Mercator Perspectives

Are Facebook Gifts a Change in Direction or Another Advertising Play?

In preparation for the holiday shopping season, Facebook announced a service called Facebook Gifts. In short, the service enables members of the social network to purchase digital (physical) goods from Facebook and send them to the email (shipping address) of fellow Facebook users.

Many analysts and reporters have incorrectly interpreted the Gifts platform as Facebook’s entrance into the e-commerce market, a move that would put them in competition with companies like Amazon and eBay. Facebook participates in the e-commerce market in that they accept orders for goods via the Internet; but unlike eBay and Amazon, Facebook probably doesn’t aspire to become a one-stop shopping destination. It would be very difficult for Facebook to compete with the long tail of eBay’s catalogue or Amazon’s fulfillment expertise. Rather, Gifts will more aptly serve as an extension of the social network’s marketing and advertising capabilities.

Looking into the future, it doesn’t make sense for Facebook to limit their online shopping platform to gifts. Why not promote the purchase of products for personal use? This could happen as Facebook expands its network of retail partnerships and would pair well with their Offers program, which enables merchants to issue coupons via Facebook pages. Some companies have questioned the value of advertising on Facebook, citing an inability to prove the ads generate sales. Accepting payments may help solve this problem by enabling consumers to act on an ad (i.e. make a purchase) without leaving the site.

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