POS Opportunities around Social Networking

“It’s a phenomenal opportunity and tremendous place where commerce is going to happen, certainly not in the next quarter, but… it’s going to be game-changing over the next few years,” said Karen Webster (CEO, Market Platform Dynamics).

Webster’s presentation focused on innovation on and around social networks.

“Where there are people connecting and buying, there’s obviously an opportunity for payments transactions,” she said.

Here’s just a few of the reasons she calls social commerce the “sweet spot” for companies:

• 61% of all Internet users use social networking sites

• 40% of people in the United States use social networking sites

• 99% of all people ages 18-24 have a profile on a social network

• 47% of all people ages 50-64 have a profile on a social network

“I’m sure we’ve all had the horror of being friended by our parents,” joked Webster, yet who was serious when she noted that even pets and children under age 2 have social networking profiles.

Noting Facebook’s dominance, Webster said the social network is starting to “cannibalize” time spent online. She attributed this development in part to the fact that many online activities – IM, e-mail, gaming, looking at group content – can now take place through Facebook. In fact, Facebook claims 50% of users log on at least once a day.

Twenty-two of the top 25 retailers are engaging in social networking initiatives on Facebook, mainly through creating fan pages and subsequently attempting to drive fan activity. Webster noted that their success has been “mixed.”

“It is not very easy to connect the dots between fans and what they might be buying. It’s hard to give people reasons to belong to that fan base. They continue to invest in Facebook because they know this is the direction commerce is moving,” she said.

The number of people connecting to brands via social networks increased by 20% in 2010, according to Webster, who added that 70% of retailers surveyed a month ago said they would be investing in 2011 in ways to find new methods to interact with fans through social networks.

Social commerce models thus far have included:

• Viral campaigns that drive traffic to brand websites (like the Neiman Marcus Midday Dash)

• Deal sites that use Facebook to drive purchases to their own deal sites (like Groupon)

• Facebook fan page storefronts

Webster noted social commerce is designed to “connect me where I buy, and let me buy where I can connect” – a loop entrepreneurs in the future will work to close on behalf of merchants.

Offering a glimpse of the future, Webster described a model where a company gives a discount if a certain number of Facebook fans click “Like” for a particular product.

For more of Webster’s ideas on how to ignite innovation in social commerce, check out her article in this month’s Lydian Journal.

PYMNTS.com Blog Entries from the Innovation Institute

Day 1

1. David S. Evans: Why the Time Is Right for Innovation (and Cash Is Not Dead) (9 a.m.)
2. No Need to Give a Eulogy for Venture Capital (10 a.m.)
3. There’s Two Sides to Every [Payments Platform] Story (11:30 a.m.)
4. The Key to Igniting and Launching Mobile Payments Platforms (12:30 p.m.)
5. Fed’s Proposal for Interchange Rates to Be Announced Within a Few Weeks (2:30 p.m.)
6. What Payments Professionals Can Learn from FarmVille (4 p.m.)
7. Driving Network Effects with Platforms (4:30 p.m.)
8. What Is The Next Great Payment App That Has Yet To Be Created? (5 p.m.)

Day 2

1. Can the U.S. Replicate Japan’s Mobile Payments Success? (8:30 a.m.)
2. POS Opportunities around Social Networking (9:30 a.m.)
3. POS Innovation in the Cloud (10:30 a.m.)
4. American Idol: Payments Innovation Style (Noon)
5. Federal Reserve: Cash Usage Increased in 2009 (1:30 p.m.)
6. Tips for Catering to Consumers’ Payment Preferences (2:30 p.m.)
7. How Walmart Views Consumer Payments Behavior (3 p.m.)