go-Digital Blog on Digital Marketing

Here’s The Big Problem With Facebook’s New E-Commerce Effort (FB)

Source: http://www.businessinsider.com/heres-the-big-problem-with-facebooks-new-ecommerce-effort-2012-9

Yesterday, Facebook announced that it will sell gifts users can send to their friends.

Chris Dixon, a successful serial investor and one of New York’s most visible startup investors is skeptical it’ll work.

“Getting users to switch ‘modes’ from online to offline (& vice versa) has historically yielded very low conversion rates,” he tweets.

His point is that when people go to people go to Website for one reason, it’s hard to get them to do anything else.

Users go to Amazon to shop, Match.com for a date, and Craigslist for a free sofa. Users go to Facebook to share photos and maybe read news, not buy things.

Just because a new feature from Facebook appears, doesn’t mean users are going to suddenly start going there to use it.

“It’s all about the mental state. Are you sharing photos online [or] giving something offline? The numbers show it’s hard to switch.”

Other cases in which getting users to switch “modes” from offline to online or back again, that hasn’t worked include “showing URLs in TV ads or magazines” or “trying to sell anything on [a] social network.”

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Groupon is bleeding in the water, and the sharks are circling.

On Friday, we learned that Groupon under reported the number of returns it had in Q4, and that the company had to revise its earnings.

Then Groupon’s auditor filed a “statement of material weakness,” basically telling the SEC it would not vouch for the company’s numbers.

Yesterday, the WSJ reported that the SEC is investigating the company.

That’s not all the company has to worry about. 

Institutional investors put big money into Groupon’s IPO.  

Since that day’s highs, the stock is down more that 50%. It tanked 16% yesterday alone.

If those institutions can blame somebody else for those losses and recoup any of their own investor’s money, they will.

That means if those investors catch even slight whiffs of fraud out of Groupon – and trust me, they are sniffing – the lawsuits and subpoenas will come in rapid succession.

Ever seen a shark frenzy?

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See Also:

• Groupon’s Andrew Mason: We Were ‘Toughened Up’ By Quiet Period
• Groupon Eyes Foursquare Territory And Acquires Location Database Startup, Hyperpublic
• San Francisco Puts Hackers To Work Fixing The Horribly Broken Taxi System

Google is still e-commerce’s best friend, at least for the time being. Social is just beginning to change  business online, but search engines still dominate referral traffic to e-commerce sites.

Google alone accounts for over 80 percent of e-commerce traffic referrals, according to a study by RichRelevance. Meanwhile, Facebook made up 0.5 percent of traffic, but that number was up 92 percent from the year prior.

There is some anecdotal evidence that this may be changing. At yesterday’s Social Commerce Summit, Sheezan Bakali, Director of Marketing at hot flash sales startup Fab, indicated that Facebook was its third largest source of traffic after direct traffic and e-mail referrrals. Nonetheless, search still powers e-commerce—for now.

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See Also:

• Facebook Is Eating The World
• The Internet’s Next Frontier
• User Engagement: Facebook’s $100 Billion Competitive Advantage