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Why Facebook Unfriended E-Commerce

Facebook on Tuesday (July 29) confirmed that it has killed the last remnants of its direct E-Commerce operation, with plans to fully shutter its Gifts shop on Aug. 12. Facebook launched Gifts back in 2012, initially selling physical goods and later only selling gift cards from more than 100 retailers,

Facebook Gifts opened in 2012 as a way for users to buy gifts such as socks and teddy bears. But the service stopped selling physical goods after a year, offering only gift cards from more than 100 merchants, according to Reuters, including Starbucks, Best Buy, Domino’s, Apple and Barnes & Noble. Facebook associated the card sales with the birthdays of Facebook friends.

 “We’ll be using everything we learned from Gifts to explore new ways to help businesses and developers drive sales on the Web, on mobile and directly on Facebook,” Facebook said in a statement.

Facebook is still experimenting with other commerce possibilities, as are all of the other major social sites. But commerce revenue doesn’t have to be directly charging dollars in exchange for goods, services or giftcards. Information-selling—a Google and Amazon specialty—is a natural for social. The ability to gain deep and vast understanding of the individual’s consumers’ habits, likes/dislikes and what they own and—much more critically—what they want is part of the fabric of social.

In other words, simply harvesting that data and selling the information—at the individual shopper level—to interested parties is a terrific way to monetize social without needing to make any direct sales.

The other social attribute that makes these sites so potentially lucrative are the detailed social connections. A retailer could try and sell someone a gas grill or could try and sell that grill to the 83 known friends/associates of the shopper, after pointing out that it’s her birthday or some other gift-giving occasion.

Facebook saw lackluster direct sales—even with the giftcards—but it has barely scratched the site’s data-harvesting and mining potential.

Bloomberg pointed out that Facebook Chief Operating Officer Sheryl Sandberg said last week that making some kind of merchant money from site operations is still critical. “The more people buy online, the more people buy things they discovered through their mobile phones,” she told investors, “the more people discover things from a News Feed and go on to purchase, the more important we are in driving e-commerce.”

Put bluntly, driving E-Commerce might be a lot easier and more profitable than doing it directly, especially if the sales are being driven to retailers who are willing to make the deals.

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