Retailers have a problem: 60% of their online traffic comes from mobile, but just 12% of checkouts are completed on those devices, according to Facebook's (NASDAQ:FB) Head of Messaging Products David Marcus. Facebook wants to help close that gap.
In the last couple months, Facebook has already rolled out several additions to its social network to help retailers promote products and convert sales. It updated Pages with a shopping section, and it expanded the buy button to more retailers. Additionally, it started testing a more robust ad product it's now calling "Canvas," as well as adding video to carousel ads. The latest addition is a test of a dedicated shopping feed similar to News Feed.
If you've ever been creeped out by a Facebook ad, you know that Facebook probably knows you better than anybody else. The only companies that can compete with Facebook on its users' personality and interest profiles are Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google and Amazon.com (NASDAQ:AMZN). With 1.5 billion users, Facebook reaches way more than Amazon's 270 million shoppers and it's on par with Google's reach. So, Facebook knows more about more people than anyone else.
Facebook can use that data to connect retailers and brands users might not know about to the users that are most likely to be interested in them. Ultimately, this could create a lean back shopping experience rivaled by no one else. Facebook wants to give everyone their own personal shopper for free.
At first, the shopping feed will be filled with products listed in the new Shop section of Facebook's revamped Pages. Over time, however, Facebook plans to include items listed for sale in Facebook Groups like the Buy, Sell & Trade groups for whichever city a user lives in. As such, Facebook stands to offer a much different selection from what's available on Amazon.com, specializing in smaller retailers and local offers.
Another threat to Google
Google already sees Amazon as a big threat to its core search advertising business because 44% of product searches start on the online retailer's website, according to a new survey from BloomReach.
Google may soon have more competition for product searches as TechCrunch points out there's a search box at the top of Facebook's mockups for the new shopping feed. Facebook could place keyword advertisements at the top of its search results pages, attracting significant attention and possibly ad dollars from brands and retailers. Google recently announced that more searches occur on smartphones than on desktops, and Facebook has the potential to supersede Google for product searches. The only problem, as TechCrunch points out, is that the shopping feed is buried in the navigation menu.
With the potential to search small and large retailers, as well as local listings all personalized based on Facebook's interest profiles, Facebook's shopping feed has a lot of potential to do some real damage to Google and Amazon.
The big push into commerce
Management says that 50% of its users come to Facebook looking for products, according to a survey the company conducted. Making it easier for those users to find products should increase the amount of time users spend on Facebook, which is an opportunity to show more ads. What's more, those users are likely more valuable than average considering their propensity for shopping.
While Facebook won't benefit directly from sales made through its platform, it's certainly creating value by connecting businesses to people most likely to be interested in them. As it creates more and more value, there's bound to be ways for the company to monetize shopping on Facebook.
Facebook is pushing in a similar direction with Messenger. It's currently aiming to connect businesses and customers more easily, and it'll figure out monetization later. With all the money changing hands from shoppers and retailers, management should be able to find a product that enables it to monetize the commerce activity it's fostering across its platforms.
Adam Levy owns shares of Amazon.com. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, and Facebook. 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.