Facebook e-commerce: the next big thing?
(Reuters) - A group of e-commerce start-ups, backed by some of the tech world's most pedigreed financiers, are betting that Facebook Inc can become an e-commerce powerhouse to rival Amazon.com Inc and eBay Inc. — As the world's largest social …
Context & Ripple Effects
Facebook's push into retail has been building for well over a year: the company began an e-commerce drive in late 2010, and by November of that year Bloomberg had it passing eBay in value as the No. 3 U.S. web company — a market-cap milestone that made the idea of Facebook-as-storefront harder to dismiss. Inside Facebook argued in April 2011 that the evidence for social commerce was stronger than skeptical reports suggested.
The Reuters piece now adds the financing layer to that arc: venture-backed start-ups such as Google Ventures-backed Copious, which launched a social marketplace built for the Facebook era in June 2011, are treating the social graph itself as a shopping destination. Whether Facebook becomes a genuine third pillar alongside Amazon and eBay is the question this cohort of investors has effectively placed its money on.
First-order effects
- Start-ups building storefronts on Facebook's platform get their pitch validated by mainstream financial press, which should ease customer acquisition among retailers wary of unproven channels.
- Amazon and eBay now face a class of competitors whose distribution runs through Facebook's identity graph rather than search or marketplace listings — pressure lands first on eBay, whose social-graph deficit is most direct.
Second-order effects
- Retailers gain a bargaining chip: as social storefronts multiply, merchants can shop between Amazon, eBay and Facebook-based channels for better terms on listings and advertising.
- Facebook itself faces a product decision — how far to open its platform to third-party commerce before deciding whether to run retail natively, a choice that shapes who captures the transaction fee.
Third-order effects
- If the investor thesis holds, commerce splits along identity lines — purchases routed through social graphs versus intent-driven search — forcing every large web platform to pick which side of that divide it owns.
- A wave of venture capital concentrated on one platform's API creates structural dependency risk: these start-ups' economics rise and fall with Facebook's policy choices about data access and fees.
The trend: Online retail is fragmenting from two incumbent marketplaces toward platform-native storefronts, with venture capital betting that social identity becomes the primary shopping channel.