Note: This post originally appeared in Forbes in May. Facebook has since announced using data to show how advertising converts to in-store visits using their location data as predicted.
As president and co-founder of an online marketing platform, I’ve seen tremendous shifts around local commerce the past few years. Local news and print marketing have been upended by online equivalents that offer more personalized discovery, powered by social feedback. Local businesses already know that the lion’s share of their marketing should be online, and that’s how they’re earning customers’ loyalty today.
We’re increasingly seeing winner-take-all economics, and it’s no surprise to see industry leaders investing to capture their market. One company that is uniquely positioned to run the gauntlet is Facebook FB -2.94%, which has been less publicly putting together assets that could disrupt local search, local news and loyalty marketing — and, in the process, solidify its local advertising proposition. But for Facebook to establish itself in the local space, it will require bolder steps and an integrated vision. Here’s what that might look like.
Facebook As The Local Commerce Check-In
Facebook is the most popular service for the “check-in” function made popular by Foursquare, and although the check-in rode on the coattails of Foursquare, its use has waned dramatically in the past years. One of the biggest reasons is that consumers don’t have a good reason to check in: the novelty of being the “mayor” of your local hamburger joint and earning a badge only lasts so long. So what would make a consumer check in? The answer is money.
Loyalty companies like Perka, ShopKicks, LoyalBlocks and others let customers check in to receive loyalty benefits. The check-in is what links the point-of-sale transaction to the consumer and vice versa. While most loyalty programs could cost anywhere from $30 to hundreds per month per location, Facebook could effectively give this away for free, creating a loyalty behemoth and further engaging local businesses on a daily basis, thus closing the loop to consumer behavior at the point-of-sale.
For an online advertising company, this is the holy grail. Facebook can now tell you what percent of people that saw your advertising made a purchase, how much the purchase was, and whether you affected their normal behavior. You can target anyone from lookalike audiences to your most profitable customers, run online contests for offline behavior, and eventually turn your following on Facebook into a CRM using email and SMS messaging.
These abilities open up a whole new world of online-to-offline marketing, and advertising is simply glue that monetizes it all. Facebook is making considerable investments in local advertising: their local awareness ads are simpler than ever for a local business to manage. In many industries, especially those that are not as heavily search-driven, we’re seeing considerable advantages in online advertising metrics like cost-per-click, cost per acquisition and engagement. Closing the loop to the point-of-sale, combined with sharing location data insights that the Facebook app is quietly collecting in the background, eliminates the final barrier to success: doubt regarding offline impact.
Facebook As The Next Powerhouse In Local Search And News
Earlier this year, Facebook announced the launch of Services, its first local search portal. While it received little fanfare, industry pundits immediately saw the long-term implications. Those of us in the local marketing industry were not nearly as surprised, given that Facebook has four times the number of reviews as Yelp.
The Services page is its first foray into packaging all the data, fan pages, social reviews and posts to compete in local search, and many have postulated that this was focused on search engine optimization to rank on Google. But Facebook needs to go much bigger.
Facebook’s social data is a key advantage in not only being able to recommend places based on your friends’ posts, but also to use collaborative filtering to say that people who have liked the same types of restaurants as you, also like these new ones. The network economy makes Facebook’s social data an unparalleled asset to deliver next-generation search.
Local search, at least traditionally, has been static — more directory than news and event sources. Facebook has the ability to be both because it’s the largest source of social updates, especially in local. How can local news and event aggregators compete?
And, because Facebook already has the notion of events and deals, it can highlight what’s most interesting to the consumer. Imagine pulling up all the live music in your neighborhood. With the right packaging, Facebook could automatically curate local news as it relates to local commerce, and even highlight what’s most likely to be interesting based on your existing likes or those of your friends.
In doing so, Facebook can become far more than a directory, but a lifestyle publication that competes with the Timeouts, Eaters and Shecky’s of the world. And in doing so, it further necessitates that local businesses participate by updating their Facebook fan page, and, of course, boost it with advertising. Facebook’s existing investment in EdgeRank and machine learning ensure highly personalized local insights, while its local advertising engine monetizes your intent to conduct local commerce.
Separate or Integrated?
Facebook will need to retrain consumers to use it in new and different ways. With the exception of Messenger, which it spun out into its own app, Facebook has been reluctant to fragment its consumer experiences, but will need to do so in order to create clean experiences tailored to each function. To continue this momentum, Facebook will need to leverage the primary Newsfeed used by over one billion people to ensure the network-level adoption needed to make the integrated vision viable. Facebook is dominating the web. With the right vision and holistic execution, it could dominate the local commerce experience as well.