Warren Knight

As investors pour millions into social commerce sites of the Group-Buy persuasion, should brands and retailers be looking to add Group-Buy functionality to their sites?

If investment activity is an indication of market opportunity, then adding Group-Buy features to e-commerce sites – a la Dell Swarm – is a no-brainer.  18-month-old-and-already-profitable startup Groupon has just received $135m investment from Facebook backers DST, valuing it at $1.2bn (projected sales $350m this year). And last week the US Group-Buy challenger site LivingSocial received a further $14m funding from a group of investors led by Lightspeed Ventures (taking total funding this year to $44m).  Meanwhile, German Group-Buy site, CityDeal recently received a further $5m Samwer brothers funding, and event shopping giant Gilt has just invested in creating its own local Group-Buy brand – Gilt City.

All this while startups are investing time and effort in new and creative variations of the Group-Buy local-deal-a-day model (70+ sites in US, 15+ in Germany and counting); focusing on particular niches (e.g. restaurants – BlackboardEats, and Feastery), deals with local newspapers, Group-Buy deal aggregators (e.g. Yipit) and imaginative deal tweaks such as making the size of the discount dependent on the number of people signing up, and special private VIP deals for premium members (HomeRun avalanche deals and ‘private reserve’).

Adding Group-Buy functionality also makes sense from a consumer trends perspective.  Group-Buy is a novel form of local advertising (‘Woot Local’) that builds on three big trends (in addition to the obvious social media trend) – the real-time-web, the location-based web (80% of disposable income is spent within 5 miles of home), and O2S (online to store), the trend that has Google fixated. The net result? A surge in popularity of Group-Buy traffic.

So how could online retailers go about implementing Group-Buy on their sites?  Well most obviously, they could either participate by offering deals with these sites, or deploy Group-Buy widgets on their own sites from social commerce solution providers such as Twongo and eWinWin.

Another approach for profiting from the social commerce group-buy trend could be to experiment with the Group-Buy blueprint proposed this week by Jim Tobin, president of social media agency Ignite.  Although Tobin sees these ideas more as an opportunity for marketplace sites looking to seize social commerce opportunities, they could easily be adapted and deployed as ‘brand butler‘ services by brands and retailers.

Phase I: Group Facilitation – Add a simple forum to your site, and invite customers to connect and coalesce into groups looking for a particular product and then come as a group to you ask for a discount.  If you are a brand, consider setting up a group-buy forum for category-related non-competitive products

Phase II: Group Negotiation – Now invite suppliers and partners to pitch for the business of the groups as they emerge

Phase III: Procurement and Purchasing – Next move from simply facilitating deals to taking payment for them (benefits of negative working capital)

Phase IV: Direct Distribution – Begin sourcing products directly from manufacturers to secure better deals for customer groups

Perhaps you’ll decide that Group-Buy opportunities are not for you.  Nevertheless Group-Buy is at the epicenter of social commerce right now – so surely that at least merits a discussion with your colleagues and agencies?

Warren Knight thanks http://socialcommercetoday.com

Put away your preconceived notions of what Facebook is all about.

For a long while, the consensus was that Facebook was the place where high school and university students go online to hangout, hook up, post drunken photos of themselves and act mischievous until the harsh realities of a cold world break their spirits into suits and boring 9-to-5 jobs that suddenly have them driving minivans, listening to James Taylor and reading columns like this (a fate worse than death itself).

Nothing could be further from the truth.

Facebook continues to grow across all demographics and psychographics (from boomers to business people) as online social networking becomes one of the primary ways that people stay connected and communicate. Their latest statistics (according to the Facebook website) paint a very different picture from the general public’s perception of what Facebook is. In short, most people see the site as a fad or trend and think it’s filled with nothing more than individuals whose sole interest is in creeping on those they went to high school with as some sick psychological game that makes them feel better about themselves and their lot in life. The reality is that Facebook has well over 400 million active users, of which 50 per cent log onto the site every day, resulting in over 500 billion minutes per month. The average user has over 130 friends, is connected to 60 pages, groups and events, and creates over 70 pieces of content each month.

On a global level, Facebook has been translated into over 70 languages (with the help of over 300,000 Facebook users), and 70 per cent of users are from outside the United States. If Facebook were a country, it would now be the third largest in the world based on population (behind China and India but ahead of the United States).

With this many people connected, sharing and creating (according to Facebook, users are currently sharing over 25 billion pieces of content a month), all eyes are on Facebook. Some wonder if this growth can continue, others wonder what the big business model will be, and most brands and businesses are still trying to figure out what the marketing opportunities are in an environment where individuals are primarily there to connect with friends and acquaintances.

Last week, Facebook held their F8 conference in San Francisco. The news of changes happening at Facebook have created shock waves (not ripples) throughout the business world. Facebook is beginning to spread its tentacles far beyond their own platform by enabling website owners to exchange information about Facebook users and their preferences. Many tech bloggers and columnists have lauded this move as a first step toward better organizing the Web based on the people who are using it. Others are raising security and privacy concerns.

