Last week’s announcement by Facebook that it would use PayPal as its payments provider brought together two of the most potent forces on the internet – e-commerce and social networking.
Yet for all the promise each sector holds, the two have been slow to converge. Online shopping is still a generally solitary affair, while social networking has yet to place much emphasis on buying stuff. This may soon change.
Today the chief executive of Ebay, which owns PayPal and is the world’s largest online auctions site, offered new insights into how e-commerce and social networking might work in concert with one another, and what he sees as the next big opportunities for collaboration.
Speaking at the Goldman Sachs Technology and Internet Conference here in San Francisco, John Donahoe said there was a natural synergy between social networking and e-commerce. “This notion of social shopping is something that’s real,” he said. “If you go into the mall it’s a social experience for many consumers, and it can now be done on the web.”
In its simplest form, social shopping works like this: you see a pair of shoes you like on a website, then share a link to that item with a group of your online friends and get their feedback.
Real as the impulse may be, social shopping’s heyday remains elusive. The main problem is that social networking sites, where people interact with their friends, are not shopping hubs. And while some storefronts have begun to appear on Facebook, the social graph and online marketplace have yet to align.
Nonetheless Mr Donahoe said the two industries are learning to work with one another. Ebay, along with Zappos, Amazon and Target and others, all have features that let users share potential purchases on social sites. “We’re embracing the social media tools wherever we can,” said Mr Donahoe. “Over time they’ll get more integrated into the experiences.” And then there is Blippy, which automatically shares a user’s credit card purchases in a Twitter-like stream.
And even if the original vision of social shopping never fully takes hold, there are other ways social and shopping sites can work together. With PayPal now allowing developers to tap into its API, Mr Donahoe says there is an opportunity to use social sites as platforms for e-commerce. This is what Facebook is doing through its PayPal integration.
It’s also what companies like TwitPay are doing. Using PayPal as a backend system, TwitPay allows Twitter users to send money from one account to another simply with a tweet. “Twitter is not getting into the payments business, but they provide an opportunity for payments to occur,” said Mr Donahoe.
As for potential growth areas, Mr Donahoe said the booming market for digital goods, primarily through social games, was an area to watch. “I see that trend, particularly in virtual goods, continuing,” he said. “PayPal is well positioned to be the foundation for many of these digital goods.”
PayPal is poised to get a cut of this as Facebook integrates its Credits system with the games on its platform, and that may only be the start. Mr Donahoe said he has spoken with Mark Pincus, chief executive of Zynga, the largest social gaming company, about implementing a common Zynga currency that could be used across different games, using PayPal as the infrastructure.
With Facebook going gangbusters and social games taking up more and more of users’ time and money, Mr Donahoe has good reason to look forward to the dawn of social shopping.
