Forrester Says Facebook Commerce Won't Take Off

While Facebook provides a highly effective advertising platform, email marketing still provides a more effective way to acquire customers, says an analyst at Forrester Research.

While Facebook provides a highly effective advertising platform, commerce on the social network might not take off, according to a report by Sucharita Mulpuru, an analyst at Forrester Research.

She wrote that email has better customer acquisition rates than social networking; Facebook averages a one percent clickthrough and two percent conversion rate, while email marketing has an 11 percent clickthrough and a four percent conversion rate on average.

Some of the highlights that she notes in her blog are:

  • There are retailers (albeit small ones) seeing a double-digit percent of their sales coming through their Facebook stores. These companies often have unique demographics or marketing models (e.g., flash sales) that drive this behavior.
  • Facebook’s “data layer” is probably one of the most underleveraged assets that exists with respect to F-commerce. There is myriad information about fans, what products consumers are liking, and competitive insights that can be gleaned from merchant and consumer activity on and off Facebook.
  • Facebook credits is a non-starter for most retailers. This is the “currency” that consumers can use to buy, say, potatoes on Farmville. Facebook, however, has little to no credibility with respect to financial services among consumers, and the same retailers reluctant to implement PayPal (which so many large merchants are) will be 10 times more resistant to a less-tried, less-reliable, newer payment mark.

We wonder whether pooh-poohing about Facebook commerce ever taking off is simply an attention-getting angle. It could take longer for social retailing to catch on than what people in the industry are gunning for. Many technologies that analysts have said wouldn’t catch on simply took longer to do so.

Often additional innovations need to arrive before a technology takes off. Example: Internet usage didn’t exceed television viewing until bandwidth speeded up to the point that video viewing online became a possibility. (The older you are, the more such examples of techie history will come to mind.) So perhaps continued improvements in security will eventually boost consumers’ confidence in shopping on Facebook.

Meanwhile, reporters from The Wall Street Journal discuss Forrester’s bearish report in a video that we’ve embedded below. Let us know what you think about all of these issues in the comments section below.