I first spoke with Rich Rao almost eight years ago when he was Director of Worldwide Sales and Operations for Google. And earlier this week I caught up with him for a LinkedIn Live conversation for the first time since then, but now Rich is Vice President, Small Business at Facebook.
Rich shared with me how Facebook is working to help small businesses transition to doing more business online, the role AI can play in helping these businesses more efficiently and effectively connect with potential new customers, and how they are incorporating Instagram and WhatsApp into an integrated approach to community building. Below is an edited transcript of a portion of our conversation. To hear the full conversation click on the embedded SoundCloud player.
Rich Rao: We have 200 million businesses now who are using Facebook for their business, and they primarily do that to connect with their community. And that could be customers that they have today, but that could also be customers who are interested or potential customers who are interested in what they have. And so businesses will post social media, just like we do, like you do as a person, businesses will post information about their business, engage with their community. And ultimately they want to drive sales and drive business. And that’s what we help them do. We have a number of free tools that businesses can use to establish their presence, to communicate and message with businesses. Messaging has been a really big trend that we’ve seen. And then we have advertising, which allows them to extend their reach beyond their current community and to reach new customers.
Small Business Trends: So how has their engagement with Facebook evolved during the pandemic?
Rich Rao: The primary trend I’ve seen is an overall macro shift to the online channel. And there was a stat that was published that 85% of people are now shopping online, 85% of people globally. So that’s where consumers are and businesses have been shifting online, and we’ve seen an acceleration of some of the trends and we’re trying to help them get online. And so people are creating pages. They’re creating Instagram profiles. They’re doing a lot more posting about themselves. One of the things that we’ve seen is this strong connection between the communities and businesses in those communities. And in fact, I’d argue that those relationships have strengthened during this time. People are trying to find a way to support small businesses. And we’ve seen a number of businesses open themselves up, engage more with the people who want to support them and find a way to do business.
Small Business Trends: One of the things that I hear from small businesses is they definitely know that they have to pick up their pace when it comes to this idea of digital transformation. But in some ways, I don’t know if they have totally identified, not just the acceleration part, but the change of what digital transformation might have meant before COVID and what it means during and what will happen eventually after we get past it.
Rich Rao: Well, you know that expression that necessity is the mother of innovation? That’s happened now. That’s how I’d summarize it. And as challenged as we’ve been that has driven and sparked innovation. I think when I talk to them, a lot of businesses say, “You know what? This is something I knew I needed to do, but now is the time to do it.” And the great news about it when you talk about digital transformation, it’s even broader, is you don’t have to do it all in one day. And what I’ve seen is that businesses have taken steps forward. And before the pandemic, only one third of small businesses had a website let alone e-commerce capabilities. And so you mentioned commerce and where we’re headed, we’ve seen just rapid innovation across verticals, industries. Main street is one of the things that I like to talk about because it’s been this modernization of main street.
And an example of is, we see it across all of our towns. You being in Atlanta, I’m here in the Bay area. Adventure Toys here in Los Altos, it’s a local toy store. And they would always drive traffic to their store, to their retail presence on main street. And then when the pandemic hit, then they uploaded their catalog, just literally a print out of their catalog online. So people could call in the order and then they could drive by and they’d bring it out to you. And now they have the ability to buy online. So that’s an example of what’s happening right now.
And more broadly at Facebook, what we’re trying to do is we’re trying to help businesses do commerce in a lot of different ways. From reaching new customers and driving people into the store to conducting a transaction online, and Shops is an example of a product that we launched because of the pandemic, or we accelerated it because of the pandemic, that allow a business to create a whole presence right within Instagram and Facebook. And we’ve seen a stat that something like 70% of shopping now is happening on mobile phones. So it’s the advancement that’s happening is on the consumer side. And businesses are really trying to keep up with that. And I’m really proud of how we’ve been able to help, but more importantly, how small businesses have been able to innovate.
Small Business Trends: Even though we’re in a pandemic, and most of us are sitting at home with about 10 big screens around us, we’re sitting with these screens, but we’re shopping via our mobile device.
Rich Rao: I think it speaks to how just pervasive mobile is and how much it will continue to be. And that there is, if you think about the full funnel of how you do marketing and sales and transactions, the mobile device has become important to all parts of it. I think especially at Facebook, we saw the transition to mobile happen and people were primarily using mobile devices to be within the app. And that’s whether they’re at their home or on the go. And we’ve seen more what we call down funnel type movement. Where instead of it just being about your brand, which is still important, I actually think that’s a trend that we’re going to see for into next year, but more in visitation of a product on a website. More onsite, what we call onsite within Facebook and Instagram shopping.
