Social networks have been a revolution in the digital space over the past generation. Combined with smart phones they seize an almost embarrassing amount of our daily routine. We are prisoners to the news feed, forever searching for that amusing video of a cat, a birthday event invitation or holiday snaps of that hot ‘friend’ you never talk to. The power that social media has over people is an accepted fact of life in 2015, but the implications of this predicament to have a monetary value assigned to them!
The various social networks are in an arms race to claim their share of the e-commerce market. Social buying, and attempts to integrate it into their platform has been somewhat led by Facebook. With over 1.4 billion users Facebook is in a position to significantly disrupt the e-commerce market by offering ‘social commerce’. The reasons for social networks pursuing the concept of social commerce are pretty darn obvious: get a cut of the sale and put an end to the frustration of users navigating to another company’s website in order to complete their transaction.
Not only would an option to buy via Facebook increase their revenue through the fees associated with this process but it would also mean just another aspect of our lives that Facebook has so graciously offered to make easier.
It would simply mean another step in their plan of global domination. Some of the social networks have claimed that this is a response to e-commerce sites not providing a good enough user experience on mobile devices. Admittedly this may be true and social commerce may well make our lives easier, but one cannot help but get the feeling that it is a substantial step towards social networks becoming the single most important connector in our digital lives, further cementing the idea of social networks becoming attractive ‘walled gardens’ which contain their users.
All of the big players: Facebook, Twitter, Pinterest, Google and Instagram have already dipped (or have announced plans to dip) their toes in the warm waters of social commerce and payment providers such as Stripe have joined the race, looking to offer a one stop shop for both social networks and the retailers looking to hawk their wares through social commerce.
Social Commerce is a natural progression
Social media advertising has already exploded. UK based users will have noticed a significant increase in the amount of sponsored content being displayed in their news feeds over the past 12 months. Companies looking to increase their exposure to potential customers are allocating more and more of their marketing budgets to social advertising, fuelled no doubt by the decrease in organic reach in the last 24 months on Facebook.
Social networks are providing increasingly complex advertising platforms which allow businesses to create highly targeted campaigns which are focussed on their target demographic. In essence, the old school ‘spray and pray’ methodology has been usurped by an ability to pay a relatively small fee to be much more specific about your content solicitation. As a result, social commerce is but a natural progression from an advertising model that is already working for the social platforms.
WHO is doing WHAT in social commerce?
You would be forgiven for thinking that the social networks and retailers are the only winners in social commerce. In fact, there is a veritable mountain of money to be made by the companies that will actually process and facilitate the payments, the two main players being Stripe and Braintree. So what does the current landscape look like for social networks, payment providers and retailers within social commerce?
Unlike the social networks who are somewhat confined to their individual user bases, social commerce represents a significant opportunity for payment providers. If they are able to provide the correct payment system for social networks and get them signed up as a partner, it eliminates the need for them to attract individual retailers (at least in the social commerce space). Instead, the social network(s) attract retailers that then sign up to sell via social which in turn means that they have inevitably signed up with said payment provider.
The big news for Stripe is that they have signed up Twitter to their social payments system, which couples with the ability for retailers to upload their product catalogue to the platform and for consumers to pay with a click of a button. However, whilst Twitter is definitely a big win for Stripe, they have bigger plans. Stripe’s social payment system, which they have called ‘Relay’, is designed to tie in seamlessly with a retailer’s online store and provide a one click buy button for social commerce, without the heavy account specific integration needed to sell via social at the moment. The issue faced by Stripe is ensuring that their payment processing and integration with online stock management systems is good enough to warrant all of the social networks using the same system. Relay is being marketed as one stop shop for social commerce, so they need all of the big players to sign up.
Braintree is a PayPal owned company (although Ebay was making noises in 2013 to purchase them) looking to capitalise on social commerce, or as they describe it ‘contextual commerce’. This year they acquired another solution provider called Modest to help them in the social commerce space. They have partnered with Facebook to test a payment process and are helping Pinterest to process their buyable pins. With testing occurring on two of the major social networks, Braintree is a significant player in the social commerce payment processing market.
Facebook have been actively pursuing social commerce for a number of years now, offering gifts and also a psuedo Facebook wallet where they autofilled payment details on retailer websites. Neither of these tests returned the type of data that Facebook needed to continue with a full roll out and as such they did not make it out of the US (the traditional testing ground for new social media functionality).
However, Facebook are now very publicly partnering with the likes of Shopify to make online Facebook stores so that the user never has to leave their carefully constructed ecosystem. It is unclear as to which payment processor they will be using but the partnership with Shopify allows them to tap into the 165,000+ retailers that already use the Shopify platform. It is not all rosy for Facebook though, they face fierce competition from other networks, most notably Pinterest. With acquisition of users in the 16-24 age category declining in relation to competitors it is critical that they do not miss the boat with social commerce.
As a network which has tested multiple versions of social buying in the past couple of years, it is clear that whilst they are willing to test innovation, they are not necessarily willing to roll out functionality globally that will not be a success. After all, you don’t get a stock valuation of over $200 billion by mistake.