We’ve already seen predictions that 2011 will be the year of the social shopper in the UK. Back in December, Frank Lord of ATG predicted that shopping through social networking sites would be a trend for online retailers to watch this year.
Barely a few days into the New Year, today’s news reports of investment into Facebook that values it at more than eBay should be focusing retailers’ attention still more.
For Facebook is now worth $50bn (£32bn), according to New York Times reports of a $500m (£320m) investment by New York bank Goldman Sachs and a Russian investor.
That makes it worth more than eBay and puts it in the same league as UK supermarket group Tesco – even though its revenue and profits appear to fall short of both of those leading retailers. As a privately-owned company, Facebook does not release much financial information, although reports from last summer put the company’s 2009 revenues at $800m (£541m) and suggested profits in the tens of millions of dollars.
So, once they’ve emerged from their shock, what does this valuation of Facebook mean for retailers? It’s easy to think that Facebook can’t be worth the money since it doesn’t have the products or assets of its retail rivals.
But let’s take a look at some statistics that Facebook does share. What Facebook has a lot of are people: more than 500m active users at the time of writing, each with an average of 130 friends. And those people spend significant amount of time on Facebook, with half of them logging on in any given day. Research has suggested that the amount of time spent on social networking sites now rivals the time they spend shopping online. So in a real way, the commodity that Facebook has to offer is the time and attention of consumers. Retailers spend a lot of marketing money on attracting just those – so it seems to make real business sense to invest some of that in social networking.
For, according to recent research from ratings and reviews provider Bazaarvoice, social conversations online are having an increasingly significant effect on purchases. Over the course of Thanksgiving Week 2010, the company measured more than 2.7bn customer opinions, answers and stories over the course of the week – 44% more than in 2009 and 128% more than in 2008.
More and more brands are adding shopping galleries, ecommerce links and product reviews, ratings and ‘like’ options to their Facebook pages, enabling people to express their consumer choices through the way they interact with people. And, the Bazaarvoice figures suggest, this is all being taken up keenly by consumers.
Social commerce then, is certainly becoming more important to retailers and this investment from Goldman Sachs confirms that big players in the market are putting their money where their mouth is.
What Facebook is arguably selling is a new way of shopping – and it’s one that retailers– up to now often unclear what social shopping has to offer them – ought, at the very least, to be investigating. Once they determine whether it’s right for them, this is a trend to catch, and to invest their own time and resources on making it work for them.
