Facebook’s data privacy woes raises questions about “social commerce”

Facebook’s data privacy scandals threaten to upend its long quest to become a true e-commerce destination that could challenge Amazon.

Data security remains an elusive goal in the United States, whether retailer or social network. But imagine how much worse it could be if the retailer and social network were one in the same thing.

Four years ago, Target’s then chief financial officer John Mulligan appeared before the U.S. Senate and apologized for a data breach in which hackers stole from up 110 million customers. This year, Facebook CEO Mark Zuckerberg appeared before the U.S. Senate and apologized for allowing Cambridge Analytica to improperly access data from 87 million users.

Mark Zuckerberg

With just one hack, data thieves could exploit both the vast reach of social media and the detailed financial/consumer history data held by retailers: names, birthdays, “likes,” friends lists, preferred news sites, places visited, credit/debit card numbers, purchase histories.

Seems like a natural fit but…

Social commerce, known as “s-commerce,” is the next evolutionary step for online shopping, or at least that’s the general thinking in the retail industry. For years, companies ranging from big corporations like Facebook and Target to private startups like Extole, The Hunt, and Chirpify have tried to seamlessly blend social media and e-commerce. Same goes for unicorns like Pinterest and Xiaohongshu.

It seems like a natural fit. In a 2016 survey of 1,008 consumers, 50 percent said social media sites, led by Facebook, influences their purchases, according to Sumo Heavy Industries. Another 47 percent said they bought something because they saw it on social media.

Facebook has long experimented with “buy” buttons, in which consumers can purchase the item they see on the site. In 2014, Last year, Twitter teamed up with Amazon to allow users to directly buy an item via a hashtag.

In 2013, Best Buy debuted  “Shoppable Hangout” on Google Hangouts, in which experts on the digital show recommend gadgets to consumers, who can buy them directly on the site.

“Over the past few years, we have used social media to amplify our message,”a top Best Buy executive told me at the time. “Now the biggest opportunity is to drive engagement — to get people to acquire products.”

Opportunity? Yes. Reality? No. At least, not yet.

The biggest problem with social commerce is that consumers apparently like to keep their e-commerce efforts separate from their social media activity. People go to Facebook and Twitter to communicate and to be entertained, not necessarily to buy stuff. And while clothes might be a thing people on social media would like to chat about, detergent and toilet paper are not exactly ideal conversation topics.

The success of social commerce also depends a good deal on authenticity and convenience. Overtly commercial information seem to overtly repel consumers on social media, especially if the presentation of the information is obtrusive or clumsily integrated onto the site.

Various startups have tried to tackle this problem. Extol recruits “consumer advocates” to plug a product or service by targeting them on Facebook fan pages, confirmation pages, account pages and dedicated emails. Chirpify created an app to allow consumers purchase items via Twitter feeds. If you see an outfit you like in a Facebook photo, send the image to The Hunt and someone can tell you where you can buy it, or at least something close to it.

But according to the Sumo Heavy Industries survey, 85 percent of people said they used social media for friends and family, compared to 51 percent “to pass the time” and 49 percent to stay informed with the news. Shopping didn’t make the cut.

Cybersecurity is the big “if”

Retail consultant Brian Kelley, a former top executive at Sears, told me it’s only a matter of time when social commerce breaks through. There’s just too many potential buyers on social media for retailers to ignore.

Indeed, Facebook is getting better at social commerce. Roughly one-third of US social media users have never bought directly from social media, but close to half have done so via Facebook, either directly through a post or through a link in a post, according to a eMarketer report on social commerce last year.

There are also plenty of startups and retail analysts who believe that Facebook Messenger will the primary platform for e-commerce in the future, thanks to artificial intelligence bots that respond to written communications. In other words, someone can buy a sweater at H&M just by typing “buy sweater at H&M” in Messenger.

So what are the biggest obstacles to social commerce? Data privacy and cybersecurity.

According to the Sumo Heavy Industries survey, 76 percent of people said they were worried about protecting credit card and banking information. The next most common answer: nearly 65 percent said they were concerned over privacy (personal information, shopping history).

Facebook and Target, which, ironically, collaborated on a major social commerce project called Cartwheel a few years ago, have shown they can’t even protect the information they separately possess now.

For now, Facebook is a social network that sells advertising. But investors also need to focus on the company’s effort to build an e-commerce business, which could open new growth opportunities on Amazon’s home turf. But e-commerce will remain an elusive goal without consumers believing their information is safe and secure.


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