Facebook launches a new type of e-commerce marketplace – Social Gifts

October 1, 2012

On September 28th 2012, Facebook launched Facebook Gifts (which we’ll call FBG for this post).  In this post, we wanted to take a deep dive into this development because we believe it has some interesting ramifications for both the worlds of e-commerce and social commerce.  This post covers these topics:

  • Marketplaces will eat the e-commerce world
  • FBG –  A new category of marketplace is born: curated social gifts
  • FBG – will it work?  872m reasons why…
  • A tour of FBG

Marketplaces will eat the e-commerce world

One trend we watch closely at ChannelAdvisor is the emergence of new marketplaces, because we believe that (tip of the hat to Andreesen), marketplaces will eat the e-commerce world (a topic for another day, and another blog post).

Here’s a quick overview of some of the categories of existing marketplaces:

  • Old school – eBay is the grand-daddy of marketplaces – started as an auction site and is still chugging today.
  • Retailer-based marketplaces – Amazon started the trend and now we have Wal-mart, Sears, NewEgg, Buy.com, Tesco and Marks and Spencer.
  • B2B marketplaces – These are marketplaces that are used for selling in industrial verticals (like construction equipment @ IronPlanet), or liquidation plays like liquidation.com.
  • CSE marketplaces – Many of the top CSEs are being re-imagined with marketplace capabilities (where you check out on the CSE vs. the retailer) including Shop.com, NextTag and PriceGrabber.
  • International marketplaces – You have the Asian-based mega-powers (Rakuten and Alibaba), Mercado Libre in Brazil, a plethora of players throughout Europe and TradeMe in New Zealand.
  • Mobile marketplaces – The top mobile apps are converting into marketplaces such as ShopSavvy and Redlaser – where you can buy right from the phone.  Amazon and eBay both live in this bucket as well as the ‘old school’ and ‘retailer-based’ categories.
  • Niche marketplaces – These are interesting long-tail niches where pockets of consumers are looking for a certain products from a variety of vendors.  We put Etsy in here as almost a network of marketplaces.  You also have some interesting niches like OneStopPlus which is focused on plus-sized apparel.
  • Deal marketplaces (curated) – Groupon Goods started this new type of marketplace that is an ‘inch wide and a mile deep’ and now LivingSocial and others have launched with their take on a deal-focused marketplace.
  • Social marketplaces – Copious, Fancy and (hopefully soon) Pinterest live at the intersection of social and marketplaces.

The launch of Facebook Gifts has created a new category of marketplaces we believe warrants some monitoring by retailers.

Facebook Gifts – a new category of marketplaces is born:  Curated Social Gifts

Facebook has all the right ingredients needed to grow a healthy marketplace:

  • 950m active users
  • Mobile
  • Lots of data on those users (Like when their birthdays, anniversaries, etc. are)
  • The social graph which causes new features to spread like wild fire.

With those two foundations in place, I believe Facebook Gifts are very interesting for the worlds of both e-commerce and social because it is the birth of a new type of marketplace: Curated Social Gifts Marketplace.

Shortly after it’s IPO, Facebook acquired a mobile gift startup called Karma for a reported $80m – Karma was an iOS app that did some basic gifting.  Facebook has taken the basic premise of Karma and really re-imagined it as a native FB feature.

The launch offering has about 100 merchants including Starbucks and 1-800-flowers.

Facebook Gifts – will it work?

Before we go into a detailed tour, there’s already a lot of pundits saying that this new marketplace won’t work.  For example, Chris Dixon (who works at eBay and founded Hunch) says: “getting users to switch modes (from online to offline) has historically yielded low conversion rates.”

I think what Chris is missing here is how seamlessly Facebook as integrated gifts.

First, once you are enabled for Facebook Gifts (FBG), you’ll notice that is now one of three actions available:

Fb_gifts12

So you now have Post, Photo and Gift.

Second, I don’t know about you, but before FB, I didn’t know about most of the birthdays and other events going on in my various circles.  Today, it’s front and centre pretty much in real-time.  FB has cleverly integrated FBG right into that as well:

Fb_gifts11
Right there as you are presented with Birthdays and Life Events, you have the FBG action item.

