Christian Louca
Posted By ] Diane Mermigas
The mighty Google has dispelled any doubt about the importance of the exploding Facebook nation and the need for companies to exploit evolving social mobile dynamics for ecommerce.
In its biggest and most adroit reactionary move yet, the search advertising giant’s new Google + aggregates its existing services and competencies (including its mobile Android operating system) in a social networking mesh that taps its vast collection of user information.
Friend grouping (Circles), sharing (including individual or crowd video chats called Hangouts), news and photo aggregation (Sparks), recommendations and other social features of Google+ look and feel like Facebook’s familiar framework — but their orientation and approach to leveraging social networks are completely different.
Google is a social outlier that filters user information through complex algorithms and manages the relationship as a critical adjunct to its advertising and search business. Facebook was created as a user interface with members’ interactions, interests and functionality at its core. Interactivity on Facebook is all about relating to others inside of existing and morphing social graphs; interactivity on Google is all about individual functionality inside of massive constructs like search, gmail and Picasa photo app.
Given the similarities of Google+ to Facebook, it seems ironic Google senior vice president Vic Gundotra told TechCrunch that the company considers online sharing “broken…even awkward.” Google has consistently missed the mark on real-time sharing among friends that is the glue that makes Facebook so “sticky.” But being late to the social -networking party is not the issue. Google’s Android is giving Apple a run for its money, even as a relative newcomer to the mobile operating system space.
Google+, an outgrowth of the earlier Google BUZZ, will be as much of “a crushing success,” according to Internet entrepreneur Jason Calacanis. Google is poised to take half the social networking market from Facebook because Google+ is backed by a mobile operating system that Facebook lacks, one fourth of the browser market (with Chrome), an app store that competes with Apple’s iTunes (charging only 5% versus Apple’s 30%), and a responsive privacy dictum (compared with Facebook’s privacy games). Google also is moving more decisively in secure mobile payment by transforming smart phones into e-Wallets.
It fundamentally comes down to which player is more successful at bending companies away from the status quo and into the new social commercial paradigm. With all the fuss over Google+, it’s easy to lose sight of the enormous advantages Facebook has as an agile, private company seeking to out-design and out-execute Google and others.
A recent Web panel discussion hosted by Wedbush Securities Internet analyst Lou Kerner underscored the less obvious ways that Facebook is quickly moving to leverage its more than 600 million global active users (70% are outside the U.S.), 250 million active mobile users and $85 billion private-market value. Here are some of the panelists insights into why the premiere social network is poised to drive social marketing and commerce:
Monetizing connections
People, not brands drive social commerce. Social graph is as important as individual preference since Facebook users generally each connect with some 140 other Facebook members. These are the micro markets some marketers and retailers have begun to creatively exploit. American Express is allowing members to convert their points to Facebook credits. The July 4 weekend, Paramount became the first studio to sell movie tickets on Facebook to Transformers III.
Defining economics
Facebook’s new video ads are being compared to conventional TV. Essentially, Facebook members (in particular the gaming zealots who have morphed on the social platform) receive credits to play even more for “free” if they periodically stop to watch relevant Facebook video ads in pop up windows. Many believe that game king Zynga is carrying Facebook developing revenue streams by contributing about $300 million in Facebook credits and $200 million in advertising.
Buying critical mass
Just a fraction of Facebook’s global user base simultaneously “liking” something could exceed the several hundred million homes tuned into any one of television’s big live events, such as the Super Bowl. Some portion of television’s $71 billion ad dollars, which are not yet reflected in Facebook’s $2 billion in annual revenues, will shift to social media because it creates its own scale, said Mott Monahan, director of digital ad network EpicSocial. eMarketer already is crediting Facebook with driving online display ad revenues beyond expectations to an estimated $31.3 billion in 2011.
Qualifying the ad spend
Unlike television, social media allows marketers to know precisely who sees and responds to any form of advertising. Facebook tracks engagement on a one-to-one basis, and marketers only pay when a person clicks on their ads. The result is more qualitative and quantitative impressions (generally 1,000 % higher than average ad unit), which renders a more efficient and cost effective ROI, according to Justin Merickel, vp marketing at digital marketing agency Efficient Frontier.
Learning the viral play
Facebook represents an amazing word-of-mouth marketing engine and personalized brand opportunity, according to 8th Bridge CEO Wade Gerten. The social shopping service’s survey of Facebook users indicates more than one-third prefer never to leave the platform for any functionality, including shopping, suggesting that Facebook is morphing beyond a social network. 85% of consumer interaction with the more than 50 brands and 3,000 shopping campaigns 8th Bridge manages occur through friend-to-friend sharing and recommendations.
While social media clearly will be a driver of e-commerce and an overall economic power shift, it is easy to over simplify this phenomenon. A Booz and Co. strategy + business article earlier this year dubbed “social apponomics” as the holy grail for companies to profitably commercialize on social media with community-based marketing and tailored applications. The key will be to focus on partners (not competitors), think local mobile, target customers in multiple segments and transform pricing into a trusted dynamic conversation that will pay continuous dividends.
Getting marketers and retailers to that promised land is where Facebook and Google will carve out their competitive edge. Successful social mobile marketing and commerce requires a completely new mind-set and wiliness to innovate. Perhaps the best evidence is that online e-commerce still comprises less than 10% of all retail sales largely because retailers essentially have slapped their print catalogs onto Web sites and into emails and texts without fully exploring social mobile commerce dynamics.
At this early juncture, both Facebook and Google are flawed in shifting their focus more to collective connections as critical mass rather than on nurturing, mining and monetizing individual consumer relevance, which could have more steady, long-term advantages to marketers seeking loyal customers.
Still, the rush to mine social commerce by Facebook, Google and others could have negative repercussions. Users already overwhelmed with instant mobile communications and data might easily be quelled by powerful new waves of interactive marketing and commerce even in the company of friends. The reluctance of consumers to spend in an uncertain economy will remain a potent counterbalance. No matter how much “fun” it is to share, recommend and buy with friends, consumers will come to their senses faster than any of these well-heeled companies.
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