The Future Of Buying Through Facebook


So far you can poke, like and comment, but what if you could buy groceries too? Facebook is gradually becoming a place where you can purchase goods, and as the social network’s user base swells past 600 million, more companies are seeking a piece of the action.

Retailers have already started establishing their own store fronts on Facebook, and British online fashion peddler ASOS (third-quarter sales $160 million) last week became the first retailer in Europe to open a Facebook store.

More than just a page that directs you to a separate Web site, its Facebook “shop” is fully transactional and displays ASOS’s entire stock on a number of pages. ASOS, says it has already made millions from Facebook referrals, but it has yet to see if the new store will lead to more sales. It is adding 1,300 new products every week which should help pique customer interest. The company could not be reached for comment at the time of writing.

What is the shopping experience like? The store front initially greets you with some qualifying small print:

You are viewing a modified version of ASOS within Facebook, rest assured your payment & account details will only be seen by ASOS.

Once in the store there is constant potential to share what you are doing — almost every page gives you the option to “share” a link to a product or leave a comment below it, while an omnipresent button implores you to “invite your friends.” The system lets you choose from a number of credit and debit card options and keeps your financial details on file so that, likeAmazon, future purchases simply use the stored details.

Danny Rimer, a partner at European venture capital firm Index Ventures, sees this as the future for e-commerce. In his search for viable investments, he’s now looking for a social media layer to any e-commerce company that comes knocking at his door.

“Facebook is key,” he tells me. “Five years ago it was search engine optimization. Today if they haven’t incorporated Facebook Connect into their retailing experience, they’ll need more experience.” (Facebook Connect allows users to log into other Web sites with their Facebook identities.)

“There’s no question in our mind that a social layer will be pervasive in pretty much every service that is offered online,” he adds.

James Patmore is the managing director EMEA for Boku, a mobile payment service that lets you pay for virtual goods and game upgrades on Facebook, working with partners like Playfish and Electronic Arts. “I would say it’s core to Facebook’s strategy to be some sort of conduit to commerce,” Patmore says.

The logo for Facebook Credits

Boku, which is more a middleman than a retailer like ASOS, recently tweaked its system to let users pay for goods withFacebook Credits instead of real cash. This is because Facebook announced this month that from July, all game developers on Facebook will have to process payments through Facebook Credits, which is used in more than 350 games and applications like Farmville and Bejweled Blitz. Facebook takes a 30% cut of all revenues earned through Credits.

Patmore adds that he is unsure how much Facebook wants to step into the payments provider role, but he says integrating with Facebook Credits put Boku in a stronger position: “It makes us baked into the Facebook payment offering.”

One of Facebook Credits‘ early iterations was buying pictoral “gifts” like teddy bears or hearts to post on someone’s wall. With 10 Credits equalling $1, it has today become the exclusive payment system for Zynga, Facebook’s biggest app developer which is expected to rake in $500 million in revenue this year, according to Inside Network.

Could Facebook Credits ever be used to buy real goods, putting it in direct competition with the likes of Amazon, PayPal and eBayInsideFacebook recently cited Guy Rom, a Facebook engineering manager who works on Credits, as saying that the Facebook currency is Payment Card Industry (PCI) compliant. This means the social network has passed an audit on protecting user data, and could enter the traditional payments industry alongside credit card companies.

Facebook’s founder and chief executive, Mark Zuckerberg, also recently said the company may do “a lot more” with Credits in the future,according to the New York Times, while news that Facebook is working on a Groupon-like service called Buy With Friends, has also hinted at bigger things to come in terms of making payments through the social network.

And another hint may be in Facebook’s new relationships with Goldman Sachsone which was facilitated by the social media investment fund DST Global. As well as being an stakeholder in Facebook, Goldman recently finished selling $1.5 billion worth of private Facebook shares to its private international clients.

Expectations are high that Goldman will eventually underwrite Facebook’s IPO in circa 2012, but who knows if its services could go further. For a social networking company that wants to become more involved in e-commerce, it can’t hurt to have ties with a bank that’s steeped in the inner workings of global finance.

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01 Feb 2011


By Parmy Olson
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