The Future of Facebook is eCommerce
Facebook Mall?
Everyone's debating the future of Facebook. Essentially, everyone in business wants to know how are they going to finally make a profit and deliver on the astronomical valuation that has been put on the company. At it's height, with Microsoft's investment a few years back, the value of Facebook was at $15 billion. Most recently, the company was valued in May 2009 at a more "reasonable" $10 billion after a $200 million investment by Russia's Digital Sky Technology.
To date, Facebook has yet to turn a profit, yet it continues to be one of the hottest technology properties. So how are they going to monetize that? With these continued investments and infusions of cash from equity firms and investors, Facebook can't continue to be the Harvard dorm room project of Eric Zuckerberg and his friends. The ad-supported, publisher model hasn't led to great success. This is probably because Facebook has been passionate about not turning the site into a tacky billboard a la MySpace. And through my own experience, running display media on Facebook isn't all that effective.
So, Facebook must be holding out for something more and I think eCommerce in a Web 3.0 world has to be a core component. It could be something akin to the world's largest shopping mall with Facebook controlling the cash register. If you think about it, most of the pieces are already there in varying degrees.
First, Facebook has the traffic. The site currently boasts 250 million active users with nearly half of them logging in every day. And these aren't just kids and college students, the fastest growing demographic are adults 35 and older and 2/3 of the current user base are out of college.
Second, Facebook has clung to its integrated ad serving platform called Ads Manager rather than giving up that real estate to someone else. It hasn't proven profitable, so there has to be a long term reason. Could it be because an advertising platform integrated into an eCommerce platform would be beneficial to merchants? Probably.
Third, Facebook has a virtual currency and checkout system in place. They are currently testing Facebook Payments allowing users to purchase virtual gifts and hired Prashant Fuloria, the former Director of Product Management for Google Checkout, to develop it. It isn't a stretch to to extend this service into another PayPal or Google Checkout and because of the continued growth of Facebook Connect, checkout becomes even easier.
Fourth, with the aforementioned Facebook Connect, merchants would no longer need to worry about maintaining their own customer databases, registration processes, and CRM systems. This could significantly level the playing field and lower the barrier to entry into eCommerce even more.
As you put these pieces into place, Facebook has the potential to become a giant in the eCommerce world capitalizing on its user base, integrated advertising platform, the ability to easily build and integrate apps, adding a payment system, and more. I see no reason why merchants shouldn't already be extending their sites to include eCommerce capable apps within Facebook now. Why not get their early and build a base of fans now before the marketplace becomes flooded.
