It's been almost exactly a year since Facebook (NASDAQ:FB) first began testing out a new "Buy" button within ads. The test has been modest thus far, and hasn't been rolled out on a widespread basis yet.
But that doesn't mean the social network is giving up. Not by a long shot. Facebook is still very interested in jumping into e-commerce.
Facebook is now testing a new way for small and medium-sized businesses to operate online stores on their Facebook brand pages. Users can browse and purchase directly on Facebook's site, or be directed to a retailer's site to complete a purchase. Only a handful of retailers are participating in the test, but e-commerce represents an exciting opportunity for the company.
Right now, Facebook isn't asking for a cut of any sales that it facilitates, but the company could likely change that later once it wants to monetize the service. The immediate task at hand is to build out the infrastructure. The business aspect comes second.
Think of the possibilities
Over the years, Facebook has made several stabs at e-commerce, and most have failed to gain traction. This was, in part, because consumers don't yet associate Facebook with e-commerce as much as they do with cat videos and pictures of people's lunches. But imagine the type of end-to-end customer experience that Facebook could potentially create over time.
If you remember, Facebook just recently integrated peer-to-peer payments into its popular Messenger service, which was an expected move after the company poached David Marcus from eBay's PayPal. While peer-to-peer payments are free, the next obvious move is to facilitate purchase transactions between consumers and businesses -- and eventually get a cut.
Consider a scenario where Facebook uses social advertising to let consumers see what their friends are purchasing or recommending, being able to go directly to an online store hosted on Facebook, complete the purchase and make a payment, and maybe even leave a review afterwards. Oh, and after-purchase support and customer service? Yeah, Facebook is already adding that to Messenger, too.
Twitter can't compete here
Compare that possibility to Twitter (NYSE:TWTR). Facebook has some inherent structural advantages in e-commerce simply by virtue of the way the site is set up. Twitter has yet to break free from the timeline architecture that everyone associates it with. While Twitter is also testing out "Buy" buttons within ads, it has utterly failed to gain traction in direct messaging or payments, and not for a lack of trying.
To Twitter's credit, consumers have now become accustomed to seeking customer service; but that's a fairly small part of the experience, and it's not something that Twitter can monetize.
Facebook has become a conglomerate of social platforms, including Instagram, WhatsApp, Messenger, and more. The social network has a very good chance at making a dent in the $350 billion per year e-commerce market. Even a small dent over time would add meaningfully to the company's top line.
Evan Niu, CFA owns shares of Facebook. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.