Can chat convert to sales on the hype network?

Amid plung­ing share prices and a flur­ry of law­suits from dis­grun­tled investors, Facebook’s May stock mar­ket launch looks increas­ing­ly trou­bled.

No won­der, then, that the world’s largest social net­work, with 845 mil­lion month­ly active users, has been qui­et­ly road-test­ing new rev­enue streams.

In August, the plat­form announced that, after a suc­cess­ful tri­al with games-mak­ers Zyn­ga, Kix­eye and Play­dom, it would make a pay­ments sub­scrip­tions fea­ture avail­able to all devel­op­ers with apps on Face­book, to allow them to “estab­lish recur­ring rev­enue streams and offer updat­ed con­tent or pre­mi­um expe­ri­ences for a month­ly fee”.

Users can sign up with a cred­it card or Pay­Pal and then man­age their sub­scrip­tions via their Face­book pay­ments set­tings. The social net­work, which now has 235 mil­lion month­ly gamers, will con­tin­ue to retain its hefty 30 per cent cut of all in-web app pay­ments.

There’s lit­tle doubt that vir­tu­al goods, and games in par­tic­u­lar, are the ide­al prod­uct for the social shop­ping mall: engage­ment lev­els are high, pur­chas­ing seam­less and deliv­ery instant. They also offer a range of ways for com­pa­nies to mon­e­tise.

Tapjoy, a free plat­form on which vis­i­tors are reward­ed for inter­act­ing with pop­u­lar brands, now claims 90 mil­lion active month­ly users. Play­ers of social draw­ing game, Draw Some­thing, owned by Zyn­ga and avail­able on IoS, Android and Face­book, for exam­ple, can earn tokens to buy “colour packs” by inter­act­ing with ads on Tapjoy’s mar­ket­place. This vir­tu­al pay­ments mod­el, under­writ­ten by adver­tis­er hard cur­ren­cy, gen­er­ates about 30 per cent of rev­enues earned by devel­op­ers on the ser­vice.

As a brand, you always want to com­mu­ni­cate with your influ­encers because they will cre­ate buzz

But when fea­tures such as cal­en­dars are utilised, the sophis­ti­ca­tion of social pur­chas­ing, par­tic­u­lar­ly in the area of gift­ing, starts to increase sharply. Paul Bowen, Tapjoy’s UK vice pres­i­dent and gen­er­al man­ag­er, is scep­ti­cal that any­one “has real­ly cracked social pay­ments yet”, but points to Kar­ma, a gift-giv­ing ser­vice with­in Face­book, cre­at­ed by Tapjoy’s founders, which was acquired by Face­book in May for $80 mil­lion, for the way the com­pa­ny tai­lored its app specif­i­cal­ly to the social net­work­ing site.

“Kar­ma have cre­at­ed a very opti­mised expe­ri­ence. There have been too many cas­es of e‑tailers just dump­ing their nor­mal web-stores inside Face­book and expect­ing them to work,” he says.

And it’s both in bespok­ing apps and build­ing on tech­no­log­i­cal advances that social purchasing’s best chances for growth lie, argues Vin­cen­zo Annun­zi­a­ta, senior social media strate­gist at Carat.

Mr Annun­zi­a­ta also cites a social gift­ing ser­vice, Wrapp, an app which enables users to send vir­tu­al gift cards to Face­book friends, for the way it could, poten­tial­ly, launch “real-time gift­ing” using geo-loca­tion to cus­tomise offers to where groups of friends hap­pen to be. “That would mean that, if I check in at Piz­za Express with five Face­book friends, I’d get a dis­count,” he explains. “That’s absolute­ly where I see social pur­chas­ing going more and more.”

Beyond gam­ing and gift­ing, the suc­cess of social pur­chas­ing is hard­er to gauge.  Cer­tain­ly as social activ­i­ty con­verges on mobile devices, US retail­ers are hur­ry­ing into the space.

Top main street brands, includ­ing Best Buy, Tar­get and Wal-Mart, have cre­at­ed the Mer­chant Cus­tomer Exchange (MCX), which will stream­line m‑commerce pay­ments and cre­ate “cus­tomis­able offers”. Yet, while For­rester Research esti­mates that US m‑commerce will increase to $31 bil­lion by 2016 (with com­pound annu­al growth of 39 per cent), it will still only rep­re­sent 7 per cent of total e‑commerce sales. Besides, how much of the 7 per cent can be clas­si­fied as “social pur­chas­ing” is moot.

