Don't Look Facebook Gifts in the Mouth

Facebook (Nasdaq: FB  ) has 955 million users with a propensity to share, and it's not beyond cashing in on the e-commerce possibilities.

The world's largest social-networking website introduced Gifts on Thursday. When the service officially rolls out, folks will be able to ship physical presents to their friends through Facebook's sticky interface.

There's been a fair deal of cynicism on the platform's potential since its unveiling. Fellow Fool Dan Newman argues that the venture won't last very long.

I disagree. Gifts will be huge, and the out-of-favor dot-com speedster is merely scratching the surface.

How do I gift thee
When Gifts goes live, it will be hard to miss. The colorful gift icon will be visible from the birthday and event reminder on a user's newsfeed. The "give a gift" icon will also be present from a friend's timeline.

For those who like to brag -- whether it's to make exes jealous or to publicly raise the bar on what a birth announcement, graduation, or birthday warrants -- the person sending the gift can make the act public. For those who prefer to keep it on the down-low -- whether it's modesty or there's something to hide -- the act can also only be broadcasted to the recipient.

This won't be for everybody. The vast majority of users may never be on either end of the process. However, somewhere out in Seattle, Jeff Bezos is shaking his head.

A new e-commerce revolution
Amazon.com (Nasdaq: AMZN  ) isn't going to be threatened with a few stuffed animals and cupcakes making the rounds. This may seem to be a bigger challenge to florists and greeting card companies, though at least one -- 1-800-Flowers (Nasdaq: FLWS  ) -- is already on board as a Gifts provider.

However, there's a real opportunity here for Facebook to rewrite the way gifts are doled out, and that's where Amazon should start to get nervous. Send a friend a gift through Amazon, and the leading online retailer is pretty agnostic about the process. It doesn't know  you're shopping for a friend until the end of the checkout process, and by the time the virtual shopping cart is loaded and the shipping address is pecked in, it's not as if Amazon is going to offer some friend-specific suggestions.

Facebook is already ahead of the curve. It knows who you're shopping for from the start, and -- get this -- it knows your friend. It knows the music your friend likes. It knows the restaurants and stores where your friend checks in.

The Gifts demo video seems pretty straightforward. A customized gift screen can bring up opportunities to purchase tickets to an upcoming show from one of the friend's favorite bands or a new CD. Let's not forget restaurant and store gift certificates. What? You're friend's favorite eatery isn't here? Well, she's apparently a fan of sushi. How about this place?

In other words, Facebook has the ability to be a smarter gift guide than Amazon right from the start! Imagine when even more merchants -- local and national ones alike -- come along.

Do you still think Bezos isn't breaking into a sweat?

Clawing back to respectability
Shares of Facebook moved higher Friday on the news, but it clearly has a long way to go before winning back investors who were burned at its IPO.

It doesn't seem to matter that Facebook is ridiculously profitable, is growing fast, and has $10.2 billion in cash and marketable securities on its balance sheet.

Investors simply see a company that went public at $38 in May and has shed nearly half of its value. Bears argue that it's still insanely overvalued, even though it's trading at far more reasonable valuation multiples than market darling LinkedIn (Nasdaq: LNKD  ) .

It just hasn't dawned on the market that Facebook's connections -- not just the 955 million active users, but the more than 100 billion friendship connections -- can turn this into a dot-com juggernaut that will make Amazon and Google (Nasdaq: GOOG  ) seem tame in comparison.

Yes, Google. Just as Gifts has the ability to deal Amazon a blow by transforming the gifting process, Facebook has already gone public with its intentions to revolutionize search by making it far more personal.

Right now, it may be easier to laugh at CEO Mark Zuckerberg's dreams of raising the bar on e-commerce and search than to respect Facebook's advantages. That would be a costly mistake if you happen to be shorting Facebook or waiting for a more opportune time to buy in.

You'll thank me, and I won't even be expecting a Facebook Gift from you when I'm right.

A world of opportunity
There's a new premium report on Facebook detailing the opportunities and challenges in store for its shareholders. The report includes a full year of updates, so time's ticking. Check it out now.

The Motley Fool owns shares of Facebook, LinkedIn, Amazon.com, and Google. Motley Fool newsletter services have recommended buying shares of Facebook, Google, LinkedIn, and Amazon.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (4)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 29, 2012, at 12:28 PM, Minow wrote:

    I'm not buying it! Face Book may have 955 million users, but its still un-proven and a one-trick pony for now that needs acquire more parts or business that will make it a success..in other words grow the business as well as the membership!

  • Report this Comment On September 29, 2012, at 3:41 PM, francescac wrote:

    I will send present to my friends by Facebiik, fo shure!!!

    It will be a fun and easy experience.

    Love it, very much so!!

    Sorry, Minow. Wath would you ever said if knowing nothing sbou I would tell you to be able to send a virtual chicken as a present to my cousin? I did it and she has been delighted.

    Now I will send her chocalates for her birthday. Easy peasy... :)

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