We all know Facebook as a platform where people connect and share their interests with other users. Facebook has an enormous user base containing more than one billion users. By comparison, Europe has fewer inhabitants. But did you ever saw Facebook as an online marketplace for used products?
Most cities or even neighbourhoods have their own ‘commodity markets’ groups which are facilitated by Facebook. According to the billion dollar company, these Facebook groups are visited by more than 450 million people each month. Facebook picked up on this trend among their users and introduced Marketplace on 3 October 2016 in The United States, the United Kingdom, New-Zealand and Australia. This new feature will eliminate the need for these commodity groups, but will it also eliminate the need for existing online second-hand marketplaces, such as the internationally known website Ebay.com and the Dutch website Marktplaats.nl?
Facebook Marketplace could become a big threat for these websites. Let’s have a look at Marktplaats.nl. Marktplaats.nl started as a website for private sellers but nowadays when I look at their website only one out of five advertisements are actually from private sellers. Mostly small companies use Marktplaats.nl to sell their products in a cheap and easy way. When Facebook markets their new feature right the user base of Marktplaats.nl could move to the Facebook Marketplace very quickly. But unfortunately, the launch of Facebook Marketplace did not go as Facebook planned. The new digital marketplace immediately filled itself with illegal goods such as drugs, weapons, paid sex and even body parts. The site’s Commerce Policy strictly prohibits users from selling such items, but to many advertisements seem to slip through the system. Facebook apologized for these events and promised to clean up their marketplace. According to Mary KU, Product Management Director at Facebook, the problem occurred because of a technical problem. The system could not automatically differentiate between legal and illegal deals.
At the moment, I don’t think marketplaces such as Ebay.com and Marktplaats.nl should fear Facebook’s Marketplace. Especially Marktplaats.nl hasn’t got anything to fear yet, since the extension has not yet been released in the Netherlands. But when Facebook fixes their current problems, I believe that their new platform could be the new place to buy and sell used products. I think people like the idea of seeing a profile picture of their seller and see how many friends the particular seller has just to have a safer feeling about closing a deal.
Hey Xander, thanks for sharing this blog!
I am wondering how Facebook is going to behave in this new market as this a total new addition to their network. What I find an insterting case, is that as a market place you do have some sort of resonsibility in the trade of the products via your platform. Facebook has had a few problems regarding illegal trade before (example of illegal gun trade: http://www.forbes.com/sites/mattdrange/2016/03/10/gun-sales-thrive-on-facebook-despite-recent-ban/#79fc41d45214) Their last approach on eliminating this illegal trade, was changing their policy. However the changing of the policy had no effect at all.
I am curious to find out how they will behave now that they will be a true mediator of trade. I will definetely keep an eye on the developments in the Dutch market for sure!
I think the Facebook Marketplace is a very interesting case of an attempt at platform envelopment, defined by Eisenmann et al. (2011) as “entry by one platform provider into another’s market, combining its own functionality with the target’s in a multi-platform bundle that leverages common components and/or shared user relationships”.
As you stated, the existing user profiles are useful for building trust, which is very important on second-hand marketplaces with strong information assymetries and many opportunities for fraud. Craigslist, the biggest second-hand platform in the US, has been notorious for fraud and dodgy offerings for years.
Other benefits that Facebook has over the competition result from their massive user base resulting in strong two sided positive network effects. For current Facebook users it is simply more convenient to use a feature integrated into a platform they are already using, than to use a separate platform. The first mover advantage of platforms like Marktplaats.nl may not be strong enough to compete, especially as Facebook will benefit from huge cost benefits through integration in their existing social network and scale.
References
Eisenmann, T., Parker, G., & Van Alstyne, M. (2011). Platform envelopment.Strategic Management Journal, 32(12), 1270-1285.
Dear Xander, thank you for your blog! I knew that Facebook was testing out Marketplace, but I had no idea that illegal things were sold when they launched it. I agree that if they fix those problems, Marketplace could be huge. However, often times, commodity markets on Facebook are for sellers close by (such as Commodity Market Rotterdam). Marktplaats, on the other hand, allows you to see products from all throughout the Netherlands. Thus, if I want to buy a shirt, but the seller is in Groningen, they can send it to me. I would not have seen this shirt if I had just looked on Commodity Market Rotterdam, as here, only things in the area are shown (that’s why I think bike selling and appartment offers on commodity market, and furniture go quite well).
But, maybe if Facebook enables sellers to sell in a country or even internationally, and ensure that the search functions for Marketplace are similar to for example Marktplaats, the competition could be huge. Thus, it would mean extending Facebook with an extra functionality, and maybe even making a Facebook Marketplace app. As you said, it is nice to be able to see the seller’s profile, as this is something for example Marktplaats doesn’t have (you can largely be anonymous). I definitely think if Facebook fixed current problems and improves Marketplace, it will become huge.