03.02.11

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Counterfeit goods have long been the bane of any fashion company’s existence. So with the recent explosion of digital commerce, these copycat goods, which were once confined to shady flea markets and back-alley rooms, have been translated online worldwide. Facebook is no exception. Recent layout changes made by the social media website have meant larger ad spaces for text and images, giving advertisers even more reason to bring their ads online and therefore more potential for fake good ads to engage with consumers. But couple this with the fact that, finally, fashion companies are now using Facebook to expand their online presence means that there could be some conflict. Counterfeit goods featured on the internet is not a new problem. One can find them on Google, amongst other places. Yet in comparing a company such as eBay with Facebook, how are the responsibilities and obligations similar and/or different? And what choices and incentives do they have to strictly police the presence of counterfeit goods? 

What is perhaps most striking about a comparison we can make between eBay and Facebook is that though they are both encountering these problems, these consequences are a result of very different influences and therefore the actions they have and should take differ. First and foremost, one must note that eBay’s central purpose, above all else, facilitates third party transactions. This means that their focus is on ensuring that sellers portray their products accurately and that products are delivered in good condition. Contrarily, Facebook is a social-networking site, whose focus is on providing social interactions online and creating niche communities.  Although the advertisements are a source of revenue for the company, it comes as an opportunity from the popular success of the company and is therefore not the central value proposition from the clients.

Revenue as Incentives?

In eBay’s business model, their main source of income comes from facilitating the merchandising process such as final value fees, insertion fees etc. It is, therefore, in their best interest to maintain good relationships with third party buyers and sellers. The situation is however a bit more complex for Facebook. Although the website provides many avenues for interaction, their larger ad spaces has meant that they are trying to juggle social engagement and ad monetization as well. On the one hand, Facebook is looking to ensure that big name fashion companies still stay on board and interact with their membership base. On the other, they too are looking to ensure that their ad spaces freely generate revenue. And if companies like Gucci were to realize that fake goods are being sold through the same website that they themselves promote on, feathers will be ruffled. 

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Image Caption: Adjacency effect at its worse. Would Girard-Perregaux want to be placed next to a $12 Tiffany ring?

Facebook therefore has two options: Firstly, it may choose to allow counterfeit ads to be placed on their wall as eBay has done in the past. Otherwise, it can choose to be more stringent in their ad policies to keep companies like Coach and Gucci happy. Finding this balancing act will depend largely on their revenue forecast in the coming years. So whether they want to forge a stronger tie with fashion companies, or sever trust that is hesitantly given to Facebook is the central question.

Image Source: Kofoed’s Flickr, Facebook