Facebook’s key to global Metaverse adoption lies in……… grocery delivery ?
You have to walk before you run.
Facebook by the looks of it is trying to fly before it can crawl.
The fact is no one ever went from buying online to using the internet, it’s always the other way around.
Facebook knows it, Like no one else: they benefited greatly from the funnel of billions of first time internet users.
Facebook wants to become a champion of the new way of using the internet through a virtual world, where anything and everything is sold. It may be on the cusp of adopting this strategy in the US and few high income countries, but is miles away from creating widespread adoption.
Before we go deeper into the problems with the Metaverse for the next billion users, we need to examine the contrasts between consumer trends of the first billion and the next billion.
The next billion internet users
Most internet users first talked to friends, posted memes, and even participated in fierce facebook debates way before finally holding their breath, pressed on that item they really fancied or clicked a facebook ad. But only about half of the global population has ever experienced the joy of shopping online as of yet.
What I just described was a standard journey towards e-commerce for the developed desktop-centric world in the 2010s. For the majority of emerging markets, users only recently reached the first social media step. They have onboarded through a very different channel, primarily using WhatsApp, TikTok, and local social media, instead of Facebook.
Adoption of social media was a much shorter curve for the population of South East Asia, South America, India, Central Asia and Africa. Characterized by a large young population, and mobile first audience.
Unlike the first billion, the next billion internet users, are not chasing convenience of next day delivery, with extreme surcharge, nor an ability to shop for exotic items that aren’t available offline.
Rise of Amazon, was characterized by abundance, and slowly translated into a habit, but when there is no abundance, creating an online habit is the first crucial step to onboard users towards online shopping.
This habit can only be nurtured by starting with items that people need on a daily basis, and selling those items through a familiar social setting of friends / family.
To push through a new way of using the internet you have to account for the unique characteristic of consumption in emerging markets.
They demand familiarity, and affordability. It is pointless to spend money on generic ads, when your potential customer uses Whats App all day.
The next billion users have a trait in common, they are unlikely to overspend online, or become early adopters of a service they do not trust. When you have a lower purchasing power, it’s hard to justify paying for shipping, or purchasing items irrationally.
What quickly emerged from those new user needs is what many know as “social commerce”, a point in-between social media and e-commerce. Pinduoduo, DealShare, Meesho, Favo, are all great examples of explosive growth in this space.
Those brands are able to transfer their audience towards e-commerce, through the greatest strength of the next billion users: their huge activity on social media.
A typical DealShare user’s journey is completely different from Amazon / Flipcart.
First a lower tier city user hears about a discount on household goods from their friends or were asked to join a savings group though WhatsApp, followed by the user first entering the website/app where they see cheap groceries that they often buy with a huge mark-up at their neighborhood store.
Before checking out the user also sees a mini-game where they can complete simple tasks and get discounts upon check-out of his cart. Finally as he/she checks out, he/she notices the coupons users get for inviting their friends and sharing individual products via WhatsApp. The discount leads him/her to complete the same action as the friend that invited him/her in the first place, creating a beautiful, unicorn size social commerce fly-wheel.
That is something Facebook itself is lacking greatly on. Tech executives in the west have to understand that for the next billion users, there is no way to create a regular e-commerce strategy to attract traffic, it can only be done by selling low priced high frequency consumer goods.
That’s it, it’s that simple.
Now back to the Metaverse.
The most common argument I hear against fast Metaverse adoption, is the high hardware price, where the Oculus Quest selling at a price point of 400 dollars is unreachable for most high income households in the US, let alone emerging markets.
But I’m convinced Facebook will easily solve the price point hurdle. At the end of the day lets not forget Google once had Google Cardboard (discontinued since 2019), which was a testament to the fact that VR is not unreachable for most.
Hell you can still make your own VR cardboard, through a simple google search.
Moreover, for those of us, who pictured there first VR set as something more durable than cardboard, and want the full Facebook Horizon Worlds Metaverse, as Cambria headset is set to release next year, I suspect they will further cut the price point for the Oculus. (or release a brand new budget headset all together)
So as you probably already get, the price point is hardly a problem.
Moreover, Adoption of the Metaverse as a concept is unlikely to be a problem, emerging market consumers are known to adapt to new concepts faster.
For example in a single year of the pandemic South East Asia has added 70 million online shoppers.
Instead the key is creating a Social Commerce Strategy, that can be easily integrated into the Metaverse, and o boy do Social Commerce and Metaverse click well together.
The Metaverse will reinvent Social Commerce as we know it
Social Commerce is characterized by three key pillars — Entertainment, Community based interactions, and Recommendation based results.
Those are all concepts that the Metaverse greatly enhances.
Entertainment
Metaverse can greatly adapt the mini-games you currently see on Social Commerce Platforms.
The iconic Orchard mini-games of Pinduoduo have become the benchmark for social commerce entertainment. In the game a user nourishes a tree with water droplets and other enhancements (that you earn by completing actions / purchases), once the tree grows you will get fruit that will arrive at your doorstep in real life. You can also steal fruits from friends online, which is a cool feature.
Metaverse can bring that to the next level, imagine completing Virtual Reality challenges, mini games, together with friends, where for example you yourself water the tree, fight-off your friends, and at any point can make purchases from the bonuses you earned in VR. That would be a game changer, that will move the needle on the important KPI of avg app session time.
Community based interaction
Don’t get me wrong, social media is a good way of creating community based interactions, with group chats, content reposts, along with in-app group purchases features.
But the Metaverse can completely reinvent this concept.
Social commerce is always about making an online interaction, as similar to a familiar offline process as possible.
