Just two weeks ago, Tidbits #6 – Shopping Edition highlighted shifts in e-commerce because of COVID19 driven by players like Shopify and Pinterest. Capital Flywheels speculated Facebook as a potential wildcard, and we did not have to wait long to see what Facebook is up to. Very, very exciting.
In a similar vein, in Tidbits #7 – Strong Balance Sheets in Motion, Capital Flywheels commented that Zuckerberg is an underestimated operator. The NY Times and Wall Street Journal recently published profiles of Zuckerberg that further support that point. A point that continues to receive less attention than it should is that Zuckerberg remains only in his mid-30s whereas all other seasoned platform operators are in their 50s / 60s (Sundar Pichai at Google is 47, but close enough). Zuckerberg realistically will remain a powerful influence on technology for the next three decades…I’m glad he’s pivoting to something less problematic than political discourse. I am also hopeful that it will deemphasize non-commerce advertising over time.
All included below. Happy Memorial weekend.
#1 Facebook Shops
Facebook Shops make it easy for businesses to set up a single online store for customers to access on both Facebook and Instagram. Creating a Facebook Shop is free and simple. Businesses can choose the products they want to feature from their catalog and then customize the look and feel of their shop with a cover image and accent colors that showcase their brand. This means any seller, no matter their size or budget, can bring their business online and connect with customers wherever and whenever it’s convenient for them.
People can find Facebook Shops on a business’ Facebook Page or Instagram profile, or discover them through stories or ads. From there, you can browse the full collection, save products you’re interested in and place an order — either on the business’ website or without leaving the app if the business has enabled checkout in the US.
And just like when you’re in a physical store and need to ask someone for help, in Facebook Shops you’ll be able to message a business through WhatsApp, Messenger or Instagram Direct to ask questions, get support, track deliveries and more. And in the future, you’ll be able to view a business’ shop and make purchases right within a chat in WhatsApp, Messenger or Instagram Direct.Source: Facebook
For years, many users (especially in the emerging markets) already used Facebook Marketplace as an e-commerce channel. And Instagram is already very much a budding e-commerce channel because its high-quality photo / content / influencer orientation made it a natural place to push products. Now Facebook is unifying the concept via a digital storefront called Facebook Shops. This is a much more mature concept than either Facebook Marketplace or Instagram Checkout. And it should have data and analytics advantages over the long-run as they unify the backends of both efforts.
When you consider that WhatsApp and Facebook Messenger are two of the dominant global social message applications in the world, the implementation of business chat with integrated digital storefronts should be a very compelling concept. This was something Capital Flywheels highlighted with Facebook’s Jio partnership in India.
Facebook’s announcements went even further:
People have been using live video on our apps to showcase products for years, from shoe stores announcing new sneakers to beauty influencers trying on different lipsticks. Now, we’re making it easier to shop for products in real time. Soon, sellers, brands and creators will be able to tag products from their Facebook Shop or catalog before going live and those products will be shown at the bottom of the video so people can easily tap to learn more and purchase. We’re starting to test this with businesses on Facebook and Instagram, and we’ll roll it out more broadly in the coming months.
The foray into live-streaming is a very interesting one because live-streaming has proven to be a massive hit in China. It’s more engaging and fundamentally changes the advertising equation. Whereas advertising is very much a “push” tactic, live-streaming is very much a “pull” tactic. Instead of spending money on advertising, many brands are increasingly hiring influencers to do live-streamed product selling sessions. It feels more authentic. And it’s definitely much more interactive. The faster Facebook diversifies away from advertising, the better in Capital Flywheels’ opinion.
Facebook’s deeper moves into e-commerce may present challenges for players like Pinterest. Amazon should still be fairly insulated simply because the positioning of Amazon is more on the utilitarian commerce side. And Amazon continues to have a massive advantage in terms of logistics. And this could be a very good thing for Shopify because Shopify is one of the partners that helps power Facebook Shops.
#2 Zuckerberg Directly Involved with Facebook Shops
Zuckerberg has always been a bit of a troubling figure. He’s incredibly focused and often seems to operate with a military mindset. As in war, morals sometimes need to be placed on hold. Many of Zuckerberg’s missteps in the past fall squarely in that camp, in Capital Flywheels’ opinion. This is particularly troubling when Zuckerberg is focused on sensitive matters such as politics and political discourse and moral and ethics. But now he seems to be focused on something more benign (e-commerce)…his extreme focus will likely prove to be an invaluable asset for shareholders.
The real significance of Tuesday’s announcement, though, may be Zuckerberg’s personal involvement in the effort. Facebook has built shopping features into its service before without much traction. Prior efforts around buy buttons in users’ feeds and selling virtual gifts never took off. Facebook has even offered product catalogs for years, including a “Facebook Page Shop” that lets brands list products within a “digital store front” — much of the same functionality that Zuckerberg announced Tuesday but under a different banner.
Zuckerberg has been heavily involved in Shops, spending significant time and attention on the product — usually a sign that a feature is here for the long haul. Zuckerberg said he’s been meeting with the company’s small-business commerce team every day during the pandemic. Shops is also under the direction of another high-ranking Facebook official, Javier Olivan, who is running the company’s efforts to integrate all of its products and has lead Facebook’s growth organization for years.Source: Bloomberg
#3 Zuckerberg – Wartime CEO
From the NYT:
In Silicon Valley, there is a certain kind of company founder whose title is C.E.O. but who presents himself as a “product guy.” A product-guy C.E.O. feels more at home developing what is for sale than actually running the company.
At Apple, Steve Jobs was a product guy, inventing the iPhone while leaving the supply chain to his C.O.O. At Amazon, Jeff Bezos is a product guy, obsessing about retail customers while others run the profitable web-hosting division. And at Facebook, for more than a decade, Mark Zuckerberg was a product guy’s product guy.
The 2016 election made it clear to Mr. Zuckerberg that the accommodation was no longer viable, as he and Ms. Sandberg were pilloried for being absent and distracted, if not willfully negligent.
Not long after, in July 2018, Mr. Zuckerberg called a meeting with his top lieutenants. In the past, he had used the group’s semiannual gatherings to chart new courses for Facebook products, or discuss new technology he was interested in capitalizing on. This time, he told his executives that his focus was on himself. With Facebook constantly under attack from outsiders, Mr. Zuckerberg said, he needed to reinvent himself for “wartime.”
“Up until now, I’ve been a peacetime leader,” Mr. Zuckerberg said, according to three people who were present but not authorized to discuss the meeting publicly. “That’s going to change.” Mr. Zuckerberg said he would be making more decisions on his own, based on his instincts and vision for the company. Wartime leaders were quicker and more decisive, he said, and they didn’t let fear of angering others paralyze them.Source: NYT
But as he tired of playing defense, Mr. Zuckerberg in 2018 took on the role of a wartime leader who needed to act quickly and, sometimes, unilaterally. He announced a series of products that took Facebook in new directions, starting with the March 2019 announcement that the company would emphasize private, encrypted messaging instead of the public posts that made it famous.Source: WSJ
Disclosures: I own shares in FB and SHOP. I have no intention to transaction in any shares mentioned in the next 48 hours.