As you’ll see in the tour, there are lots of great and well-thought out integrations into the FB social/viral loop, but I think these two integrations that are really raising the awareness, visibility and action-ability of FBG are going to prove unbelievers wrong.

In fact Susquehanna Financial Group analyst Herman Leung estimates that gifts for Facebook friends could generate as much as $872 million in annual revenue for Facebook by 2014.

A Tour of Facebook Gifts

Gift Sender Experience

Let’s start with the Gift Sending experience first.  There are three steps involved with sending a gift:

  1. Choose gift
  2. Add message
  3. Pay – which is actually optional.

Here’s a view of how you start the process.  You hit the green button that says ‘Give a Gift’:

Fb_gifts9

 

Next, you select which of your friends to give a gift too (Recipient).  Other flows fill this out – e.g. if you see someone’s birthday and say ‘give a gift’, you’ll skip this step.

Fb_gifts8

 

Once you select a gift recipient, you then go through a user interface that allows you to pick an e-card and message (you’ll see that in the recipient side so I omitted it here).

After you pick a message/e-card, you pick a gift.  At launch there’s a pretty robust set of gifts.  However, there is no search functionality, you navigate between these categories:

  • Recommended Gifts
  • Baby and Kids
  • Fun
  • Flowers
  • Pets
  • Food and Drink
  • Home and Kitchen
  • Fashion and Body

Here’s a shot of what that looks like:

Fb_gifts10

As you go through the gift choosing experience, there are good product descriptions and images, but it’s not always clear who the underlying retailer is, making this a somewhat opaque marketplace where the FBG branding is more front and centre vs. the partner retailers.

Once a gift is chosen, you actually have an interesting choice, you can pay before the gift ‘accepted’ or you can defer until the recipient accepts the gift and enters their shipping info.  Note the little ‘gift process flow’ icons are used throughout  the UX which is a nice touch.

Fb_gifts15

 

When you do choose to pay, it’s a pretty standard UX that looks like it came from the old virtual gifts/ Facebook Credits experience:

Fb_gifts16

 

Gift Recipient Experience

On the recipient side, you get notifications that look like this on mobile and desktop:

 

Fb_gifts1

 

When you drill into your timeline, you see this detail:

Fb_gifts2

 

Every gift  has a message and just like gift giving, when you receive a gift, you are given a three step process:

  1. Open card (shown below)
  2. Preview Gift
  3. Ship it

Fb_gifts3

When you open the card, you can see the message inside:

Fb_gifts4

 

Next, you enter an interesting process where you can customise the gift or you can even swap it. Here, I received a yoda flash drive and was able to change to the Darth Vader.  I also could have taken my balance with me and chosen a completely different gift by clicking the link in the bottom left: “swap for a different gift’.

 

Fb_gifts5

 

Once I lock down my gift, I enter my shipping information.  This is very different than any other e-commerce transaction because usually the buyer does this step and here we have a model where the recipient enters their ‘ship to’ information.  This makes sense and it will be interesting to see if FB stores this info and gives me a pick list down the road (same is true with payments) so I can get closer to one click gifting.

Fb_gifts6

 

Once you click Ship it, the sender is notified (remember those icons) and they are prompted to pay if they haven’t.  After that all you have to do is sit back and wait for the gift to arrive!

Facebook Gifts Facebook integration

There are a couple of interesting Timeline integration points.  I showed the Birthday integration and the post/gift integration.  But here’s how a gift appears on your timeline before you open it – it has wrapping paper and a little tag.  Note that FB does give you the option to make gifts private and not show up on timeline.

Fb_gifts14

 

Once the recipient opens the gift, it appears opened as you see here (e.g. the wrapping paper goes away).

 

Fb_gifts7

 

Conclusion

For a first e-commerce effort, I was really impressed with the user experience on this offering.  I was a Karma user and they kept some of the core pieces of that M+A, but they have definitely put a lot of thought, effort and polish into Facebook Gifts.

It will be interesting to see how rapidly it is adopted and what users think about it.  Also, we already have retailers looking to get their products into the marketplace, so it will be interesting to see how FB scales up the supply side of the equation as well.

What do you think – hit or bomb?  Let us know in comments!