Facebook’s Move to Add a Shopping Service

Posted on | November 9, 2007 | Comments Off

Mark Zuckerberg, CEO of Facebook, recently announced the arrival Facebook Ads, which is a new practice of having a user-initiated product endorsement coupled with a marketing message. Zuckerberg said this system ushers in a new “pull marketing” age that allows consumers to endorse the brands they enjoy. He also believes Facebook Ads signals the end of waste for media targeting.

One part of the ad program is a user-initiated recommendation. Businesses can set up a Facebook page and when someone visits that page they can disclose this visit by writing on the brand’s wall or becoming a fan. Each of these actions will be reported in the newsfeed or mini-feed, thus sharing with the rest of their peers the interaction with the brand or product.
Facebook has also developed something called “Beacon” which is another way for people to share their brand interaction with their network of friends. Beacon allows you to let everyone know if you buy movie tickets from Fandango or make reservations at you favorite sushi restaurant. The idea behind this concept is that communication flows from the consumer to his family and friends rather than from the brand to the consumer.

Facebook has also introduced paid advertising where advertisers can attach a message to the user notifications that come up via user-initiated actions. These ads are bought with target users in mind based on criteria such as age, interests, political leaning, etc. The ads themselves are simple text and graphics. Chamath Palihapitiya, VP-product marketing and operations for Facebook, believes this move puts “advertising back in the hands of people.” He also believes this system of user recommendation makes ads “less like ads and more like information and content” being shared.

The Beacon application and business branded pages are currently free on Facebook. However, many people believe the business that will do well in this environment must have inherent social aspects because the users of Facebook will have to want to share their buying behaviors with their network.

Some challenges Facebook face in this platform include an assumption that Facebook users are honest in their profile. It also doesn’t take into account the offline world. And perhaps the largest challenge will be one of reputation management, with the potential of a slip-up broadcast for something akin to a porn purchase to your entire social network.

However, Facebook has often made controversial moves only to the betterment of the brand. We’ll see shortly how this move stacks up.

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