“The idea for such a reorganization has been around for a long time,” states the article, How Facebook Could Organize the Internet, published on The Atlantic‘s website last week. “Tim Berners-Lee, the inventor of the World Wide Web, years ago envisioned the next stage in the Web’s evolution, calling it the Semantic Web. It would, he wrote, ‘bring structure to the meaningful content of Web pages,’ enabling computers to understand that content and how it relates to other sites and information across the Internet. Change has been slow because standards are hard to set and enforce, but Facebook’s scale could accelerate the transformation.”

Here’s how this plays out…

About a month ago, you could “like” what people were saying and doing on Facebook and you could also “become a fan” of pages (which may have been created by individuals or brands). Facebook recently changed this, so now you can “like” individual pieces of content, brands, pages and groups. All of this information is displayed on your profile and can be seen by everyone connected to you.

At the F8 conference, Facebook announced that an individual’s ability to “like” something is now going to extend all over the Web. So, if you like a movie at IMDB, you can “like” it right there on the IMDB site. If you like a restaurant on Yelp!, you can “like” it right there. Not only are you giving content throughout the Web your own personal thumb’s up or down, but you’re also able to discover which of your Facebook friends are on the site and what they like (or don’t like).

This new platform from Facebook, called Open Graph, allows developers to exchange this information as well, so that they can create content around people’s interests, and allows them to exchange this information between one another. This, in the end, sounds like the ultimate word-of-mouth marketing mixed in with an all-powerful recommendation engine based on an individual’s friends and connections.

Facebook can (and will) make more money (lots of it).

Last week, I spoke at the Bazaarvoice Social Commerce Summit in Austin, Texas. The intersection of social media and e-commerce is one that concerns many online merchants. How much commerce versus how much loyalty and community building is the right mix? During a panel discussion that saw a handful of Digital Millennials (those born between 1982 and 2000) talk about their media and shopping habits, it became abundantly clear that they live on their mobile devices and spend an active amount of time in online social networks. Pinny Gniwisch, co-founder of Montreal-based Ice.com, asked the panel if they would like to be able to shop directly in Facebook, to which the entire panel (made up of young men and women) sat up and unanimously said, “Yes!”

In February of this year, Web analytics firm, Compete, announced that Facebook surpassed Yahoo! to become the second most popular website after Google.

Now, as Facebook allows users to connect back to them while being practically anywhere on the Web, imagine what Facebook was versus what it is about to become.

Warren Knight thanks http://www.twistimage.com

Q: How much is a Facebook fan, er ‘liker’ worth?  A: $3.60.

New data shared by Vitrue, the Facebook marketing/sCRM agency with some very big clients (Apple, AT&T, Best Buy, Ford Motors, Kelloggs and P&G) has calculated that the media value generated by the average Facebook fan is $3.60/year (if you post to your wall 2x per day, based on impressions generated in Facebook news-feeds. (As an aside Vitrue found, interestingly, virtually no viral effect on feeds (propagation coefficient – 1:1.04)).

Vitrue did find that assuming $5 CPM, 1m Facebook fans produce $3.6m in media value over the course of a year (AdWeek article reporting findings archived below).

Like any AVE (advertising value equivalency) approach (much used, abused and confused in PR and sponsorship marketing), the $3.60 value should be taken with a pinch of salt, even if you do use Facebook primarily as an advertising medium, as opposed to/in addition to an e-commerce or CRM platform. But it’s a number that will be helpful to many marketers building a business case for Facebook marketing.

The Vitrue data opens the interesting and mildly ironic business opportunity of Facebook Fan Arbitrage; we reported earlier that you can buy Facebook fans from Usocial.net and subvertandprofit.com from $0.15 – and if you can sell them to brands for up to $3.60, surely there’s a new market opportunity emerging in buying and selling Facebook fans.  Something to occupy all those hedge fund traders whilst they wait for the market to recover…

___

AdWeek article archived from:
http://www.adweek.com/aw/content_display/news/digital/e3iaf69ea67183512325a8feefb9f969530

Value of a ‘Fan’ on Social Media: $3.60

The findings are based on impressions generated in Facebook’s news feed

April 13, 2010 | Brian Morrissey

Brands have rushed to Facebook to build fan bases, with some amassing millions of connections. The nagging question has been: What is the monetary value of these fans?

Social media specialist Vitrue, which aids brands in building their customer bases on social networks, tried to put a media value on such communities.

The firm has determined that, on average, a fan base of 1 million translates into at least $3.6 million in equivalent media over a year.

The company’s findings are based on impressions generated in the Facebook news feed, the stream of recent updates from users’ networks.

Vitrue analyzed Facebook data from its clients — with a combined 41 million fans — and found that most fans yielded an extra impression. That means a marketer posting twice a day can expect about 60 million impressions per month through the news feed.

