It's not about the flowers. It's about the data. How Facebook is taking over the world of social commerce.
When Facebook bought Karma, one of the leading gift sites, it was clear that Facebook Gifts was just around the corner. Given Facebook’s tools and resources, they have the potential to make gift-giving more rewarding for both giver and recipient. Remember that the excellence of a gift lies in its appropriateness, not simply in its value.
What's less obvious is that, from Facebook's perspective, the dollars generated from gift purchases may be nowhere near as valuable the data these purchases generate. Facebook will get purchase decision data from each gift, which is just the start. The connections each gift establishes between two or more Facebook users form another layer of data. Each gift will create opportunities for follow-on sales and service and cross-marketing. Plus, recipients will fill out their own addresses - information Facebook doesn’t necessarily have right now - making it easier to tie all this new data to existing information that’s already available. What Facebook is aggregating is data, data and more data, with virtually no acquisition cost and high degrees of precision and accuracy.
Personal data is the oil of the digital age, and Facebook increasingly owns the primary pump.
Socially-informed commerce has been around for a while, but we’re at a major inflection point. That’s because of hyper-personalization and precise and cost-effective targeting. We’ve long known that if you give a consumer too many choices, they are far more likely to buy nothing than if you give them a limited and more relevant set of choices. Now new companies such as Local Offer Network are developing tools that deliver “exactly right” offers to consumers the very first time they visit a site.
But Facebook’s involvement potentially takes us somewhere new. Consider that when a Facebook “friend” recommends that you take an action online, the impact, as compared to a simple ad solicitation, is major. You’re 15% more likely to download something and 8% more likely to buy something. If and when you do buy, the average order size is 22% larger. That’s a lotta lift.
Facebook Gifts heralds a seismic shift from a relatively simple social graph to a deeper interest graph. Because we, and Facebook in particular, have pretty much cracked the code on personal data and demographics, the next hurdle is pretty clear: “Tell me what you’re interested in and what you pay attention to, and I will tell you who you are.” Online, you need to be where your targets and customers are, and a relevant part of their world, or else you’re nowhere. This is where both Instagram and Pinterest loom large.
As we see better and better tools to interpret, identify, and categorize visual materials, we will see more and more emphasis on and influence of the players who are successfully aggregating these huge treasure troves of visual information. These days, a picture is worth about a million words--if it’s the right picture.
HOWARD A. TULLMAN is the General Managing Partner of G2T3V, LLC – Investors in Disruptive Innovators and of Chicago High Tech Investors. He is the former Chairman and CEO of Tribeca Flashpoint Media Arts Academy. Over the last 40 years, he has founded more than a dozen high-tech companies. @tullman