Market Insight

Facebook tests in-app shopping as mobile commerce innovation grows

October 13, 2015  | Subscribers Only

Jack Kent Jack Kent Director, Media and Advertising

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Facebook is testing in-app mobile shopping from its News Feed. The new features enable a small test group of US retailers to promote products in the news feed, use full screen product pages, and allow users to browse and make purchases directly from Facebook or link to their own sites to make transactions.

Other recent commerce activity from Facebook includes driving payments in Messenger with the 2015 launch of peer-to-peer US payments. Facebook has also been extending the Messenger platform to include third-party content and services and discovery features.

Our Analysis:

Commerce is fuelling the next wave of mobile innovation

There has been a flurry of recent activity from leading companies across the mobile ecosystem:

  • In addition to point-of-sale purchases, Apple’s Apple Pay also offers in-app transactions aimed at making the buying process more seamless.
  • Both Samsung and Google have launched their own Apple Pay competitors in the past few months. Google’s Android Pay also supports in-app transactions.
  • Amazon’s recently launched Underground program for Android aims to integrate its mobile retail, app and content experiences outside Google Play.
  • Asian apps LINE, KakaoTalk, and LINE have made commerce a core revenue stream for their messaging app platforms.

The advantages for Facebook promoting in-app retail are clear:

  • Bringing the point of advertising and the point of sale closer together: one of the main challenges holding back online ad revenue is the lack of standardised measurement. TV has the Nielsen, BARB or Mediametrie ratings, search has the click, but display advertising lacks a single currency for advertising effectiveness. By bring commerce into the Facebook or Instagram platform, Facebook will be able to directly demonstrate the cause and effect of its ads from brand awareness all down the funnel through to sales.
  • Data, data, data: Facebook has a wealth of data about users’ online behaviour, but until now it has not tracked any purchasing behaviour. The introduction of commerce in its app will deepen its understanding of the consumer, which will drive its developments in its ad offering, AR experience and messaging apps
  • Expanding native advertising on Facebook platforms: the majority of Facebook’s ad revenue comes from mobile today, which requires different formats to the desktop. User frustration with the mobile banner has led to a now ubiquitous problem of ad blocking, a key concern for the industry. Facebook’s strategy is to focus on its native in-stream advertising product, which is more immersive and does not obstruct the user experience, tackling the current antagonism towards advertising. This will in turn yield higher CPMs and higher revenues for the online advertising company. 
  • Promotion of Instagram advertising formats: the commerce product comes less than a year after Instagram’s start of advertising operations and a month after Instagram’s announcement of new ad formats at dmexco in September 2015. The ability to purchase fits well with Instagram carousel ads and Facebook hopes it will boost ad revenue for the platform quickly. Instagram is key focus for Facebook in 2015 and 2016, as the online tech giant wants to prove the scale and potential of its subsidiary to investors who are increasingly asking about the monetary value of the 2012 acquisition.

Though there are some challenges:

  • How much control are retailers willing to give up?: Facebook’s test group is focused on a small and medium sized businesses for whom the benefits of working with Facebook are likely to offset any concerns about ceding control or user data to another party. Larger retailers may be less willing to have the whole browsing and payment process occur inside Facebook.
  • Simple payment and billing is crucial: unlike many others now involved in mobile commerce, such as Apple and Amazon, Facebook does not have a wealth of user credit card or payment information. To ensure that the whole payment process can take place inside Facebook it will need to work with billing partners provide a frictionless experience for consumers.
  • Mobile commerce is competitive: many of Facebook’s competitors in the global mobile social and messaging market, particularly Asian apps such as WeChat, LINE and KakaoTalk – but also some Western counterparts, have more established mobile commerce businesses.

For further analysis of how mobile social and messaging platforms are driving innovation in the mobile ecosystem see IHS Mobile Media Intelligence’s recent report Commerce, Content, and Communications fuel the rise of new mobile ecosystems   

 

Geography
USA
Organization
Facebook
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