertising on every platform – especially mobile. Boland acknowledged, however, that such formats are better suited towards larger media concerns. A handful of publishers will similarly see how things evolve, he said. But it remains “a challenge for midsized publishers.”

LSA 2013: Facebook’s Dan Levy on Importance of Local

“Local search is really important for Facebook,” with a major boom in local business adoption, and the synonymous nature of mobile usage and local search, notes Facebook’s Dan Levy, who spoke April 16 at The Local Search Association conference in Las Vegas. Levy says there are 15 million SMBs on Facebook now, and 680 million monthly mobile users.

“The best way to judge Facebook is to look at where we are spending our efforts,” adds Levy. While Levy concedes that Facebook’s changing lineup of ad products may be hard to keep track of, the current lineup of ”Promoted Posts,” “Nearby” and “Graph Search” are “a real testament” to Facebook’s commitment to local, he says.

What Facebook is ultimately shooting for are products that best leverage Word of Mouth, says Levy. “Getting a recommendation via word of mouth is very important. We are building that into our ad products.” It also doesn’t mean reinventing the wheel. “Social advertising isn’t a new industry,” he suggests. “It is just advertising that is social.”

Promoted Posts are seen as a success for Facebook because it has been picked up so quickly. A million businesses have used a promoted post in less than half a year, and they have kept using it. The product has a 75 percent retention rate.

What doesn’t work for Facebook is when value isn’t being added. Deals didn’t work so well because they didn’t provide many unique values. But a new product, Offers are a homegrown success story, with “70 percent of users connected to at least one local business,” says Levy. More importantly, offers quickly go viral. Most offers aren’t being claimed by the original audience, but by friends of fans, says Levy.

Converting Facebook SMB Pages to Websites

Various companies have built SMB websites and landing pages by scraping the Web. PaperG comes to mind. How about using Facebook. BIA/Kelsey data from our Local Commerce Monitor shows that more than 40 percent of U.S. SMBs have Facebook pages. Many, however, still don’t have standalone websites.

Exai, a spin off of TrafficMedia, is pursuing this path with a freemium model. Companies can opt to have a free, custom-created, mobile-optimized site based on their Facebook page, but can also upgrade to an enhanced version for $3-6 a month. The enhanced version includes maps, Google indexing and other features.

TrafficMedia was originally based on the idea of custom created sites that don’t use a template. Exai’s concept theoretically makes website building even easier by populating the content for the SMB.

The businesses are recruited via targeted Facebook ads. Most of the SMBs are outside of the U.S. and Western Europe , where Facebook’s advertising rates are less affordable for startups. They largely come from the Middle East, North Africa, The Far East and Asia. The company is also building via word of mouth, including a contest it is hosting for best website built from Facebook content.

Founder Gal Moran, a serial entrepreneur, says the company is currently focused on Facebook, but will soon also scrape other social media sites, such as LinkedIn. Facebook’s appeal is that it is universally used by a high percentage of SMBs. The company currently has built 10,000 SMB sites from Facebook, and is adding 1,000 + new sites a day.

Moran adds that Facebook has been very helpful , even sending staffers from Ireland to help facilitate things (living up to a promise made by Facebook exec Dan Levy at ILM West to help third party sites work with it). Exai has also gotten support from Google, which is able to leverage Exai for its ability to index Facebook-only content that previously was only available to Microsoft Bing.

Do Facebook SMB pages generally have enough content to make a compelling SMB website? It is a good question. It probably varies. At the very least, they provide a head start for the majority of SMBs that aren’t self-starters.

The End of Facebook Credits (and Next Steps)

What happened to the theory that Facebook Credits would become a universal virtual currency, competing against the likes of PayPal and others? Facebook very quietly closed the program down a few weeks ago, reverting to a more standard model that enabled spending and credits to be made with local currencies around the world (similar to an iTunes account).

Credits was originally conceived in 2009 as a virtual currency, and specifically supported gamers needing to buy and exchange game elements (fake palm trees, etc.). They were used by 15 million social gamers in 2011, but had begun to be used for other applications, including travel and especially, Facebook Offers. The shut down of Facebook Offers after just a few months, however, seemed to limit Facebook’s ambitions to develop its own currency.

