Selling products on third-party websites is not new. What is new is Facebook’s latest test, the so-called Facebook Buy button, that allows ecommerce merchants to sell their products, potentially, on that platform.
There is no better expert on third-party selling than Scot Wingo, the long-time CEO of ChannelAdvisor. He joins Practical Ecommerce’s Kerry Murdock to discuss the Facebook Buy button, among other multi-channel selling topics.
Practical Ecommerce: What is the Facebook Buy button?
Scot Wingo: Facebook announced through a blog post that they were doing a test of a new ad unit — the Buy button — that allows consumers to not only see a product advertised in their newsfeed, but to buy it right on Facebook without having to leave Facebook.
PEC: This is not Facebook’s first attempt at ecommerce. Back around 2007 or so, Facebook experimented with something called Marketplace, which was similar to classified ads. And there have been integrations over the past years of different shopping carts on Facebook. Most of those tests and activities have not been successful to our knowledge. What is your view of the ultimate success of the Buy button?
Wingo: It’s important to even back up and ask why would Facebook care about ecommerce. The reason is, when you look at some of the larger companies out there like Google, it’s widely reported that about 40 percent of Google’s [ad] revenue is from the retail and ecommerce vertical. If you’re going to have an advertising platform, you really do need to conquer retail at some point. I think that’s part of what’s driving Facebook’s interest there.
The other thing is mobile. One of the most interesting stats to me in ecommerce right now is the fact that, when someone’s on a desktop or tablet, they tend to convert between 2 and 3 percent.
On a smartphone, however, based on our data and all the other industry data we’ve looked at from ecommerce, that conversion is below 1 percent. I think those are two interesting data points to have in mind. Number one, advertising is 40 percent retail and then there’s this mobile conversion rate problem.
A lot of brands kind of organically tried to do stores within their Facebook pages. That didn’t really work because there’s nothing inherently social about it. What happened is a company has organically solved this, and that company is called Lolly Wolly Doodle.
It’s funny, whenever I tell people about this, they used to laugh at me, and then the CEO is on the cover of Inc. magazine. Now, everyone knows about them. What this lady did was she had bought a mill here in North Carolina to get into the manufacture of kids’ dresses, primarily for girls.
It did not go well and she was liquidating a bunch of this inventory on Facebook and found that, if she would list an item on Facebook and then have people comment on that item in the newsfeed, it could viral. The reason why is, if you and I are friends and you see me commenting on some third party’s newsfeed item, that probably gets you curious, like, “Why did Scot just say that?” and you go look at it.
That’s what really has happened here. I think Facebook has seen the success of this company and several others that have copied that model. It solves the primary problem that their last attempts did not, which was how do you tie into what people are interested in and what they see on a daily basis. Instead of me having to hunt and find this stuff, if my friends are actively buying these things, I can see it and it becomes viral.
I think that’s what’s different about this approach. That’s why it has a pretty good chance of working is because it already is working. I think Lolly Wolly Doodle has built an over $10 million business off of this pretty quickly. Facebook is codifying what already is working.
PEC: You just asked, “Why is Facebook fiddling with ecommerce?” We’ve wondered the same thing. Facebook is wildly profitable, with profit margins of 25 percent or greater. Last year, it recorded over $1 billion in net income. Could you expand on your thought about “they ultimately need to conquer ecommerce,” because, as it is now, Facebook is extremely successful?
Wingo: Yes. A lot of people have kind of forgotten about Facebook because they had some negative publicity around their initial public stock offering. A lot of people believe that they’re, in some way, a failure. But it could be not further from the truth.
The one metric that gets me really excited is the monthly active users in the advertising world. Facebook has 1.37 billion monthly active users and a staggering number of those active users access Facebook through mobile. I think it’s around a billion.
Facebook has this really great property in that when people are on their smartphones, it’s the number one activity.
With that on mind, they have this prime real estate and they’ve been selling advertising, I think the feedback (but this is speculation on my point) but when you look at the advertising industry, you kind of have two buckets. You have brand advertising, and this is where BMW, say, does a big TV commercial, just getting their brand out there so people are familiar with it. And then you have the more transactional kind of advertising. Some people call it direct advertising. So that’s brand and direct.
To date, Facebook’s revenue is largely on the brand side, with the exception of gaming. They do have some game companies. They’ve been dabbling in direct, and it’s been going very well. It hasn’t been ecommerce directly so, but it’s in the app ecosystem, for different applications.
As you go through the different verticals in the world that have direct advertising, retail is one of the top ones. Again, I think we can all look at the blueprint that Google has put out there for building a very large, successful advertising company. Retail is one of their largest verticals, if not the largest vertical.
Facebook has to keep growing and to continue to perform like they have been, they need to figure out ecommerce
PEC: Could you bring us up to date on ChannelAdvisor? Also, for our readers that aren’t familiar, could you tell us a background on the company?
Wingo: We’re a 13-year-old company based out of Research Triangle Park, North Carolina. We’re a software company. Our software helps retailers of all sizes — over 2,600 customers — manage ecommerce channels.
We help sell your products across, say, eBay and Amazon, we call these marketplaces and we support 37 marketplaces. We also support comparison shopping engines like Google Product Listing Ads, Shopping.com, PriceGrabber, et cetera, and search. Imagine a centralized dashboard that lets you not only publish your products across all these different channels but helps you decide where to focus your efforts.
That’s what our software does. We have over 600 people in the company that wake up every day thinking about ecommerce. It’s how we can make our customers successful.
PEC: Anything else?
Wingo: One theme that’s interesting is the wave of marketplaces that came out because of the success of Amazon, Newegg, Buy.com, et cetera. What I get excited about with the Facebook Buy button is not only that Facebook has the potential to be a pretty large ecommerce channel, but, now, there’s reports that folks have seen Twitter test of similar kind of a concept.
I think we could see this kind of wave of new options for retailers as places to put their goods. I think that’s good for our industry because, in a world where you have kind of Google, Amazon, and eBay, wouldn’t it be better to have more selling options?
I think we’re going to have many more options for both consumers and retailers in the future. We’ll look back at this as a bit of a golden age because there’s going to be some exciting new ways for small, middle, and even large retailers to take advantage of this and get their products in front of consumers.