Update: Facebook - Better Monetization While Improving The User Experience

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 |  About: Facebook (FB)
by: Jeffrey Himelson

Summary

Facebook announced today that it will shut down its Facebook Gifts permanently on August 12th.

This announcement cements my thesis about Facebook's receptiveness to the user experience and it being on the verge of improving monetization through the integration of the "buy button".

In my previous article, I outlined the implications of the "buy button", but did not explicitly predict the end of Facebook Gifts.

Today, Facebook (NASDAQ:FB) announced that it will be shutting down its Facebook Gifts on August 12th. The announcement comes after Facebook recently announced that it will be integrating a "buy" button onto various ads shortly. Facebook gifts was originally launched in September of 2012, but has not gained traction since. When wishing someone a happy birthday, users were quickly prompted to buy them a gift. The gifting was not a natural extension, and many users were irked with being constantly prompted to purchase.

The implications of this removal are two-fold. First and foremost, it marks a shift of Facebook focusing on entering the e-commerce business through the integration of its novel "buy button". This change signals that the "buy button" will start to be rolled out shortly. An ancillary implication of the alteration, is that Facebook recognizes the user experience is essential. Facebook could have integrated the "buy button" while keeping Facebook Gifts running, but it prudently wants to ensure users sustain a certain level of satisfaction with the platform.

In my previous article entitled: "Facebook Is Getting Closer To E-Commerce," I discussed the vast impacts of the addition of a "buy button". As an investor, I am delighted with the announcement, as it is evidence that FB is receptive to users and is on the verge of adding new ways to improve the ROI of advertisers, which will increase the price of ads. The elevated price of ads will lead to higher quality ads which will improve the user experience further, and create a virtuous cycle. Facebook is an incredible investment opportunity at these levels and I reiterate my price target of $103.50.

Disclosure: The author is long FB. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. I also own LEAP call options.