“It’s important to understand that once you build that fan base, you want to make sure you’re leveraging it,” said Michael Strutton, chief product officer at Vitrue.

Not all brands are created equal. Vitrue found wildly divergent impression-to-fan ratios. Some marketers generated just .44 impressions per fan, while another saw 3.6 impressions. Strutton chalked that up to sexier brands having more engaged connections, giving them access to the news feed more often. The impressions are not unique.

Vitrue arrived at its $3.6 million figure by working off a $5 CPM, meaning a brand’s 1 million fans generate about $300,000 in media value each month. Using Vitrue’s calculation, Starbucks’ 6.5 million fan base — acquired in part with several big ad buys — is worth $23.4 million in media annually.

“It helps [marketers] justify the spend they’re making, especially in acquiring a fan base and engaging that fan base,” Strutton said.

Of course, the figures don’t include perhaps the most powerful incentive for brands building fan bases: social customer-relationship management. Marketers often use their Facebook hubs to inform fans of new products, services and promotions.

“When you start to [add] engagement value, it goes higher,” said Strutton. “We were trying to get an easy-to-understand valuation terminology.”

Warren Knight thanks http://socialcommercetoday.com

Whilst many brands have still to digest the difficult-to-underestimate implications of new Facebook initiatives announced last week at f8 (widely seen as Facebook’s Google Moment, amounting to nothing less to an audacious bid to takeover the Web by becoming the social glue that binds the web together by rolling out Facebook social plumbing across the entire Web (through social plugins, portable social graph (Open Graph), single sign on/up (using OAuth 2.0), social analytics and a new virtual currency)), some brands been quick off the mark with new f-commerce initiatives using the new technology.

Fashion brand Levi’s has just launched an elegant Facebook-powered social shopping feature called Friends Store that uses Facebook’s new social plugins – notably the ‘Like’ button (taking a cue from YouTube).

In a nutshell, the ‘Friends Store’ on Levi’s e-commerce showcases only products recommended by Facebook friends, and allows you to invite friends to co-browse the store. It’s like Pandora for Fashion, providing personalized recommendations from people you like and people like you.

Meanwhile, Procter & Gamble has been working with Resource Interactive, who recently set up a Facebook ‘Wall Store’ for fashion brand The Limited, and has added a Shop Now Tab and Facebook Wall Store for new-yet-to-be-found-in-store Pantene products.  This is an novel and natural role for CPG f-commerce, using Facebook as a ‘tryvertising‘ tool – paid-for sampling designed to create word of mouth for new products. Expect more brands to follow where P&G f-commerce treads.

Finally, video game company PopCap, maker of the ubiquitous Bejeweled game, has been beta-testing the Facebook Credits virtual currency, and using it as the sole payment method for the Facebook variant of the game – Bejeweled Blitz (Facebook take an App store style 30% commission on items purchased with F-Credits).  The FT reports that Facebook’s new Open Graph protocol could be the plumbing needed for Facebook Credits to become the dominant virtual currency on the Web, and for Facebook to become a global virtual bank.

Working like a pre-pay cell phone/debit card account, Facebook Credits avoid all the tedious messing around with credit card authorizations for each and every transaction – and advantage for shopper and vendor.  And for Facebook, member account balances will be valuable .  For brands and retailers, allowing customers to pay for digital and real goods with F-Credits within Facebook and on e-commerce website may boost sales by making the purchase experience smoother and more open to impulse buys.

Facebook founder, Mark Zuckerberg, emphasized that creating a payment system secure and stable enough to cope with more than 400m+ members will take time and investment.  Nevertheless, F-Credits are now set to become part of fabric of e-commerce, and so future-proofing your e-commerce strategy will involve addressing this new online currency.

Warren Knight thanks http://socialcommercetoday.com

At the f8 Conference this week, the people at Facebook talked about their house currency, the Facebook Credit. The Credits have been in Beta phase since last August and should now be taken to the next level (“Facebook: Credits Will be the “One Currency” on All Apps”).

According to Facebook, the Credits will be implemented by over 50 application developers who have integrated the credits in over 100 applications. The majority of these are game builders. All Facebook has an overview of a selection of these.

To get users accustomed to applying the credits, Facebook will use apps now to start gifting credits to users who have never used them before, thereby encouraging their acceptance.

Furthermore, there is the new possibility to “earn” Credits (“Facebook Adding Offers to Payment Options for Credits”):

Facebook’s interest in Facebook Credits lies naturally with their goal to establish a universal payment medium. Venturebeat quotes Facebook CEO Mark Zuckerberg:

The “Apps2User” is a program planned by Facebook to make it possible for App developers to transfer proprietary rewards points into Facebook Credits:

Facebook will be cashing in 30% of all transactions using Facebook Credits.

Warren Knight thanks http://www.optaros.com