The indi­ca­tions are decid­ed­ly mixed. While Payv­ment, the lead­ing e‑commerce plat­form on Face­book, saw its month­ly active shop­pers tre­ble dur­ing 2011 to more than one mil­lion, research by online mar­ket­ing tech firm Mon­e­tate found that plat­forms, such as Face­book and Twit­ter, lag far behind search and email as a tool for send­ing users to e‑commerce sites.

The report analysed more than 100 mil­lion “shop­ping expe­ri­ences” and found that, while 4.25 per cent of refer­ral traf­fic from email in the sec­ond quar­ter of 2012 went on to make a pur­chase (and 2.49 per cent from search), social had a con­ver­sion rate of 0.59 per cent.

Unsur­pris­ing­ly, there­fore, social is still chiefly viewed by the indus­try as a “seed­ing” or mar­ket­ing medi­um. Mr Annun­zi­a­ta says its main val­ue is to dri­ve chat­ter among niche advo­ca­cy groups. “As a brand, you always want to com­mu­ni­cate with your influ­encers because they will cre­ate buzz,” he says.

F‑commerce suc­cess sto­ries in this sphere include Adi­das, who accord­ing to Katie White, head of social at com­mu­ni­ca­tions agency Iso­bar, “have mas­tered the art of the flash sale on Face­book, allow­ing their most hard-core fans to buy lim­it­ed-edi­tion and new-release prod­uct for the first time through their Face­book page”. She also cites Dulux for “wrap­ping con­ver­sion into social inter­ac­tion, show­ing their spe­cif­ic colour ranges through con­tent on Face­book and allow­ing their users to click straight through to their site and order a tester”.

Yet indi­vid­ual brands, how­ev­er large, are in a sense an irrel­e­vance, while the key social play­ers are still test­ing pay­ments mod­els. Twit­ter, for exam­ple, is exper­i­ment­ing in social gam­ing, com­merce and giv­ing, via Twit­pay, while Apple is vying for a stake in the social-pur­chas­ing world with its poten­tial acqui­si­tion of The Fan­cy, and Facebook’s much vaunt­ed NFC-enabled hand­set has the poten­tial to own users’ pur­chase jour­neys from search to check­out. Pin­ter­est, too, is said to be close to launch­ing shop.pinterest.com – a vir­tu­al win­dow-shop­ping plat­form for brands.

But for now, social pur­chas­ing remains in a sort of hyper beta-mode, caught in the slip­stream of e‑commerce.

PAYMENTS

From TwitPay to iZettle

Tim Dunn, direc­tor of mobile strat­e­gy at Iso­bar, imag­ines a day in the life of smart­phone user Joel, just a few months from now… 

9:14am: Joel’s on the tube when he gets a text from his friend Tim who he owes £20. So Joel opens a Tweet and tweets the mon­ey using Twit­Pay, which pays it direct­ly into Tim’s account.

9:55am: Next, Joel nips into Star­bucks to grab a bagel and lat­te, pay­ing via the Star­bucks app, which means he sim­ply has to show a QR code to the till to charge his account.

1:03pm: While in the queue at Eat, he checks in on Foursquare and sees that Amer­i­can Express have a spe­cial offer run­ning: they will pay for his lunch today, if he uses the Amex account on his phone. He quick­ly flicks his phone over and pays by Amex.

1:56pm: Joel stops at a street stall as it’s his turn to buy cakes for the office. The stall­hold­er inserts Joel’s cred­it card into his phone, which has the iZettle plug-in attached, to take pay­ment.

4:40pm: Back in the office and check­ing his boss isn’t look­ing, he renews his Zyn­ga pre­mi­um sub­scrip­tion via the social games company’s Face­book app.

7:29pm: After work, Joel’s phone buzzes with an alert from Tick­et­mas­ter: there are tick­ets left for Trash­can Sina­tras. With just a few clicks, he and his girl­friend are in. On the way, he spots that the iPint app from Car­ling is offer­ing vouch­ers which they take into a pub for free drinks.