Will Privacy Concerns Limit F-Commerce?

JWT Intelligence published its trend report, Social Commerce last month. In it, Ann Mack and Patti Orsini did a great job summarizing three key social commerce trends, providing case studies and research to support their findings. I also participated in the report.

The JWT research found that nearly eight in 10 American and British adults said they worry about the privacy implications of shopping directly on Facebook. Three-quarters said they “don’t think Facebook is secure enough to make purchases on.”

What surprised me is that many media and blog sites picked up on this and quickly commented on this as a hurdle to social commerce adoption, identifying consumers’ privacy concerns as being the hurdle.

Let’s stop for a minute and think about this. Let’s take a look at the millions being spent currently inside Facebook casual social games with Facebook Credits for virtual goods.

Facebook Credits is the mandatory virtual currency used for games and in-app virtual goods on the Facebook Platform. Facebook takes 30 percent on all Facebook Credit transactions within in-game applications. Facebook Credits can be purchased using a credit card, PayPal, or other local payment system inside Facebook.

Zynga recently embarked on its initial public offering and reported a few key numbers. There are 230 million monthly active users across all of Zynga’s games, and Zynga claims 60 million users play its games each day. Zynga also reports it sells 38,000 virtual items every second. Zynga made $575 million in revenue off the sale of virtual goods in 2010, compared to $22.8 million in advertising revenue.

If I understand this correctly, these consumers seem very comfortable using their credit cards inside Facebook games to buy virtual goods like sheep and skyscrapers but apparently not so comfortable using their credit card in Facebook to buy real goods like shoes, jeans, and perfume.

AmEx is also betting on Facebook Commerce with its Link, Like, Love program, a Facebook application that links a consumer’s Facebook account data with her AmEx card. Once consumers link their two accounts, they will begin to see deals from companies such as Whole Foods, Dunkin’ Donuts, Virgin America, and Sports Authority.

An interesting feature about the AmEx Facebook app is that all consumers have to do to get the deal is use their AmEx card to buy the item and the deal amount will be credited directly to their AmEx account. The AmEx app is a fully integrated Facebook commerce solution right up to product purchase online or in-store. Privacy does not appear to be an issue for the 231,673 monthly users who have already installed the app in less then two weeks. Kudos to American Express for a great example of social commerce.

Are privacy concerns a hurdle to social commerce adoption? This seems to be the case for actual consumer behavior trumping attitudes expressed in survey research. The consumer may indeed be concerned about privacy on Facebook, but the consumer is spending millions inside the Facebook platform and that spending is increasing at a dramatic rate. The concern around privacy does not appear to be a direct hurdle for F-commerce adoption for a large part of the population.