Facebook Inc. has launched a gift service that allows users to send items such as real stuffed animals and cupcakes to friends, pushing the social network into Amazon.com Inc.'s online retail territory as it ramps up its search for new income streams.
Facebook has established varying revenue-sharing agreements with each of the retailers it is partnering with to sell the gifts, including Starbucks.
The new service marks the social network's first official foray into dealing in physical goods. Until now it has restricted its commerce activities to gaming and digital goods such as music and movies.
The commerce strategy was announced on the same day that privacy advocates asked U.S. regulators to investigate how Facebook is using data about users' retail purchases to improve its advertising products.
The Center for Digital Democracy and the Electronic Privacy Information Center sent a letter to the Federal Trade Commission, requesting it investigate whether Facebook's data-sharing agreement with Datalogix , which tracks purchases through loyalty cards, violates the settlement agreement the FTC struck with the social network over its privacy practices.
"Facebook asserts that the shared information is hashed and thus anonymous. But the Commission has stated that "hashing is vastly overrated as an 'anonymization' technique", the letter said. "It is critical that the FTC police the adequacy of these practices."
Weaving Facebook's social data into the commerce experience, like the regular reminders it sends to users about friends' birthdays, combined with knowledge of their preferences expressed through "likes" could give the social network a competitive edge if it manages to build the service significantly.
"It's this all-in-one experience that's just a few clicks," said Jed Williams, an analyst with BIA/Kelsey. "That potentially is disruptive and very compelling because of how efficient it is. Amazon has built its kingdom on efficiency."
Facebook cannot compete against Amazon's shipping and distribution infrastructure. It is also missing one crucial element of user data to make the service work: peoples' physical addresses.
When users order a gift, a Facebook message gets sent to the friend, asking them to fill in their physical address.
Facebook launched the service on Thursday with a handful of products, including cupcakes and Starbucks gift cards, but it has plans to expand to a range of goods including chocolates, socks, miniature dinosaurs and even ice cream.
In the past, Facebook offered a service that charged users to send virtual cakes or cards to friends on their birthdays or special events but it discontinued that several years ago.
"Real friends. Real gifts," is the tagline it is using to promote the new feature.
The service is enabled by technology that Facebook acquired when it bought Karma, a social gifting start-up, on the same day as its initial public offering in May.