What if group buying wasn’t a watered down version of a “digital town market” — as Itself Pinduoduo puts it, but an actual town market in the Metaverse. When you negotiate the prices with the seller, go shopping together with friends in a virtual mall. Your purchases would get conveniently delivered to your doorstep, instead of having to carry the bags yourself.
Recommendation Base results
Lastly recommendation based results, could take a new form, by moving away from tiny smartphone screens.
The key problem with current recommendations, isn’t the algorithm, those actually have gotten very precise especially in China. The problem is the invasiveness of recommendations, that always pop-up inorganically across your screen, leading you to skip the item and browse instead.
In virtual reality, recommendations might become less annoying. Instead they will seamlessly emerge in the gameplay experience. Imagine logging into a game and as you go through your regular activities you notice pieces of clothing, accessories, and other items that were carefully curated for you to see based on ML recommendation.
Projection on Facebook’s push into Social Commerce
Back to reality for a second. Before you can show all the cool features that blow regular online shopping, and offline shopping out of the water, you need universal adoption. You need users that already have trust in shopping online, having developed a habit of shopping for daily essentials online.
Creating its own social commerce platform
Facebook has the essential prerequisite of owning the user funnel, to become an important social commerce player. The Fact is all of the current platforms in emerging markets are in some way integrated with Facebook’s social media ecosystem, most often through WhatsApp.
But the reason social commerce platforms emerged in the first place was to fix the decentralized, hectic sales made by independent vendors.
What’sApp is Plagued by is a lack of selling tools such as even an end to end check out, causing a choppy user experience.
Facebook will need to complete a full 180, to become the champion of platformization, and re structure its own apps. This means creating a seamless checkout process, adopting group buying functionality, and creating tracking solutions for vendors in all its social media apps.
Late to the social commerce party, it won’t be a walk in the park to convince vendors to move back from convenient social commerce platforms that have already developed independent user funnel.
Facebook can also throw a wrench for all the social commerce platforms, in a form of restrictions for 3rd party integrations with its Social Media. By making the seamless user experience exclusive for Facebook’s own social commerce platform.
Regulation
But regulation could be a problem. It’s hard to name another company that has been in more regulatory and public boiling water in recent years. Restricting competitor platforms that mark themselves as champions that uplift SMEs, could prove very difficult in the court of public opinion.
Meesho is a great example of this, having this year launched a Women Entrepreneurship Summit, and setting an ambitious target of onboarding 100 million small business owners in India.
Logistics
Logistics would be a completely new foray for Facebook. Unlike Amazon, or even Facebooks Chinese counterpart Tencent — that till recently was a major shareholder in e-commerce giant JD.com.
A move into social commerce would mean a development of a robust hub and spoke model.
Moreover Facebook would have to work with a Group buying or an iteration of Community Group buying model, to reduce logistics costs. It would make sense for Facebook to enter social commerce with one of those two models.
Looming acquisitions
Building out logistics by themselves could prove difficult for Facebook with a lack of experience in the O2O model.
Due to regulation, and rapid growth of competitors, creating a “walled garden” that integrates WhatsApp and instagram only with Facebook’s parent platform is also unlikely to work.
If I had to make a bet for 2022, it would be that Facebook will complete at least one headline acquisition in the space.
DealShare, Meesho, Favo, Ula, could all be great, albeit pricey targets.
Zucc’s Old friends
Interesting note, in many of Zucc’s new forays, he seems to constantly revisit some Old friends (or foes)
In 2019 when Facebook’s push into cryptocurrency became public, some of the most vocal critics of the Libra were the Winklevoss twins
The first crypto billionaires have voiced caution over the project’s potential regulatory hurdles .They were spot on, as the Libra Project is still yet to launch as of the end of 2021, due to global regulatory pressure.
Zuckerberg’s new interest in the Metaverse (read social commerce), could potentially overlap with another famous ex-Facebook figure. If Facebook’s starts shopping for a Social commerce platform, it may well find itself across the negotiation table from Eduardo Saverin’s B Capital. Zuckerberg’s fellow ex-founder, has been an early believer in Social commerce, with B Capital leading rounds for Meesho, and Ula.
My projection
— is a sell throughout 2022–2023, as it’s yet to make a big push into social commerce, and is likely to overpay for multiple social commerce platforms in the process.
Tencent — strong buy
Upside
- Has already began moving into the Metaverse
- Owns the second largest social media platform in the world
- Major shareholder of Pinduoduo / even with the JD divestment well positioned for the social commerce meets Metaverse
- Highly beaten down stock throughout 2021, bound for a bounce back
Amazon — strong buy
Upside
Has one of the strongest logistics networks
-over the last decade build up a big hardware muscle — my projection they will release a Alexa- enabled VR device soon
- Bezos personal fund already became a lead investor in Indonesias Ula
Downside
- it still needs a social platform to become competitive, but they have a war chest ready to deploy (maybe Snapchat could be a cool target ?)
XIaohongshu — strong buy
- The first platform that transformed from a commerce platform into a social media
side note: (this is a potential risk for facebook as well, as emerging market players have limited potential to acquire a personal network themselves, and become a commerce focused social media channel)
Alibaba — buy (Potential 2022 dark horse)
- most beaten down stock of 2021
- has the strongest logistics muscle across emerging markets with Lazada, AliExpress etc.
- Making a push into the Metaverse
- lets not forget Baba is a Major shareholder in a social media channel — Weibo (media tends to understate that investment in the wider Baba strat)
IF you are a VC, or prefer not to gamble with all time high Nasdaq stock. Another opportunity is to participate in the seed round of the first Eastern Europe / Central Asia Social Commerce Platform — BelkaFood.
