If you have a Facebook account and shop at Target, you may want to know that Target on Wednesday is planning to unveil a test version of Cartwheel, a new service that combines social networking and discounts to generate more savings.
For a large U.S. retailer such as Target the introduction of Cartwheel allows the company to target their ads to Facebook users who can share the discounts with their friends.
But the shared discounts can only be redeemed across Target’s brick and mortar stores since the discounts are not yet available for online purchases.
How Cartwheel Is Designed To Work
Facebook users must log in through cartwheel.target.com with their Facebook accounts and then pick a selection of discounts. After selecting a deal, it appears on the Facebook newsfeed so their other friends can view it.
If the privacy settings are adjusted, Facebook users can block other users from seeing their information. However, Facebook users earn more offers by having their Facebook friends sign up. The deal can be printed out and the barcode number handed to a store clerk or else the deal could be accessed through a Facebook users’ smartphone.
Facebook is trying to monetize its large user base as it seeks to generate a greater share of advertising revenue with its recent move into mobile.
By collaborating with a major retailer, Facebook is seeking to solidify itself in the business community as a powerful tool for e-commerce while still assuring Facebook investors that more growth is on the way.
The latest type of ads that Facebook has embedded into their daily news feeds are called “native advertising”, a fast growing type of advertising in which the advertiser attempts to gain attention of the user by providing valuable content in the context of the user’s online experience, viewed through the flowing content stream.
Last Thursday on Bloomberg’s Money Moves with Deirdre Bolton, Bo Peabody from Greycroft Partners spoke about the growing significance of native advertising, and commented about the potential dilemma that Facebook will be face by having more advertisements on the social networking site.
“The question is for Facebook as they put more of those things in that are clearly advertisements, how does the user base respond? That’s I think the fundamental issue for the company” Peabody said.
As Facebook seeks to monetize its user base and become more of a marketplace, the concern remains that Facebook users may get tired of seeing more and more ads on the social networking site and abandon the site.
When asked if Facebook and Twitter can succeed with native advertising, Peabody said that he thinks the native advertising is important to both companies but he also struck a cautious note.
“I have always believed that their is an inverse relation between monetizing a social network and keeping their consumers happy. The more you try to make money, the less happy the consumers will be” Peabody said just ahead of Facebook’s first quarter earnings report.
Peabody explained that he was planning to examine Facebook’s user engagement number and traffic on their first quarter earnings report for evidence that monetizing Facebook may be leading to less traffic on the social site.
“If traffic starts to trail…. it’s a sign that as they try to make more money from it, their users are using it less” he said.
Last Wednesday Facebook posted 1st quarter earnings that beat Wall St. estimates, proving that the world’s largest social network can increase their revenues by shifting their focus to mobile and concentrating their ads for active people on the go who are more likely to use smartphones and tablets than traditional desktops.
Facebook recorded a 26 percent increase year over year with their active daily users while their number of active monthly users jumped to 1.1. billion, a record high.
An average of 665 million people used Facebook every day in the first quarter of 2013, up 47 million from 618 million in the last December quarter of 2012.
So based on the noticeable increase in traffic during Facebook’s first quarter earnings report, it does not appear that monetizing Facebook is scaring users away from the site- at least not at the present time.
If coupons are being offered through partnerships with retailers such as Target, Facebook users may turn more frequently to the social site to check to see what deals their friends have recently discovered that could be of use for them.
Despite Facebook’s impressive first quarter earnings report which pushed shares of the company up over 5 percent in trading on Friday May 2nd, Facebook’s share price has plummeted around 2 percent every day since then.
This Barron’s article titled Facebook’s Results Fail to Impress released on Saturday did not help to calm the nerves of Facebook investors. In the article, a disclosure was made that Barron’s has been bearish on Facebook since its IPO last year. The article seemed particularly bearish and contained some speculative statements about “desktop ad revenue soon may start to drop.”