The recent announcement by Facebook of Facebook Shops is likely to be a shot in the arm for this social media platform in this period of uncertainty and falling revenues. We share four lessons that businesses can learn from this new initiative at Facebook.

 

Although the saying, ‘necessity is the mother of invention’, might never be truer than it is these days, as organisations grapple with the unprecedented changes that have recently occurred to the way they did business, considerable opportunities can also emerge. Case in point:  earlier this week, social network giant, Facebook, announced the launch of a new service: Facebook Shops. Facebook Shops will allow businesses to create an online store on Facebook and Instagram for free.

The service is geared to, and has been optimised for, mobile devices, which potentially makes it accessible to every smartphone users. Further, Facebook Shops is able to leverage WhatsApp, Facebook Messenger or Instagram Direct, so that businesses can connect directly with their customers, in order to answer questions, provide customer support, etc., as needed.

Although it is still early days, the introduction of Facebook Shops could be a gamechanger for the Facebook. To a considerable degree, the company’s business model has relied on ad revenues  – ergo, the challenges business pages have been experiencing over the past few years  to achieve any reach on the platform without boosting posts, or engaging in other paid promotion activities.

It is well known in the industry – see articles from the Verge, the New York Times, the Next Web and Forbes, to name a few – that Facebook considers WeChat, the Chinese multi-purpose messaging, social media and mobile payment application, as model it could emulate. The introduction of Facebook Shops allows to company to not only broaden its service offerings, but also to potentially develop a new revenue stream, through the 5% fee it intends to charge on all transactions made through its platform.

Although very few companies have the size or clout of Facebook, introspection on possible lessons and takeaways that could be applied to businesses and organisations within your sphere of influence is still useful. We offer four.

 

1.  Ad revenue (alone) is not a robust revenue stream

Facebook came to market when a nebulous business plan was not an indication of failure. To a considerable degree, the company was one of the first wave of online platforms that sought to aggressively grow its customer base, with the intention of leveraging access to that base for advertising dollars. That business model was widely adopted by many a start-up for several years, but in practice, it may not have been as sound or as lucrative as initially envisaged.

Moreover, for those organisations that have been able to generate considerable income from advertising, many are now discovering how vulnerable that revenue is in the face of COVID-19. Recent reports across many sectors that rely on ad revenue, such as media, newspapers, magazines, social networks etc., have experienced a sizeable drop revenue, which in some instances, has resulted in significant cutbacks in order to try to keep afloat.

In introducing Facebook Shops, the organisation’s business model is evolving. It is moving away from being solely dependent on ad revenues, and is positioning itself to develop new and different revenues streams, which ultimately, will make Facebook more robust and resilient.

 

2.  Find ways to leverage a captive audience

Following from the previous point, it could be argued that although Facebook has enviable subscriber base – of over 2.6 billion monthly active users as of the first quarter of 2020 (Source:  Statista) – it had not been capitalising on that base to strengthen its business. In the same vein, many organisations see themselves and what they do just one way. They may not readily take into account, among other things:

  • how their environment has been changing, and thus how they need to evolve
  • whether or not, or the extent to which they might be able to broaden and/or deepen their offerings, and
  • how they might be able to tap into the needs of their existing customer base, in order to increase sales whilst fostering greater brand loyalty.

In adding Facebook Shops, Facebook is facilitating transactions that would either need to be conducted offline, or through another online platform. Hence, in addition to providing businesses, especially micro and small businesses, with a more seamless way to complete sales online, the company (potentially) is adding value for all of its subscribers, which is likely to encourage even greater use of the platform, which Facebook may find additional ways to leverage.

 

3.  Look for synergies with other platforms or partners

Being the behemoth that is, it could be argued that Facebook Shops will be a success thanks to the sheer size of Facebook’s subscriber base. However, the company has ensured that its other platforms, WhatsApp, Facebook Messenger or Instagram Direct, support Facebook Shops, in order to improve the experience of both business subscribers and their customers, whilst also increasing the overall value (and importance) of all of its platforms to subscribers.

On the other hand, many business owners tend to look at partnerships through the lens of scepticism: there must be a winner and a loser; we both cannot win. As a result, we tend to shuffle along by ourselves, with our limited resources, not prepared to benefit from synergies with others – if it means they will also benefit.

Although Facebook also owns WhatsApp, Facebook Messenger or Instagram Direct, and so technically, they are not its competitors, it would have been easy to limit the involvement of WhatsApp and Instagram Direct in particular. However, in doing so, Facebook would be limiting the potential reach it could have through the access it has to those platform. More importantly, through a new service, it is elevating all of its platforms at the same time.

 

4 . It is critical to stay relevant

Finally, and although Facebook has a significant subscriber base, new social networks and online platforms are continually emerging to draw the attention of consumers. A trend that has been occurring over the last few years is that teens and Generation Z users (those born after 1996) have been moving away from Facebook. The results of a recent survey of the Generation Z demographic by the Pew Research Center in the United States indicated that, “YouTube, Instagram and Snapchat are among teens’ favorite online destinations. Some 85% say they use YouTube, 72% use Instagram and 69% use Snapchat. Facebook is less popular with teens – 51% say they use this social media site”.

Further, it is easy to forget that Facebook has been around for nearly 16 years, having been founded in 2004! The way we use the Internet, and the features and capabilities that we now take for granted, were not available then. The fact that Facebook has been able to survive for this long, when others, even some newcomers, have either failed outright, or are just limping along, speaks to the fact that it has been able to tap into an important need of its subscribers. However, and perhaps more crucially, it has recognised that it cannot be complacent, but to needs find ways to stay relevant, which is an important lesson so many businesses need to be reminded of, from time to time.

 

 

Image credit:   StockSnap (Pixabay) 

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