The Insider Selling That Will Save Facebook

Facebook (NAS: FB) didn't generate a lot of buzz when it announced its upcoming Facebook Gifts platform two months ago, but it's starting to get closer to becoming a reality.

The world's leading social-networking website operator held a press event on Thursday night, broadening the number of merchants participating in the new website offering where buyers can publicly gift recipients with physical goods.

You won't miss Gifts when it does in fact go live for stateside users in time for the holiday shopping season. A gift icon will show up as you have upcoming birthday and event reminders or whenever you check out a friend's timeline.

You can already figure out the viral magic at play here. If the person sending the gift chooses to make it public -- and that is optional -- it's going to remind others that simply pecking out "Happy Birthday, bro" on someone's profile page isn't enough anymore.

This can backfire, of course. Some of the website's 1 billion-plus active users may conclude that the site has grown too commercial. Keeping up with the Joneses may make the site less social. However, the upside is substantial for Facebook as a company that stands to get a cut of the action in every sale as a middleman.

Making it pay for merchants
Companies know they need an online presence on Facebook, though they're dealing with a double-edged sword. Merchants are now being encouraged to pay to bubble up their updates as sponsored posts, and some fear that their exposure will be limited if they don't. Despite the growing popularity of Promoted Tweets, some merchants think Twitter may be a fairer social platform than Facebook to get their marketing messages across.

General Motors (NYS: GM) , for one, publicly backed out as an advertiser shortly before Facebook's IPO earlier this year, arguing that it could continue to benefit from the site by supporting its free fan and product pages on the website without having to shell out big money for ads.

Welcome to the social reality. The tenuous relationship brewing between merchants and website operators isn't limited to Facebook. Yelp (NYS: YELP) has been accused in the past of not only favoring its 35,500 paying accounts over the 889,000 claimed business page owners, but also of pushing its active merchant plan as a way to bury bad reviews. Yelp has denied the claims through the years.

There really won't be any kind of controversy for Facebook Gifts merchants, though. Any sales will be incremental, so it's not a surprise to see some of the big names of physical retail -- including babyGap, Brookstone, and ProFlowers -- as well as heavy hitters of digital services including Hulu Plus and Pandora on board.

Now that some prolific names are in the mix, lesser merchants will wonder why they aren't taking advantage of the platform. Yes, there's viral magic at play on the merchant end. Companies that steer clear of Facebook Gifts will be doing so at their own peril.

It's all about timing
How neat is it that Facebook chose to expand its roster of Facebook Gifts -- ahead of its sitewide launch -- on Thursday, the day after lockup restrictions expired on roughly 800 million shares of stock? The conversation went from insider selling to selling from the inside.

On the other hand, it's easy to see how the first Facebook Gifts transactions will play out. Snide remarks like "thanks, big spender" will follow as comments. The gift buyer or the recipient may get self-conscious, possibly to the point of deleting the timeline notification.

Then the sentiment will start to shift. The parents and grandparents on Facebook -- the ones who younger users dreaded would invade the website back when it stopped requiring ".edu" email addresses -- will have their say. The tide will turn. It always does.

That's when Amazon.com (NAS: AMZN) and eBay's (NAS: EBAY) PayPal will start to break a sweat. Anyone denying the power of Facebook and wondering why even those companies need to be worried aren't thinking this through. Amazon knows what you want, but Facebook knows who you know -- and what their interests are. PayPal is a trusted online source for financial transactions, but as more people trust Facebook with their credit card information to complete online purchases, it's just a matter of time before the platform spreads to other sites the way folks can now register for a growing number of sites by connecting their registrations to Facebook.

The stickiest website on the planet will bridge the gap between social and e-commerce. When it happens, don't bother sending me Facebook Gifts in appreciation. Being right will be its own reward.

A world of opportunity
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The article The Insider Selling That Will Save Facebook originally appeared on Fool.com.

Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Facebook and has options on Facebook. Motley Fool newsletter services recommend Amazon.com, eBay, Facebook, and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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