Facebook Commerce Startup Ondango Picks Up €500K To Turn More Likes Into Buys

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To date, Facebook has focused the majority of its revenue efforts on ads, and, to a lesser extent, payment services around apps that run on its social platform. But Facebook commerce, where users buy physical or other good not connected to apps, is one area where Facebook has not done much– yet. In the meantime the social network becoming a revenue driver for third parties, including Berlin-based Ondango. Earlier this month, the company picked up a €500,0000 investment led by the new VC Connect Ventures in London, and it is now using that funding to further build out its services and the number of businesses using its platform to drive their Facebook marketplaces, including a push from next year into the U.S.

This brings the total amount of funding in Ondango, which went live 11 months ago, to €700,000. Other investors in Ondango include Andy Goldstein, executive director of the Ludwig MU Entrepreneurship Center, Estag Capital, Tilman Buggenhagen, Mario Brockmann and Alexander Klug.

The market for Facebook commerce is still in a pretty early stage. Recent research from TNS for e-commerce enabler Ecwid revealed that currently only about 4% of UK consumers have bought something from Facebook.  That works out to about £2 billion ($3.2 billion) of an estimated $50.3 billion spent on e-commerce in the UK.  TNS’s consumer survey seems to indicate that growing to £3 billion in the UK over the next few years. Booz & Co. research estimates that worldwide the market for social commerce will be $9 billion this year and top $30 billion by 2015 (that would include more than just Facebook, including sites like The Fancy and many others).

Like Facebook commerce itself, Ondango is also in an early stage of growth: it works with over 400 customers, says Jose Matias del Pino, one of its co-founders. One point of differentiation with Ondango is that its aim is an international one: about 60% of its customers are in Germany, and the rest are “everywhere else,” with the platform available in 14 different languages. This is noteworthy for a platform like Facebook, where a lot of its growth (and currently the majority of its customers) are actually outside of the U.S.

As a point of comparison, U.S.-based Payvment in July told the NY Times that it had more than 170,000 social commerce customers and is signing up 1,500 every week. But while its social platform, Lish, is available in 23 countries, it’s only in English at the moment. Users need to download an app use Facebook authorization in order to use it. (Ondango says that it found a dropout rate of 80% of users when they had to authorize an app to make a buy.) Another company, Moonfruit, enables e-commerce on some 5 million sites, some but not all of them via Facebook. E-commerce widget maker Ecwid in August noted that 40,000 of its customers have enabled commerce both on its own sites as well as through Facbook pages.

Del Pino says that up to now, the landscape for Facebook Commerce has been developing on two tracks. Bigger businesses and high-profile brands have largely stayed away from the area, he says, because trying to replicate their product portfolios, and a controlled retail experience, on Facebook “just doesn’t work,” so many of them see it easier to simply bounce people to their own sites to make purchases. That’s a trend that was also highlighted earlier this year, with companies like J.C. Penny, Gamestop and U.S. department store Nordstrom all shuttering their Facebook storefronts.

That’s often the case for bigger startups, too. Nasty Gal, which recently raised a $40 million round from Index Ventures, has been touted as being a Facebook phenomenon for how well it’s leveraged the social network in its viral growth. But all the same, when a would-be customer wants to actually buy a piece of clothing displayed by Nasty Girl on its Facebook page, she is redirected to the website.

Even the designer cake maker, Got What It Cakes, profiled in that New York Times only this past July, doesn’t appear to have a storefront on its Facebook page to sell its cakes. It links out instead to its own site.

On the other hand, where there has been more opportunity has been in the area of smaller businesses — the “long tail” of e-commerce as Del Pino refers to it. It’s tailoring its own service to cater to this sector, he says, offering an API that lets merchants integrate logistics and shipping into the purchasing scheme to reduce the number of steps needed to buy something straight from Facebook. It also lets merchants choose their own payment methods, whether that is Paypal or credit cards or something else.

Target markets for Ondango to date have been fashion, sport, design and music, with the latter focus being merchandising and concert tickets rather than digital music itself.

Here’s a selection from a storefront for a specialty kite maker:

He says that the company is starting to see some trends emerging among its customers. The average price for purchases is about $35, with the most common buys being impulse buys. The average conversion rate on its stores is at 1.3% — Del Pino considers that “a healthy conversion rate for a normal online shop and even better for Facebook considering it is relatively new.”

For now, he says that Ondango-enabled Facebook stores remain separate pages rather than integrated into users’ Timelines. “Purchases in the Timeline is something we have explored but we don’t think it’s the right time right now for that,” he says. “It might happen in the future.” Indeed, with Facebook implementing more advertising in the Timeline, adding more commercial activity in there could prove very problematic for user experience.

One thing Ondango has created is a “want”-style feature for users, something that we have also seen Facebook itself exploring. Ondangos is a “should I get it,” option. Clicking on this creates a story on a user’s Timeline, along with an image and a price that friends can use to vote on an item. “It drives social recommendations in  a more playful way,” he explains. However, he also points out that this data is not contributing to Facebook’s wider social graph. “Facebook gets nothing from us and we get nothing from Facebook,” he explains.

Does the fact that Ondango is moving into waters where Facebook itself eventually swim worry Del Pino? Not for the moment, he says. For now, any activity that ecourages commerce in Facebook also means users are spending more time on the site. And there are ads running alongside those commerce pages, meaning that there are more impressions for those as well. Also if the merchants see that Facebook is a viable commerce channel, they would be more willing to invest in Facebook ads themselves, Del Pino notes.

Ondango’s prices currently start at €12.99 per month per shop, and go up from there depending on size and functionality across multiple shops and multiple pages. He notes that about 80% of its customers are on its basic plan, with another 15% taking the next tier up and 5% on premium. These prices are more expensive than the basic free service being offered by Ecwid, although Ecwid has just in the last few days announced that they are curtailing their free service by quite a bit, and is gearing itself up for more revenue generation in Facebook commerce, too.