Facebook – Go to place

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Facebook has everything it needs to disrupt classifieds.

• Facebook is jumping into the world of classifieds and recommendations but it will take a lot more than just throwing it out there to make it successful.
• In the US this is aimed squarely at Angie’s List and Yelp but the performance of the searches that Facebook makes for local goods and services so far is somewhat patchy.
• What Facebook is doing is providing the ability to search through businesses that have a Facebook page and using user reviews on those pages as a rating system.
• This sort of service is a winner takes all game and here I apply my rule of thumb for network companies.
• Any company that relies on the network must have at least 60% market share or be at least double the size of its nearest rivals to begin really making profit.
• In social networking and messaging, Facebook is already there but looking at the service that has been launched (see here) quality, usage and engagement all remain issues.
• For example, a business that has a better Facebook page will appear to be superior to competitors even if the service that it offers is not.
• The key to this will be to use the strength of the social network and encourage its users to look for goods and services that exist within its own network rather than look elsewhere.
• To do this, I think it will be recommendation by people that the searcher already knows that will make it compelling and there is no sign of this yet.
• A review by someone you already know and trust is far more valuable than the review of a stranger and this is something that Facebook’s competition will really struggle to emulate.
• This is where Facebook has the potential to deal massive damage to the likes of Yelp and Angie’s List.
• However, execution will be critical as Facebook must now encourage its huge user base to give the listings a try as well as make it easy and fun to use.
• It will also need to tie it in well with Facebook M (see here) which is Facebook’s answer to Siri, Google Now, Cortana and the like.
• Social based recommendations has the potential to undermine the online classifieds as they exist today, but this is much more difficult than it sounds.
• Once an online destination is known as the “go to place” for something it takes a truly mighty effort to undermine it.
• The classic example of this is Craigslist which offers a poor user experience but has easily managed to resist attempts by well financed and much better offerings to undermine it.
• This is where Facebook’s ingenuity and its ability to execute really becomes important as this is very far from a guaranteed success.
• Like Yahoo, all of the elements are in place but Facebook has to put them together in a compelling and fun to use way.
• This is what Yahoo appears to be completely incapable of doing.
• Facebook has executed superbly when it comes to the monetisation of mobile and of video and so I think it has a good chance of pulling this off.
• Facebook remains an embryonic ecosystem but one that has substantial upside if it can continue its record of excellent execution.