Facebook’s Next Big E-Commerce Kick

Rocked since its May IPO by investor concerns that it will be unable to sustain growth, Facebook (NASDAQ:FB) has been trying desperately to monetize its now 1 billion-strong user base and prove its value to shareholders. The company’s efforts to increase revenue also include diversifying revenue sources. To date, the vast majority of Facebook’s revenue has come from advertising, while the rest came from its partnership with social game maker Zynga (NASDAQ:ZNGA). Now, the company is on an e-commerce kick, testing various features that allow users to shop for actual rather than virtual goods, directly on the social site.

This past week, Facebook’s latest e-commerce offering is a feature called “Collections,” which will help retailers share their products on the social network. For the first time, Facebook is allowing users to click through and buy products on the site. Facebook is currently only testing the feature, and isn’t yet taking a cut of profits, though it can be expected to do so if testing proves successful.

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

To start, the company is allowing seven retailers to share information about products through “Collections,” which users can then share with their friends. Users viewing these collections are given three different actions to choose from: “like,” “collect,” and “want.” Each of these three actions will show up on a user’s Timeline for friends to see.

The sharing aspect is similar to how brands share products on the wildly popular Pinterest, on which users “pin” photos to boards that are shared with “followers,” or friends. Currently, users can link their Facebook accounts to Pinterest so that items they pin appear on their Timelines as well.

But Facebook’s feature varies from Pinterest is that the social network is including a “buy” link for products within a collection, sending people to the sites to purchase products. Facebook isn’t currently charging for the service, which means it won’t bring in any revenue, but presumably it plans to take a cut of sales that originate on its platform once the feature is out of beta testing.

Facebook is starting the test with seven major retailers: William-Sonoma’s (NYSE:WSM) Pottery Barn, Limited Brands’ (NYSE:LTD) Victoria’s Secret, Neiman Marcus, Fab.com, Michael Kors (NYSE:KORS), Smith Optics, and Wayfair.

Don’t Miss: Are You Ready for Earnings Season?