And we’ve actually created new surface area and space within our apps for consumers to shop because they’re on their phone on Instagram, on Facebook, actually looking and browsing and discovering. And then it’s only natural then that the transactions will happen. So I think this is a trend we’re going to continue to see play out.
Small Business Trends: Another technology that was getting a lot of attention, well before the pandemic broke out, was this whole area of AI. But I saw a lot of small businesses really struggling with how AI helps them. Maybe you could talk about that in the context of how it helps them and even how it helps them right now in the midst of what we’re going through?
Rich Rao: I think it’s a really important question, Brent. AI is one of those things I like to joke that everybody wants AI, but no one really knows what it is or how necessarily to use it. But the great thing about it is that we can just look at our consumer lives and see how we’re using it. So an example is when you log into Facebook and you’re working through your feed, you’re seeing content that’s personalized to you. And then the more you interact with it, the better it gets and the better the content is. And we want to serve up what’s most relevant to you. So we use it all the time in our consumer lives. And so the question is, could we utilize the same technology for the benefit of our business as well? And what we’ve seen from our clients is people want to use AI, but they want to have control.
And so I think that’s the right combination, applied AI and machine learning, but have the control to understand what it’s doing, how it’s doing it, and ultimately be able to have the control as to how you manage that. And so right now your question is to like, what can you do with AI right now? There’s a number of things within any product platform, certainly within ours, that you can leverage AI today. And so for an example is automated ads. Some businesses are using this and others are still discovering it, but essentially it allows you to set up your ads, and it’s not set it and forget it, but essentially it allows you to identify your objectives, supply a budget, start it with creative, and then it will do the rest. It will kind of handle running your ads for you. And so you can get better results and also save time in doing that.
Messaging, as I mentioned, is a really big thing. We’ve seen advances in how people… Consumers want to message with businesses. Now, the question is, how do you serve that up in a really effective way? And technology is being used to do that. Creative is another example. And I love this one because think back two decades ago. What did it take to make a video ad or TV ad? For a small business, pretty prohibitive from a technology standpoint, from a cost. But now anyone with a phone could shoot a video and then with a few tools can really make a high quality production. So those are some of the ways that I think AI can be used today.
Small Business Trends: Are you seeing small businesses use one of your two channels, whether it’s they focus more on Facebook or versus more on Instagram, or are they incorporating how they leverage each channel in a more integrated fashion?
Rich Rao: What I’ve seen is that businesses will start with typically one of Facebook, Instagram, and increasingly WhatsApp – especially internationally and globally. And then they start with one, they’ll create an IG profile or a Facebook page or a business presence on WhatsApp. They’ll then start to open it up. And then they quickly realize that there are similar audience, but also different audiences on each of the products. And so they’ll then move and they’ll kind of create their presence across multiple platforms, multiple of the products. And our tools allow you to do that pretty easily now. Advertising is a good example. Once you go to advertise, you can just kind of check the box and opt in to advertise across our platforms, and it’ll optimize for you. So based upon your product, your audience, your ad, it’ll actually spend your dollar and find the best audience for that money you’re investing to drive the most value. And so that’s one thing we’ve seen that in a lot of businesses. They start with the one, but then they rapidly expand. And they see the benefits and the efficiency of scale that comes along with that.
Small Business Trends: That’s cool, and I’m assuming because it’s a pretty low cost of entry for advertising, are you seeing even more experimentation between small businesses saying, “You know, I never really thought about doing advertising but maybe it’s time. And maybe I could try it with a couple of bucks and try it out.”
Rich Rao: We have seen an increase in experimentation with using our products, including advertising. We’ve seen people engage a lot more with their free tools and messaging is one of the trends that has already been in place before the pandemic. That accelerated, so more messaging as you can imagine between businesses. It used to be you would call the phone and they would pick up in the store, but now messaging is this sort of ever-present channel that’s available to you. And then advertising. It’s interesting because anyone with a few dollars and with a mobile phone can create an ad. So the barriers to entry are very low and it’s one of those things where typically businesses will try ads for 60 days, 90 days, and then they start to see. They optimize their creative, they optimize their ad personalization, they optimize their objectives. And then they start to see the gains and the returns kind of come through.
And so it doesn’t have to take a full year of investment before you see the return. And the attribution to which you can measure the results is one of the key differentiators. That’s kind of how it’s different than doing a radio ad. All forms of advertising can be very effective for you, but one of the unique things about digital advertising on Facebook is you can measure and see pretty quickly how things are going. And yeah, we’ve seen that work for a lot of businesses.
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This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.