Could Credits have been successful as originally conceived? Facebook didn’t do very much to educate users how to earn and spend Credits; most users never had an idea what Credits were for or even how to check their Credits balance (hidden several clicks into a users’ profile).

In addition, Facebook charged developers a 30 percent commission to accept Credits, discouraging many hard goods companies with lower margins from joining the ecosystem and selling their products. Many companies that had high incremental costs (i.e. hard goods companies and restaurants) would be reluctant to pay such a high fee.

One company that had counted on using Credits but will adjust to the new system is Plink, which set up a Loyalty/Rewards program using Facebook Credits as its sole reward currency. Plink enables members to earn rewards by patronizing nine top dining and takeout establishments at 35,000 locations, including Taco Bell, Outback, 7-11, Burger King, Arby’s and Dunkin’ Donuts.

Even before Facebook phased out Credits, the company saw that FB Credits wasn’t universally applicable beyond the 70 million strong gamer universe. Hence, the creation of a partnership with TangoCard, allowing rewards to be spent at retailers such as Amazon and iTunes.

Plink CEO Peter Vogel says the dual track with Facebook and TangoCard still works well for the company. While Facebook remains important to the company, “Members were asking for more options and we are trying to spread out our ability to acquire members,” he told us.

Vogel still believes, though, that commerce is about to heat up on Facebook. “Facebook made this move in order to make it easier for members to buy and sell, eliminating the confusion presented by a made-up commerce,” he notes.

In a note on its developer page, Facebook said it was eliminating Credit “to simplify the purchase experience for users, give you more flexibility, and make it easier for you to reach a global audience of Facebook users.” The note added that the successor product will support pricing in local currency ( ex. US Dollar, British pound and Japanese Yen.)

Vogel also asserts that Facebook is showing other signs that it is serious about commerce. Facebook has finally opened an App Store and may soon be selling Paid Apps, he suggests.

Facebook has also hinted that it will consider lowering that 30 percent commission for certain industries. And at the same time Facebook cancelled Credits, it added subscription billing to its payments platform. This will enable consumers to be billed monthly for subscriptions (most likely from digital entertainment providers like Netflix, Spotify, The Washington Post and others).

Sounding off on Facebook’s IPO: The BIA/Kelsey Webinar

via CNN
via CNN

If anybody wonders whether the considerable “legs” of Facebook justifies a valuation now set for $83 Billion, have a listen to a terrific BIA/Kelsey Webinar on Facebook’s IPO, featuring Trada CEO Niel Robertson Wildfire CEO Victoria Ransom, and Plink Co-Founder Peter Vogel (and BIA/Kelsey analysts Jed Williams, Matt Booth and Jeanne Dattilo).

People have to understand that “Facebook is more than advertising,” said Trada’s Robertson. “It is a platform that takes people through the digital marketing funnel. It lets you acquire prospects and move them through the different stages,” he said.

It will be more of a challenge over time as Facebook moves its client relationships down scale from the giant brand companies to mid market brands and SMBs. Creative is really hard at those levels. But the basic idea of collecting fans is a winner all around. “It’s like collecting email addresses you can use over and over again,” he said. “Fans amplify your own message.”

Wildfire’s Ransom said that most of the trends for Facebook in social media are very positive. “There was a lot of anxiety from businesses about the Timeline,” she noted. But Wildfire studies show that Timeline has proved to be a smashing success, with a 22 percent jump in photo sharing, and a 90 percent jump in video sharing.

The challenge for Facebook is get beyond the sheer quantity of Facebook friends. “How do you engage them? Who are the right fans? The valuable fans?” asks Ransom. Facebook is getting better and better coming up with answers. And “there are more tools coming out.”

Plink’s Vogel, meanwhile, noted that Facebook watchers are looking for signs that the company will break out big in transactions and payments – an area enabled by its games-based Credits feature. It hasn’t happened yet – perhaps the Facebook’s 30 percent “tax” on transactions performed via credits.

Vogel, however, expressed confidence that the transactions and payments space will soon break out. The company is known for constant adjustment until “it gets things right,” he said.

If Facebook does get transactions and payments right, that “will be more than enough to justify its valuation,” added BIA/Kelsey’s Matt Booth. Facebook is “the biggest website that’s ever existed,” said Booth. Indeed, classifying it as a ‘website’ is misleading since the company encompasses so many things. And will encompass even more as it begins to buy a lot of companies to round out its offerings. “The entire U.S. display market won’t sustain Facebook,” he said.

