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Facebook (NASDAQ:FB) is mounting competition for companies like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) as it takes its first steps toward becoming an e-commerce platform, this week launching a feature for users to buy and send real gifts.
Beginning Thursday, Facebook users can purchase and ship products from more than a hundred “Facebook Gifts” vendors. Products include Starbucks (NASDAQ:SBUX) coffee, pastries from New York’s famous Magnolia Bakery, and cookie greetings from 1800 Flowers. Purchases and shipping are made simple by allowing recipients to input their own shipping details and even change the size, flavor, or style of the gift after being notified instantly after it’s purchased.
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The platform, which hasn’t yet rolled out to all users, marks a major attempt by the company to unlock a potentially significant revenue stream. Since its May IPO, Facebook has been trying to diversify its income sources, but so far still relies heavily on display advertising. In the second quarter, more than 80 percent of its $1.18 billion in revenue came from ads, while roughly 15 percent came from game-maker Zynga (NASDAQ:ZNGA).
Facebook will make money from this new gift-giving platform by taking a cut of each transaction. The amount will vary based on individual deals struck with vendor partners. But first the platform will have to catch on, and marketing researchers aren’t yet sure that it will. So far, the social network has been mainly a place to chat with friends and post messages. Facebook will have to get users to accept gift-giving as part of their social routine — responding to a birthday alert, for example, by sending cupcakes, or a teddy bear when a friend’s status mentions being sick.
Currently, gifts on the platform cost anywhere from $5 to several hundred dollars. To make the process as seamless and simple as possible, Facebook takes care of every step of the transaction, storing users’ credit card information, alerting them when their packages are shipped and received, and including customizable cards in each package that come stamped with the Facebook logo.
The service is now only available to a random group of U.S. users logging into Facebook through its website and an Android app. An iPhone app is still in development.
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