The Emergence of Social Commerce
Everything that you do on the internet is data. And, it is being leveraged by businesses in the best possible way. How? Read on.
Everything you do on the internet leaves a digital footprint. Every scroll, every like, every comment is data that helps social media platforms “profile” you. They understand your behaviours, your likes and dislikes, your attention span. Everything. They know you more than you know yourself.
So much so, that they have the power to potentially affect the results of elections. It happened in the U.S; it happened in India.
But, we are not here to discuss politics.
We are here to understand how businesses leverage our information to make money from us.
Facebook’s “move fast and break things” strategy created the largest social media platform on the planet, connecting billions (2.6 billion, to be precise) of humans to one another. More and more people joined this “free” social media platform, and hailed Mark Zuckerberg as the liberator of the masses. Few realised how this would change the world.
Once hooked, people shared their happiest moments and saddest stories on the platform, and ‘posting’ on digital ‘walls’ became the norm. They poured their hearts out. What they did not realise was how Facebook was waiting for the opportunity to leverage this. To use your emotions and play with your mind.
Personalisation of content became the norm. More social media platforms, like WhatsApp and Instagram, gained traction.
Back in 2012, while we were still getting used to posting pictures on Instagram, Facebook went out and acquired this mobile-first social media platform for $1bn. And then, lo and behold, Facebook went out and bought the most successful messaging platform - WhatsApp for $19bn in 2014. With these applications in its arsenal, it was ready to rule the world.
While Facebook was bringing people closer, e-commerce giants like Amazon were disrupting retail supply chains (an easy to understand piece on supply chain, just in case). As people started spending more time on the internet, their transactions on the web, too, increased. Smartphones changed the game altogether. What one could only achieve through a high-end laptop and a great camera was now available on our fingertips. Literally.
Social media platforms opened up opportunities for businesses to interact directly with their customers. They offered scale at a very low cost.
Social media platforms finally found a way to turn this gold-mine of data they were sitting on into money.
Bits to dollar bills. The new Alchemy.
And the catalyst? Advertising.
Advertising essentially plays the role of a matchmaker, a communicator between businesses and consumers. Before the Dawn of The Digital Era, businesses found it hard to reach specific consumer groups. They had little clue about what consumer needs were. The ones who really wanted to understand consumer intent spent a lot of money on surveys.
When online shopping picked up in India many were elated to see the variety of products they could buy sitting at the comfort of their home.
Remember how many shops you visited to get that one product?
Sometimes all that effort was fruitless, those groggy shopkeepers never told you where, when and how you can get that product. And ah, don’t forget the unlimited bargaining sessions (some people enjoy it. I, un-apologetically, don’t).
However, with e-commerce coming into picture you have thousands of retailers selling products. So, the chance of not finding your product is very minimal. Even better, your friend or cousin might find the product you need and simply share the link with you (where do you think all that data is going).
So, companies boosted their online presence, complementing their brick-and-mortar (physical) stores, to reach a larger audience. This worked in their favour (or so they thought).
How?
Traditionally, to acquire new customers, companies had to open physical stores. The cost (land, construction or rent) and risks (political, local unions) were high. This was not the case with online platforms.
Problem solved.
The social media companies had data-banks worth billions of dollars that the business people would kill to get.
Businesses could now target users aged 18-24, living in Bangalore, who were tea lovers and went to the movies twice a month (ever got caught bunking school because someone ‘tagged’ you saying - “Having fun with Joe @PVR”? I have).
And targeting at a lower cost. They were happy to shell out millions of dollars for this. Moreover, consumers could now check reviews about a product given by actual users of the product. They could now know clearly what to expect the moment a product lands at their doorstep (Bye, bye celebrity endorsements).
Everyone is an opportunist if they have an opportunity.
Watching users being redirected to Amazon, Ebay and other merchant websites through ads on Facebook was no fun for Zuck. It was downright boring. Nobody would want to redirect so much traffic to other websites without getting a share of the pie.
Moreover, why would they want you to exit Facebook / Instagram at all? Why would a bootlegger want you to quit drinking? “You can check out anytime you like; but you can never leave.” - Hotel California (you are in for a treat if you haven’t heard this song or read about it before. It’s a beautiful metaphor on addiction).
Coming back to the point - with hooked users, hungry businesses and growing trust on digital payments, the environment was just right for a new form of commerce to emerge.
Social commerce.
Leveraging the large user base, and the fact that businesses now depended on such platforms to drive their sales, the idea of social commerce took shape. Facebook started off with its own marketplace, where users could now publish their products and sell online. Businesses could advertise their products on the platform, redirect users to their Facebook page (where other buyers had put up reviews and comments about the product), and the user could buy the product then and there.
This is how the flow looks like:
Maybe you searched for Adidas shoes on the web. Maybe you liked Adidas’s page on Facebook. Maybe you followed its Instagram handle. Maybe you liked your friend’s picture, where they had tagged their new Adidas shoes. Maybe you were talking about Adidas shoes with your best mate on WhatsApp (yes, they track that too). Maybe, you did all of the above.
Powered with this information of your heart’s desires, Facebook displayed the Adidas ad to you. And you ended up spending your hard earned money on it. You rationalised it saying it was an "impulse buy." Think again, next time you do this.
They call this “personalisation of your feed” - showing you what you are thinking about. As if it is supposed to help us more than help them. I can literally hear Zuck laughing out loud in the background.
Zuckerberg 1 - 0 You
Okay, enough of attacking this guy. Let’s give him a break. All’s not that bad. There are definite advantages of being connected to 2.6 of 7 billion people on the planet.
More so for a small business person. It has never been easier to display your skills, services or products to a large number of people, without spending billions on TV commercials or celebrity endorsements.
It has empowered numerous small businesses to reach out to their consumers and showcase their offerings to a wider audience. (as of 2019, 60 million local business pages have been created. Over 6 million businesses are using Facebook Ads to reach their target audience).
It has paved the way for new and innovative ways of marketing and creating brands. This is the Age of Influencers. A twenty-four year old can now dream of ‘influencing’ an entire generation through his work, thanks to Zuck.
Come to think of it, social commerce does have a ‘social’ angle to it.
Now, let us look at some stats that makes Facebook the unparalleled King in this game(need to back our claims with data, lest you become skeptical).
One hell of a network, this Facebook, isn’t it?
Facebook has entered the Game of Stores with its own marketplace. And, it is betting heavily on these small businesses to make a difference (read how it is helping Jio to disrupt the Indian retail supply chain here). True to its nature, it is moving fast and breaking things.
India’s social commerce is expected to be a $100bn ($1bn = Rs. 7,500 crores) opportunity by 2025. Obviously, Facebook wants a piece of the cake.
In our next story, we will look at how an Indian start-up leveraged social commerce and enticed Facebook to invest in an Indian company for the first time (and no, it’s not Jio).
Picture abhi baaki hai, mere dost.
Stay tuned.
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