{"id":26376,"date":"2017-11-15T22:18:36","date_gmt":"2017-11-16T03:18:36","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/facebook-impact-on-small-and-midsize-businesses-in-global-digital-economy\/"},"modified":"2017-11-15T22:18:36","modified_gmt":"2017-11-16T03:18:36","slug":"facebook-impact-on-small-and-midsize-businesses-in-global-digital-economy","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/facebook-impact-on-small-and-midsize-businesses-in-global-digital-economy\/","title":{"rendered":"Facebook: Impact on Small- and Midsize Businesses in Global Digital Economy"},"content":{"rendered":"

Facebook is helping small and mid-sized businesses access consumer demand in a global digital marketplace\u2026<\/em><\/p>\n

 <\/p>\n

Currently, Facebook is among a number of catalysts behind the breakdown of supply chains and the mass digitization of consumer and brand interactions \u2013 i.e., traditional supply and demand dynamics.\u00a0 Prior to the Internet Revolution, manufacturers teamed up with distributors and retailers to introduce products to consumers with long lead times and equally long supply chains.\u00a0 Today, the internet has made distribution of all kinds \u2013 digital media content, consumer products, and ondemand services \u2013 a cheap commodity or free.\u00a0 In this world, markets have increasingly become demand driven.\u00a0 Consumers pull products and services that they desire immediately and advertisers aggressively target groups that fit their ideal customer profiles.<\/p>\n

 <\/p>\n

Facebook is a driving force behind this transformation of the supply chain and the platform is particularly good at enabling small- and midsize businesses to participate in the digital global economy.\u00a0 This is a focal point of Facebook\u2019s strategy to date, as Sheryl Sandberg, Facebook\u2019s COO, further emphasized in the Q3 2017 earnings call: \u201cToday, we’re announcing that Facebook has over 6 million active advertisers\u2026the vast majority of these are small- and medium-sized businesses, which are a major source of innovation and create more than half of all new jobs globally.\u00a0 These businesses often have small ad budgets, so the ability to reach people more effectively is really valuable to them.\u201d[1]\u00a0 Facebook began as a social network and has become so much more as it adapts to the changing realities of an internet-centric economy.<\/p>\n

 <\/p>\n

The below charts illustrate the impact on the global supply chain of the Internet Revolution.\u00a0 The advent of a platform like Facebook allows consumers to indicate interest in certain products and services and for companies to respond directly to those preferences, rather than the other way around. [2]<\/p>\n

\"\"<\/a>
Pre-Internet<\/figcaption><\/figure>\n
\"\"<\/a>
Post-Internet<\/figcaption><\/figure>\n

 <\/p>\n

\u2026and the transformative impacts of Facebook\u2019s platform for small- and midsize businesses include targeted advertising and the ability to participate in a globalized marketplace\u2026<\/em><\/p>\n

 <\/p>\n

Facebook\u2019s platform enables small and midsize businesses with limited advertising budgets to reach customers directly and efficiently.\u00a0 Businesses can target customers through business pages and audience targeting tools that can be segmented by geography, demographics, lifestyle, and purchase behavior.[3]\u00a0 For instance, Pair of Thieves, an eCommerce company that sells an array of socks, shirts, and underwear, ran a highly successful 3-part holiday campaign that resulted in an 8.3x increase in online sales and a 12.2x increase in website traffic.\u00a0 The 3-part campaign consisted first of identifying the best performing creative advertisement through Facebook\u2019s analytics and serving this ad to more Facebook users, second of running Holiday specific ads on Black Friday, Cyber Monday, and Christmas, and finally of retargeting website visitors.\u00a0 This campaign utilized dynamic ads, video ads, customer audiences, and lookalike audiences.[4]<\/p>\n

 <\/p>\n

Additionally, Facebook\u2019s platform enables brands to expand with ease internationally and utilize the Company\u2019s dynamic language optimization technology to advertise across 6 different languages with one advertisement.\u00a0 For instance, if a business wants to advertise across the European continent they can do so cost efficiently.\u00a0 Employing Facebook\u2019s Lookalike Audience tool, businesses are able to provide a source set of customers to target and Facebook can clone those across countries and geographies.[5]\u00a0 As an example, west elm, the home brand subsidiary of Williams-Sonoma expanded to the UK and targeted a UK audience most likely to buy its products.\u00a0 It utilized the Lookalike Audience targeting tool resulting in 3.3x increase in website traffic, a 40% increase in purchase rate, and reached 1.6 million prospective new customers.[6]<\/p>\n

 <\/p>\n

\u2026but in the future, Facebook should take a more active role in eCommerce: become a comprehensive online marketplace where brands and customers come together to solve each person\u2019s unique preferences\u2026<\/em><\/p>\n

 <\/p>\n

Today, Facebook primarily serves as a platform for advertisers to push traffic towards their dedicated eCommerce sites that are often owned and manned by individual businesses.\u00a0 Expanding services that mirror marketplaces in Amazon, for instance, would put Facebook in a position to capitalize on its massive active user base and advertisers.\u00a0 As the world becomes increasingly customizable, Facebook\u2019s measurement and targeting tools can be utilized to set up a personalized mall for consumers.\u00a0 Messenger can be utilized to set up customer service chats with prospective customers as they peruse product inventory.\u00a0 In addition to the Facebook platform, Instagram is a perfect platform to deliver a Pinterest-esque service but with the ability to immediately purchase products.\u00a0 In the future, Facebook should strive to go beyond a simple social media and targeted advertising platform to truly integrate itself as a platform that brings together businesses and consumers in an incredibly unique and targeted way.<\/p>\n

 <\/p>\n

\u2026though this strategy leaves much to contemplate.<\/em><\/p>\n

I\u2019m interested in hearing about my classmate\u2019s perspectives on the future of small- and midsize businesses on the platform in the future, the feasibility of a Facebook marketplace, and Amazon\/Alibaba\u2019s reaction to such a move.<\/p>\n

 <\/p>\n

Word Count: 800<\/p>\n

 <\/p>\n

Footnotes:<\/u><\/p>\n

[1] Facebook, Inc., Q3 2017 Earnings Call, November 1, 2017.<\/p>\n

[2] Stratechery by Ben Thomson, \u201cManifestos and Monopolies\u201d, February 21, 2017.<\/p>\n

[3] Facebook Blueprint, \u201cTargeting the Right Audience\u201d, https:\/\/www.facebook.com\/blueprint\/courses\/category\/targeting?ref=fbb_raise_awareness<\/a><\/p>\n

[4] Facebook Business, Success Stories, \u201cPair of Theives\u201d, https:\/\/www.facebook.com\/business\/success\/pair-of-thieves<\/a><\/p>\n

[5] Facebook Business, \u201cLookalike Audiences\u201d, https:\/\/www.facebook.com\/business\/help\/1589915247700182<\/a><\/p>\n

[6] Facebook Business, Success Stories, \u201cwest elm\u201d, https:\/\/www.facebook.com\/business\/success\/west-elm-uk<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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