Facebook Is Giving Investors A Gift This Season

| About: Facebook (FB)
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Facebook (NASDAQ:FB) just downshifted in the quest to monetize its 1 billion users through its new Gifts service.

The decision to launch Gifts into the teeth of the holiday shopping season reflects Facebook's confidence the service can shore up user eye-share and eventually reshape e-commerce.

The company has partnered up with 100 different retailers, including Starbucks (NASDAQ:SBUX), to give Facebook users the ability to shop and gift among friends directly from its site.

The concept makes sense. Millions of users count on Facebook to remind them of friends and family birthdays, weddings and anniversaries. Integrated gifting with these reminders provides a powerful commerce tool, which makes shopping convenient and simple.

Facebook Gifts is mobile friendly.

Arguably the biggest knock against Facebook pre and post-IPO has been its inability to monetize mobile users.

Clearly, consumers are increasingly turning to mobile devices instead of PC's not just for socializing and surfing, but for gathering information. As a result, the mobile device is not only our car companion, but our couch companion too.

The shift hasn't been lost on Amazon (NASDAQ:AMZN), whose Kindle tablet lineup has created a mobile shopping ecosystem. Clearly, Apple (NASDAQ:AAPL), Amazon and Google (NASDAQ:GOOG) have all concluded service businesses will need front end hardware, optimized for offerings, to compete.

Facebook's Emerging Ecosystem

The biggest asset Facebook has is its members. Their engagement drives page views and advertising revenue. Increasing that engagement remains job one for ensuring Facebook's long term survival.

In short, Facebook Gifts is a natural extension of the engagement experience. By making Facebook more valuable to consumers, Facebook boosts usage and ad revenue while receiving affiliate revenue from its retail partners.

It's unlikely such affiliate revenue will move the needle on sales this quarter or next. Instead, it marks a logical push to establish Facebook as more than a simple social sharing site.

If this is indeed Facebook's aim, it's likely the company will continue to integrate services designed to keep user eye-balls firmly planted within Facebook's ecosystem. This includes its $1 billion purchase of Instagram, which Comscore notes saw more user visits per day than Twitter in August.

The challenge is big.

According to Comscore, Facebook users spent 5% less time surfing the site last month than the month before as visits from PCs users fell 13%. This was offset partly by a 3% increase from mobile users.

As the freighter turns, Facebook will face additional struggles to maintain the presence it enjoyed in a PC dominated world.

But, the turning point may be near.

Comscore also noted 43% of Facebook users are now accessing the site through their mobile devices.

Given non-store retail sales growth increased 10.6% in the most recent month, far more than the 4.4% growth in overall retail trade sales, Facebook Gifts could grow handsomely over time.

It should also prove a valuable source of new business for its partners too, which makes me wonder how long before Amazon becomes one too.

Regardless, Facebook and its retail partners should see tailwinds from the move, which may mean investors buying on down days in the low $20s will be rewarded.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.