The acquisition of WhatsApp for $US19 billion ($21 billion) in cash and stock was big news for the technology sector and another milestone in the Facebook legacy. If your mind was boggled by the deal you’re not alone.
Facebook’s imperative is to tap in to social commerce, the sweet spot where social networks affect, drive and fuel purchasing behaviour. In its simplest form, social commerce is where consumers are talking about products or brands, recommending and reviewing goods and services, and buying directly through platforms.
Add to that the fact that 66 per cent of consumers are accessing social media through mobile devices, and the imperative to invest in “SoLoMo” (social-local-mobile) apps arises. SoLoMo drives social commerce with the added context, courtesy of the mobile phone, or location.
Facebook continues to grow and evidently is not afraid to make bold moves, so what’s next for them?
One of the world’s fastest growing social media networks, Pinterest is now 70 million users strong, with extremely high engagement from its users. A photo-sharing website that allows you to bookmark and organise the images you love by “pinning” them to themed pinboards, its average users spend twice as much time on Pinterest as on Instagram.
With “pins” predominantly in food and fashion categories, Pinterest has already begun to monetise by enabling businesses to promote their pins to users and add real-time pricing and availability information. Users can receive notifications when their favourite products drop in price and retailers, such as Sony and Sephora, are already seeing success.
In October 2013, Pinterest was valued at $3.8 billion. This could be attributed to the fact that Pinterest drives more traffic to retail sites than Twitter, Reddit and YouTube combined. While Facebook is still the king of directing traffic, their retail referral rate dropped 20 per cent from 2012 to 2013 while Pinterest’s rate rose 80 per cent. If Facebook wants to be a big-time player in social commerce they better move quickly to protect their dwindling stake.
Dating apps are on the rise and research suggests this is more than just a fad. The online dating industry, worth $900 million in 2007, is on track to be worth $2.3 billion by 2016. Apps are starting to beat out websites due to their SoLoMo nature, giving users the power to chat with and meet potential dates nearby anytime.
An attractive element for Facebook is the success dating apps have in deeply engaging users and the user expectation to pay for online dating services. Additionally, most of these popular apps base their matches on data they’ve pulled out of user’s Facebook profiles. This provides an opportunity for Facebook to integrate its social graph and offer dating services with deeper matches based on social and behavioural habits.
Foursquare and Yelp are at the centre of the SoLoMo world. These apps allow you to search, check in and review venues and businesses, and share with your network and the public. With a dedicated user base, Foursquare and Yelp have a combined network of about 145 million people.
Facebook has been testing the waters with reviews and location marketing by playing around with its own rating and offers system. The functionality has struggled to gain traction and received mixed feedback.
As the prevalence of location marketing increases, Foursquare and Yelp will continue to take away from Facebook in this space. This is increasingly important considering the growing ability to take restaurant booking and takeout orders through applications.
Another attractive element of Foursquare’s is its integration, currently 40,000 apps rely on Foursquare’s location data including Facebook-owned Instagram and their competitor Vine (owned by Twitter). Founder Dennis Crowley describes Foursquare as the “Location layer of the internet”.
If Facebook is serious about ratings, reviews and location marketing, integrating Foursquare or Yelp could be a prime opportunity.
The heat is on for Facebook to generate profits and deliver to its investors. They have tested the waters of diversifying their platform for social commerce, but the real monetary wins appear to be happening elsewhere. If their track record is anything to go by, an aggressive move through an acquisition of one of these three platforms is not far off.