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Viewpoint: Will Facebook Take Over the World?

by Randall Craig on March 17, 2011

Filed in: Blog, Global Business, Make It Happen Tipsheet, Planning, Social Media, Strategy, Viewpoint

Tagged as: ,

You may not know it, but the game playing, ad-serving, stalker-friendly site called Facebook is poised to bust out of it’s walled garden and move into the “real world” in a very big way. And when it does, it will have profound implications for government, other businesses, and each of us as individuals.

Unless you were living in a cave for the last few years, you probably know all about Facebook. It’s an ad-supported social network that allows individuals to connect with friends, share photos, status, games, and support groups and organizations by “liking” them.

The first step in Facebook’s evolution occurred over the last year or so: they developed some clever code that allowed webmasters to put “Like” buttons throughout their site. By clicking on the embedded button, we each became complicit in a process that helped Facebook not just reach out to these other sites, but to actually embed this external content within Facebook itself. This isn’t a particularly bad thing – in fact, it is a win-win-win proposition, but it accomplishes a strategic goal for Facebook that isn’t apparent to most. More on this later.

The second step, also introduced over the last year or so, has been to offer site owners (and their users) another clever nugget of functionality: the ability for users to logon/register on third party sites with their Facebook ID’s. Again, a win-win-win proposition, and one that accomplishes a strategic goal: to develop a network of external sites who are comfortably dependent on Facebook, and whose developers feel very comfortable using Facebook-embedded code.

The final brick in the wall are Facebook “credits”. These have been virtual rewards in Facebook games, that when “spent”, can give the user extra capabilities or access. What we are starting to see, and will continue to see, is the migration of Facebook credits  from a virtual currency to a real one. The actual credits take on value within Facebook, as games and apps “give” credits to winners, or “give” credits for even more valuable personal information. The credits themselves are funded from game or app developers’ ad revenues. As an aside, Facebook credits are now even sold in Radio Shack stores. They have value.

But a currency is worthless unless it can be spent. This is where Facebook is clearly going. Consider this scenario: You go to your favorite web site to purchase some merchandise. Signing on with your Facebook ID, you pay for your purchase with Facebook credits. The merchant prefers this because Facebook charges less than the credit card companies to process the transaction. Think of it: hundreds of thousands of online merchants accepting credits instead of credit cards. Not only does Facebook make money on every transaction, but because credits are a “stored value” instrument, Facebook earns investment income from the value of credits held.

Is this scenario likely?  Consider these factors:

  1. Website owners “trust” Facebook – a trust earned through the “like” button and the Login with Facebook functionality
  2. Web developers are comfortable implementing Facebook code
  3. Users trust Facebook, and because they will want to spend the credits they have earned.

More than these three factors, however, is a fourth: It’s in everyone’s commercial interest to have this happen as quickly as possible. For web merchants, it makes it easier and faster to transact, resulting in higher sales at a lower cost. Users will want to spend their credits they have earned, and Facebook opens a new channel of revenue: transaction fees.

What is even more exciting, at least from Facebook’s perspective, is that the web is just the beginning. Why be content with hundreds of thousands of web merchants, when there are millions of bricks and mortar businesses who would jump to lower transaction fees in a second. As Visa and MasterCard processing fees have risen substantially, there is a window of opportunity for an organization that’s big enough to offer an alternative. Facebook is. And of course, if these merchants are already accepting Facebook credits on their websites, it’s just a simple step to accept them in the real world.

But how might these payments be delivered? This is but a detail, but there are some obvious possibilities, such as a new “credit card”. What is more likely is that the payment will be delivered through the next generation of cellphones, with built-in Near Field Communications. Picture this: log into your Facebook Mobile App on your Smartphone; then “tap tap” the phone on a pad at the retailers, and the Facebook credits are transferred immediately to the retailer. Of course, the retailer can just “bank” the credits (less the transaction fee)… or they can recycle the credits within the Facebook ecosystem to pay for more advertising. Facebook might even cut them a deal.

The big question is what about the other social media sites? Which – if any – might have a vision this big? Unfortunately for the 525+ other sites, only Google might be up for the challenge…and even they might be found wanting. To survive, every other site will become a niche player, at best.

Will Facebook take over the world? Not in a traditional sense. But if this analysis is right, they will come close.

This week’s action item: How you can take advantage of some of Facebook’s technologies today, either as an individual, or for your organization?

An uncomfortable question: Do you have such a far-sighted strategy, either personally, or in your business?  Most don’t.   (What can you do about it?)

Note: The Make It Happen Tipsheet is also available by email. Go to www.RandallCraig.com to register.

Randall Craig
www.RandallCraig.com
www.ptadvisors.com

About 

Randall has been advising on Web and Social Strategy since 1994 when he put the Toronto Star online, the Globe and Mail's GlobeInvestor/Globefund, several financial institutions, and about 100+ other major organizations. He is the author of seven books, including the recently released "Everything Guide to Starting an Online Business", and speaks across North America on Social Media and Web Strategy. More at randallcraig.com and 108ideaspace.com.

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