A group of e-commerce start-ups, backed by some of the tech world's most pedigreed financiers, are betting that Facebook Inc can become an e-commerce powerhouse to rival Amazon.com Inc and eBay Inc.
As the world's largest social network hurtles toward a $5 billion initial public offering, it will come under more pressure from Wall Street to find new sources of profit growth and reduce its reliance on advertising, which accounted for 85 per cent of its 2011 revenue.
Some entrepreneurs and investors increasingly think "f-commerce" - meaning e-commerce on Facebook - is the answer. Start-ups such as BeachMint, Yardsellr, Oodle and Fab.com are coming up with novel ways to persuade Facebook users to not just connect with friends on the social network, but to shop as well.
Backed by tens of millions of dollars from venture capital firms like Accel Partners and Andreessen Horowitz, and other big investors like Goldman Sachs(GS.N), these start-ups are pushing out shopping apps, hosting online garage sales and testing out new business models on Facebook.
"E-commerce is a huge category with very strong tailwinds and it's a natural move for Facebook," said Sam Schwerin of Millennium Technology Value Partners, which owns Facebook shares and has a stake in BeachMint.
Amazon revolutionized online shopping by crunching lots of customer and purchase data to come up with relevant, personalized recommendations. In the same vein, Facebook's combination of data, analytics and payment technology could fuel the next generation of e-commerce, Schwerin said.
Harvard MBA David Fisch, a former executive at eBay's StubHub online tickets business, oversees Facebook's e-commerce efforts, working with retailers to build social commerce businesses on the platform.
"People have always shopped with their friends; now they expect it online," Fisch wrote in a December blog. "Companies who think differently about social will find success."
Fisch declined to comment, but investors said Facebook understands the importance of having an e-commerce strategy.
"It's a big imperative for them," said Theresia Gouw Ranzetta of Accel Partners, an early backer of Facebook. "They understand it's an important strategic benefit for them to make e-commerce players successful on the platform."
Big Brand Stores Flop
Facebook had 845 million monthly active users at the end of 2011, far higher than Amazon's 164 million active accounts or the eBay online marketplace's 100 million active users.
But despite that huge base, Facebook is primarily a way to connect with friends, and not an online shopper's first destination. Big retailers including J.C. Penney (JCP.N), Gap (GPS.N) and Nordstrom (JWN.N) had previously set up stores on Facebook but shut them after generating few sales
Facebook had 845 million monthly active users at the end of 2011, far higher than Amazon's 164 million active accounts or the eBay online marketplace's 100 million active users.
But despite that huge base, Facebook is primarily a way to connect with friends, and not an online shopper's first destination. Big retailers including J.C. Penney (JCP.N), Gap (GPS.N) and Nordstrom (JWN.N) had previously set up stores on Facebook but shut them after generating few sales