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Facebook gifts urges users to shop while they share

Facebook gifts urges users to shop while they share

By Somini Sengupta, The New York Times | Updated: 28 November 2012 14:57 IST

Facebook is already privy to its users' e-mail addresses, wedding pictures and political beliefs. Now the company is nudging them to share a bit more: credit card numbers and offline addresses.

The nudge comes from a new Facebook service called Gifts. It allows Facebook users only in the United States for now to buy presents for their friends on the social network. On offer are items as varied as spices from Dean & DeLuca, pajamas from BabyGap and subscriptions to Hulu Plus, the video service. This week Facebook added iTunes gift cards.

The gift service is part of an aggressive moneymaking push aimed at pleasing Facebook's investors after the company's dismal stock market debut. Facebook has stepped up mobile advertising and is starting to customize the marketing messages it shows to users based on their Web browsing outside Facebook.

Those efforts seem to have brought some relief to Wall Street. Analysts issued more bullish projections for the company in recent days, and the stock was up 49 percent from its lowest point, closing Tuesday at $26.15, although that is still well below the initial offering price of $38. The share price has been buoyed in part by the fact that a wave of insider lockup periods expired without a flood of shares hitting the market.

To power the Gifts service, Facebook rented a warehouse in South Dakota and created its own software to track inventory and shipping. It will not say how much it earns from each purchase made through Gifts, though merchants that have a similar arrangement with Amazon.com give it a roughly 15 percent cut of sales.

If it catches on, the service would give Facebook a toehold in the more than $200 billion e-commerce market. Much more important, it would let the company accumulate a new stream of valuable personal data and use it to refine targeted advertisements, its bread and butter. The company said it did not now use data collected through Gifts for advertising purposes, but could not rule it out in the future.

"The hard part for Facebook was aggregating a billion users. Now it's more about how to monetize those users without scaring them away," said Colin Sebastian, an analyst with Robert W. Baird.

He added "Gifts should also contribute more to Facebook's treasure trove of user data, which has the benefit of a virtuous cycle, driving more personalization of the site, leading to better and more targeted ads, which improves overall monetization."

Facebook already collects credit card information from users who play social games on its site. But they are a limited constituency, and a wider audience may be persuaded to buy a gift when Facebook reminds them that a friend is expecting a baby or a cousin is approaching her 40th birthday.

The Gifts service, which grew out of Facebook's acquisition of a mobile application called Karma, was introduced in September and expanded earlier this month on the eve of the holiday shopping season.

Magnolia Bakery, based in New York, was among Facebook's early partners for Gifts. Its vice president for public relations, Sara Gramling, said the company had sold roughly 200 packages of treats since then. She counted it as a marketing success. The bakery, which gained fame thanks to "Sex and the City," had only recently begun shipping its goods. "It was a great opportunity to expand our network," she said.

Magnolia Bakery isn't exactly catering to the masses. A half-dozen cupcakes cost $35, plus about $12 for shipping. Facebook, Ms. Gramling said, takes care of the billing. The bakery is eyeing Facebook's global reach, too, as it opens outlets internationally, especially in the Middle East.

One of the appeals of Facebook Gifts is the ease of making a purchase. Facebook users are nudged to buy a gift (a gift-box icon pops up) for Facebook friends on their birthdays. They are offered a vast menu to choose from beer glasses, cake pops, quilts, marshmallows, magazine subscriptions and donations to charity. They are asked to choose a greeting card. Then they are asked for credit card details. Facebook says it stores that credit card information, unless users remove it after making a purchase.

Facebook has declined to say how many users have bought gifts, only that among those who have, the average purchase is $25.

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