Markets

How Many People Are Ready to Shop on Social Media?

Twitter's buy button. Source: Twitter

To this end, there's a lot of room for Facebook and Twitter to help. It's a start to be able to re-target shoppers who previously visited a retailer's e-commerce site, but it doesn't separate those interested in shopping on social media from those who are just interested in shopping online. Both companies could help retailers target users who have looked into the more-passive shopping options on both platforms to improve the effectiveness of using "buy" buttons.

If Facebook or Twitter are serious about increasing the number of advertisers using this functionality, then they ought to subsidize the price of bidding on those ads. Simply moving those ads higher up in the News Feed or timeline will provide data to determine who's interested in "buy" buttons, and how much value they provide.

They should be interested

Amazon will generate more than $100 billion in revenue this year. And while neither Facebook nor Twitter are interested in warehousing and shipping millions of products, it shows the huge market for online commerce that exists. Taking even a small cut off the top -- through direct advertising sales -- would provide a meaningful boost to both companies' top lines.

A better comparison would be eBay , which makes money from providing a platform for buyers and sellers to find one another. The company is expected to generate $8.6 billion this year off of an active customer base of 157 million. That's roughly the same size as the audience expressing interest in Facebook's "buy" button, and about four times larger than the potential audience on Twitter.

If Facebook and Twitter can monetize buyers at a quarter the rate of eBay -- considering each buy button ad replaces the opportunity for a different ad -- Facebook stands to increase revenue by $2 billion (16% 2014 revenue), and Twitter could increase revenue $500 million (36% 2014 revenue). But it's up to the social networks to do the hard work and make the necessary short-term sacrifices to secure such a big opportunity. Retailers aren't going to do for them.

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The article How Many People Are Ready to Shop on Social Media? originally appeared on Fool.com.

Adam Levy owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com, eBay, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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