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The rise and risks of Facebook Marketplace

When Facebook sneezes, the rest of the online world catches a cold. Or something like that.

So when Facebook announced last year that it was launching its own online marketplace, catchily called, Marketplace, the rest of the classifieds community sat up and took note.

Today we’re taking take a look to see what Facebook’s offering is and how its concerted efforts to dominate yet another sector will impact the rest of the online sales community.


What is Facebook up to?

In October 2016, Facebook launched Marketplace. This desktop and in-app feature gave users the ability to buy and sell items via a simple eBay-style portal. Before launch, 450 million users were already buying and selling via Facebook each month, most using groups to informally negotiate purchases. Marketplace formalised that process and is a further attempt by Facebook to dominate ecommerce.

Since launch, Marketplace’s popularity has grown immensely, with Facebook saying that the number of searches completed has increased threefold since January. The giant also reported 70% growth in conversations between buyers and sellers in the first half of 2017 and that in May, 18 million listings were made on Marketplace, which is now operating in over 20 countries.

And they’re not stopping there. As of October, Facebook created a dedicated section of Marketplace for vehicles, which can be bought and sold from individuals and from large car dealerships. And this month Marketplace began offering house and apartment rentals in a move that is a clear challenge to incumbents, such as Craigslist and Airbnb.

One feature Facebook hasn’t integrated yet is the ability to process payments. In a sense, what it’s offering at this stage is a little more than a glorified peer-to-peer platform that offers a point of contact between buyers and sellers. Once connected and a price agreed, it’s up to you to arrange transfer of funds. Developments are underway to integrate payments directly into Marketplace, but for now, this must take place in person or on a platform other than Facebook.


Why is Facebook doing this?

With additional sectors and functionality being added, it’s clear that Marketplace is considered a key driver for Facebook’s revenue. Facebook’s core approach to growing revenue revolves around keeping users onsite and in-app as much as possible, so that adverts can be pushed to browsing users. Facebook earned over $9 Billion in advertising revenue in Q2 2017, so you can see why their focus is on developments that promote browsing.

Marketplace is its latest effort to bring in-house a function that users previously did elsewhere. Giant online classifieds providers will be watching this growth with interest, acutely aware that Facebook’s 2.1 billion users - and 1.3 billion daily active app users - give it a huge advantage when it comes to competing for an engaged, active audience of buyers and sellers.

Unlike other online marketplaces, as it is not processing payments, Facebook can’t charge a transaction fee. Right now, it is purely looking to grow the time a user spends on the site. Despite its growth, it still has a way to go before it overtakes the likes of eBay, Craigslist and Etsy in direct revenue and ecommerce traffic, who dominate classifieds, especially in the US.

But you get the feeling Facebook is testing markets, trying to find where it can be most effective. When it settles on a niche, it will likely deploy payments, too. With smartphone ecommerce on the rise - and set to grow more than 50% this year to over $100 billion in the US - it’s clear why Facebook wants in on the action as they try to win market share in yet another industry.


What are the dangers?

One reason why Facebook is confident that it can gain popularity in the competitive classifieds space is due to the immense reach of its network. This reach, they say, also provides safety. Marketplace uses user profiles as a method of security to validate identities and provide location information for a buyer and seller in any transaction. Facebook claims this will reduce fraud as, in spite of its gargantuan size, Facebook is notoriously tough to hack and set up fake accounts.

However, where there’s money, it’s always better to be safe than sorry when completing any form of online transaction. As they aren’t processing payments, Facebook are not offering an anti-fraud service, and they refuse to involve themselves in any post-transaction disputes. As a result, some question how safe it is. So users should beware, more so than ever when using Facebook, about the perils of buying via online classifieds and follow the usual cautionary steps.

One way to reduce the risk of fraud is to use a service like ShieldPay to protect you.

Even with the highest level of user transparency being offered by the world’s largest social network, there is always the possibility that online transactions can go wrong. Using Shieldpay’s simple method of payment security - where peace of mind is given to both buyers and sellers via escrow and our secure ShieldPay Vault – you can significantly reduce your chances of being defrauded when arranging transactions online. You can read more about our service and sign up here.

The rise of Marketplace is very significant for the online classifieds community. We await payment integration, for only then will we see how significant Facebook’s impact will truly be in dollar terms. Thus far, it’s growth has been impressive and you get the feeling that it is only just getting started.

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