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Managers at the Palo Alto (Calif.)-based social network have met in the past month with more than 20 companies, said David Fisch, who runs a newly formed commerce partnerships group at Facebook. The aim is to help retailers set up shop on its pages and build tools that let Web users interact while buying.
Facebook is adding e-commerce features to attract users, keep them logged-on longer, and generate higher advertising sales. The effort may turn the company into an online shopping alternative to retailers such as eBay (EBAY), says Sucharita Mulpuru, an analyst at Forrester Research (FORR). "It's not natural to go to Facebook to shop—yet," says Mulpuru, whose firm is based in Cambridge, Mass. "But it's not a long step."
Fisch's team was set up in November in a division that includes groups focused on gaming and media. "Ultimately, the onus is on my team to prove we can create a lot of value for users," Fisch says. "We hope to see a lot of innovation."
The group is meeting with retailers to help Facebook develop software that lets users solicit advice and product reviews from Facebook friends in real time, even while they're shopping on other sites. Facebook is also building analytic tools to let retailers learn more about who's drawn to certain products, Fisch says.
Facebook now lets users buy in-game products, such as weapons and additional lives, using its Facebook Credits virtual currency that is purchased with real dollars. It has no plans to let consumers use Credits to buy physical products, Fisch says.
Fisch is getting assistance in his e-commerce drive from Alvenda, a Minneapolis-based start-up whose technology helps companies—including shopping site HauteLook and air-travel provider Delta—sell products from Facebook pages. HauteLook opened its Facebook store in November after Delta's opened in August. J.C. Penney this month added features to its Facebook page that let more than 1.38 million fans interact while they buy clothes and other products from the Plano (Tex.)-based retailer.
Another startup that helps retailers peddle wares via Facebook is San Francisco-based Payvment, which makes software that can turn Facebook pages into storefronts that accept a credit card or eBay's PayPal online payment service. Payvment has been starting 250 new Facebook retailers daily; that's up 42 percent since August, according to Payvment Chief Executive Officer Christian Taylor. Its stable of more than 40,000 retailers offers more than 750,000 items, including all-natural cosmetics, handmade jewelry, and T-shirts.
Facebook shopping is still tiny. Retailers that use Alvenda reached a daily record of $100,000 earlier this month. That translates to about $1.16 in sales a second. That compares with about $2,000 a second at San Jose-based eBay.
Investors expect social commerce growth to accelerate. Eventbrite promotes events that range from yoga classes to conferences on Facebook and Twitter, directing consumers to its own site to buy tickets. It raised $20 million in October during an investment round led by DAG Ventures. Last month, Payvment got $6 million in a round led by Sierra Ventures. "The goal is to become as big as eBay and Amazon (AMZN)," Vispi Daver, a partner at Sierra Ventures, says in an interview. "Payvment's growth has far surpassed all kinds of expectations."
Payvment, which is still developing its business model, doesn't impose fees on buyers or sellers. Alvenda, on average, charges $5,000 to $10,000 a month for custom Facebook store set-up and maintenance. EBay charges fees for placing an ad and for when an advertised item sells.
Even sites that compete with Facebook for the attention of Web users are lining up behind its social commerce efforts. More than half of the top 25 retail sites, including eBay and Amazon, have linked their sites to the social network in the past year, Facebook says. Shoppers who go to Amazon.com can log into Facebook and get recommendations for purchases based on their declared tastes in music and movies.
On Nov. 1, eBay rolled out Group Gifts, a way for Facebook friends to chip in together for a gift. Users can also share listings with Facebook friends. "We will continue to add options for integrating shopping into social networks, and sharing listings and other eBay pages," eBay spokeswoman Johnna Hoff says in an e-mail. Seattle-based Amazon didn't return requests for comment.
In three to five years, 10 percent to 15 percent of total consumer spending in developed countries may go through sites such as Facebook, said Mike Fauscette, an analyst at research firm IDC in Framingham, Mass. He says: "There's money in this for all of the players involved."