BIA/Kelsey’s Jed Williams said one of those forms will inevitably be an ad network – an ‘AdSense’ for social,” he called it. Williams also predicted that Facebook will march quickly into the deals and offers space. It will introduce a new offers tool for managed service accounts such as Macy’s and extend down market, he predicted. Mobile is another mega-opportunity, although a risk as well since it hasn’t yet been monetized.

BIA/Kelsey’s Jeanne Dattilo, a BIA/Kelsey valuation expert, said signs were very good for Facebook’s valuation to hold up. She noted that Facebook’s EBITDA of 56 percent last year has got to be considered “really impressive.” Google was in the mid-30s; Yahoo was in the mid 20s.

Listen to a replay of the Webinar here:

Rethinking Deals after Facebook and Yelp Pullbacks

Facebook and Yelp are downsizing their separate deals initiatives after launching them with some fanfare. Facebook is now limiting its deals to users that check-in to businesses; and Yelp is sharply reducing the number of deals that it features, while continuing to support self-serve efforts that are integrated with other Yelp ad products.

Are these pullbacks a sign that deals are collapsing even before Groupon’s IPO? I don’t read it that way at all (and quickly note that Google, Amazon, AT&T and others are still ramping up their “Groupon killers.”)

To me, Facebook and Yelp are mostly following former GE head Jack Welch’s edict to always be among the Top 2 players. As Welch famously said, “When you’re number four or five in a market, when number one sneezes, you get pneumonia. When you’re number one, you control your destiny.” In the case of both companies, they can buy their way in later.

Let’s look at Facebook first. Conceptually, there has been much to admire in Facebook’s prospects in deals. It had strong potential to target users based on their FB posts (i.e. proclivity to go to happy hour, buy discounted travel, and attend jazz concerts.).

It also has been poised to use Facebook messaging to lessen reliance on email overload – a real advantage if one accepts the idea of email fatigue. The site’s ability to ramp up Facebook Credits as a transactional agent also loomed large for closing the loop on sales.

But as Facebook realized, none of these conceptual advantages were really ready for prime time. Moreover, during the four months that it was in the deals market, its ability to source deals from other players resulted in nothing special and inevitably, in an “also ran” status.

Perhaps Facebook can come back via a smart acquisition –including some feet on the street. Meanwhile, its local efforts continue to smartly build via Ads, Pages and Sponsored Stories.

Yelp, similarly, saw a ripe opportunity to highlight local deals when it entered the marketplace a year ago. It also, ambitiously, was seeking to source deals via a ramped up local deals sales force – taking on the big players directly. In June, it integrated its deals into its smartphone apps in more than 20 markets.

But Yelp may have been a little out of context in the deals space – it has such a strong identity for its local business reviews. And the requirement to highlight a daily deal for a site that might be a less regular habit ended up watering down the deals quality. According to data from Yipit, Yelp’s deal revenue was down from $30,000 a deal at the beginning of the year to $10,000.

Yelp now says it will focus on fewer deals that can get more attention. Weekly service deals featured on sites such as Angie’s List and Kudzu have done well in this manner.

So — what conclusions can we draw from these pullbacks by Yelp and Facebook? Some of the press thinks it means that deals are going down, having already peaked. This is supported from Yipit data, which shows that 38 daily deal companies have recently quit the business, while just 36 jumped in. (a point of trivia which means nothing at all, really.)

But here’s another thought: what if the pullback shows that there really are, perhaps, barriers of entry after market leaders have been established. This is what Groupon board member Ted Leonsis cryptically suggests.

But I would suggest that there are other signs of vulnerability – for the big guys as well. I think there is little doubt that deal quality –and the positioning of deals –has really suffered. In my market of San Diego, the same deals are being repeated, and uninspired merchants are being featured. Indeed, hardly anything has tempted me (or amused me) for months.

It is probably a reflection of my personal interests, but the only deals site that consistently engages me is Marketsharing, a B2B site that constantly comes up with fresh takes on B2B offerings (messenger delivery, cleaning services, copier discounts). In the end, it might be the interesting niche sites with highly curated offerings that really end up driving this thing.