On Tuesday, Facebook and Amazon announced a partnership that I think has Google very concerned. The partnership is the most significant integration between the social and transaction-based segments of the web. In a nutshell what the integration allows is for Amazon to offer a “personalized” page, where consumers can see product recommendations that are influenced by their social media footprint, their friends and their own tastes. This is extremely powerful. For example, we know that Amazon has been the master of relational data and have used the purchase habits of its users to assist shoppers and make recommendations. Then, it added shopper reviews to the site, which gave the shopper a way to clearly distinguish between like products (it is said that adding reviews to the site increased sales by 30%). NOW, the shopper has even better data to make distinctions between products and to get recommendations based on data outside of Amazon’s shopper network.
This is a big deal for a number of reasons, but I will focus on the two big ones. This partnership could really hurt Google’s attempts to corner the e-commerce market. Google makes a fortune on pay-per-click advertising, particularly where the consumer has decided on a product to buy. Google’s cost per click in most all instances is well over $1 and in highly competitive areas, the costs are much higher. With this new integration between Facebook and Amazon, consumers will be able to bypass pay-per-click and go straight to their friends to find out what to buy and where to buy. When Facebook figures out its search within the site, look for Amazon to be integrated into the results in a creative way as well.
The other reason that this deal is so huge is that now Facebook can access key information to quantify how social media recommendations translate into sales. One of the hardest things to do on the Internet is quantify brand advertising. Currently, most online advertisers focus not on generating intent to buy, but rather spend money harvesting intent (pay-per-click). Online advertising today rewards the last ad clicked. It really does not measure or reward all of the other elements that might have influenced that consumer. In my business, I see this behavior play out every day and clients want to see a quantifiable, trackable return on ad spend. Now, Facebook can get key pieces of data from Amazon to study how sales are influenced by social recommendations and ads. I can see a day when Facebook can quantify just how valuable it is for a consumer to “Like” a product or brand. Facebook will have access to data to prove its assertion that social ads improve brand awareness and influence purchase behavior. This could totally undermine Google’s lock on pay-per-click marketing. Is this the first chink in Google’s armor? Maybe.
Of course, I left out the part about what Amazon gets out of this. Again, I see them somehow being integrated into Facebook’s search results in the future. But also, they will get huge amounts of data as well. Amazon already possesses the most powerful recommendation engine on the web and this new data will only help make it better because they will have access to “real” data and interactions between the consumer and their friends, rather than relying solely on purchase behavior. This is a brilliant partnership and poses a big threat to Google’s domination of Internet advertising.
I look forward to watching the battle play out.