Monday, February 7, 2011

Prediction: Facebook becomes digital retailer....

...and clashes with Amazon and Apple sometime in the next 2 years. Once FB incorporates retail it will become the equivalent of a Web 2.0 "shopping mall," where (millions of) people go to catch up with friends, waste time, and occasionally buy things.

I started to think about this off-and-on after a friend tweeted several stories about Apple rejecting a Sony app because it funneled e-book buyers away from the Apple iBooks store. It was basically Apple's way of protecting the 30% revenue share it earns through its ecosystem.

That made me start thinking about what would happen if Facebook tried to sell things through its iOS app. I don't think it would want to give Apple 30% of the revenue, because it has a mighty ecosystem in its own right. This train on my thought tracks only picked up steam from my Marketing Channels group project, which is on the music industry.

I've concluded that Facebook could be a killer platform for selling stuff, particularly digital media (like music, movies, etc), but probably much more than that, due to its social graph. I read somewhere recently that recommendations from friends are one of the top influences on purchase decisions, though this HBR article concludes that isn't always the case in social networks. Nonetheless, imagine what happens if "Likes" from your circle of friends start becoming product recommendations for things like music.

Facebook already has the social stuff nailed (500M+ strong). Apple and Google have both tried to build social on top of their existing applications (Ping on iTunes and Buzz on Gmail) with less than stellar results. I imagine that they are both dieing to get in on the social party and will continue to try to do so.

Since Facebook has the social already set up, it just needs to build a marketplace, which shouldn't be too hard to do with all of the programming skills they've hired. In fact, they already have the Facebook Credits payment system in place, and that gives Facebook the same 30% revenue share that Apple, Amazon, and others are enjoying. I think they only use it for games right now, but it should be pretty easy to extend it to other products. They also already have storefronts in the form of Facebook Pages.

So, I think sometime in the next two years we'll see FB emerge as a digital marketplace that rivals the likes of Amazon and Apple. It will probably begin with FB and some other media company announcing an exciting partnership. Watch for it!

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