Amid plunging share prices and a flurry of lawsuits from disgruntled investors, Facebook’s May stock market launch looks increasingly troubled.
No wonder, then, that the world’s largest social network, with 845 million monthly active users, has been quietly road-testing new revenue streams.
In August, the platform announced that, after a successful trial with games-makers Zynga, Kixeye and Playdom, it would make a payments subscriptions feature available to all developers with apps on Facebook, to allow them to “establish recurring revenue streams and offer updated content or premium experiences for a monthly fee”.
Users can sign up with a credit card or PayPal and then manage their subscriptions via their Facebook payments settings. The social network, which now has 235 million monthly gamers, will continue to retain its hefty 30 per cent cut of all in-web app payments.
There’s little doubt that virtual goods, and games in particular, are the ideal product for the social shopping mall: engagement levels are high, purchasing seamless and delivery instant. They also offer a range of ways for companies to monetise.
Tapjoy, a free platform on which visitors are rewarded for interacting with popular brands, now claims 90 million active monthly users. Players of social drawing game, Draw Something, owned by Zynga and available on IoS, Android and Facebook, for example, can earn tokens to buy “colour packs” by interacting with ads on Tapjoy’s marketplace. This virtual payments model, underwritten by advertiser hard currency, generates about 30 per cent of revenues earned by developers on the service.
As a brand, you always want to communicate with your influencers because they will create buzz
But when features such as calendars are utilised, the sophistication of social purchasing, particularly in the area of gifting, starts to increase sharply. Paul Bowen, Tapjoy’s UK vice president and general manager, is sceptical that anyone “has really cracked social payments yet”, but points to Karma, a gift-giving service within Facebook, created by Tapjoy’s founders, which was acquired by Facebook in May for $80 million, for the way the company tailored its app specifically to the social networking site.
“Karma have created a very optimised experience. There have been too many cases of e-tailers just dumping their normal web-stores inside Facebook and expecting them to work,” he says.
And it’s both in bespoking apps and building on technological advances that social purchasing’s best chances for growth lie, argues Vincenzo Annunziata, senior social media strategist at Carat.
Mr Annunziata also cites a social gifting service, Wrapp, an app which enables users to send virtual gift cards to Facebook friends, for the way it could, potentially, launch “real-time gifting” using geo-location to customise offers to where groups of friends happen to be. “That would mean that, if I check in at Pizza Express with five Facebook friends, I’d get a discount,” he explains. “That’s absolutely where I see social purchasing going more and more.”
Beyond gaming and gifting, the success of social purchasing is harder to gauge. Certainly as social activity converges on mobile devices, US retailers are hurrying into the space.
Top main street brands, including Best Buy, Target and Wal-Mart, have created the Merchant Customer Exchange (MCX), which will streamline m-commerce payments and create “customisable offers”. Yet, while Forrester Research estimates that US m-commerce will increase to $31 billion by 2016 (with compound annual growth of 39 per cent), it will still only represent 7 per cent of total e-commerce sales. Besides, how much of the 7 per cent can be classified as “social purchasing” is moot.
The indications are decidedly mixed. While Payvment, the leading e-commerce platform on Facebook, saw its monthly active shoppers treble during 2011 to more than one million, research by online marketing tech firm Monetate found that platforms, such as Facebook and Twitter, lag far behind search and email as a tool for sending users to e-commerce sites.
The report analysed more than 100 million “shopping experiences” and found that, while 4.25 per cent of referral traffic from email in the second quarter of 2012 went on to make a purchase (and 2.49 per cent from search), social had a conversion rate of 0.59 per cent.
Unsurprisingly, therefore, social is still chiefly viewed by the industry as a “seeding” or marketing medium. Mr Annunziata says its main value is to drive chatter among niche advocacy groups. “As a brand, you always want to communicate with your influencers because they will create buzz,” he says.
F-commerce success stories in this sphere include Adidas, who according to Katie White, head of social at communications agency Isobar, “have mastered the art of the flash sale on Facebook, allowing their most hard-core fans to buy limited-edition and new-release product for the first time through their Facebook page”. She also cites Dulux for “wrapping conversion into social interaction, showing their specific colour ranges through content on Facebook and allowing their users to click straight through to their site and order a tester”.
Yet individual brands, however large, are in a sense an irrelevance, while the key social players are still testing payments models. Twitter, for example, is experimenting in social gaming, commerce and giving, via Twitpay, while Apple is vying for a stake in the social-purchasing world with its potential acquisition of The Fancy, and Facebook’s much vaunted NFC-enabled handset has the potential to own users’ purchase journeys from search to checkout. Pinterest, too, is said to be close to launching shop.pinterest.com – a virtual window-shopping platform for brands.
But for now, social purchasing remains in a sort of hyper beta-mode, caught in the slipstream of e-commerce.
PAYMENTS
From TwitPay to iZettle
Tim Dunn, director of mobile strategy at Isobar, imagines a day in the life of smartphone user Joel, just a few months from now…
9:14am: Joel’s on the tube when he gets a text from his friend Tim who he owes £20. So Joel opens a Tweet and tweets the money using TwitPay, which pays it directly into Tim’s account.
9:55am: Next, Joel nips into Starbucks to grab a bagel and latte, paying via the Starbucks app, which means he simply has to show a QR code to the till to charge his account.
1:03pm: While in the queue at Eat, he checks in on Foursquare and sees that American Express have a special offer running: they will pay for his lunch today, if he uses the Amex account on his phone. He quickly flicks his phone over and pays by Amex.
1:56pm: Joel stops at a street stall as it’s his turn to buy cakes for the office. The stallholder inserts Joel’s credit card into his phone, which has the iZettle plug-in attached, to take payment.
4:40pm: Back in the office and checking his boss isn’t looking, he renews his Zynga premium subscription via the social games company’s Facebook app.
7:29pm: After work, Joel’s phone buzzes with an alert from Ticketmaster: there are tickets left for Trashcan Sinatras. With just a few clicks, he and his girlfriend are in. On the way, he spots that the iPint app from Carling is offering vouchers which they take into a pub for free drinks.
