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Will Facebook Move To The Commercial District?

Managing investor expectations is going to be the next big challenge for Facebook after its $5 billion IPO that would raise its valuation to a mindboggling $100 billion. The Wall Street Banks and venture capital firms are already egging the social media giant to take the next step to expand its revenue stream and enter the biz world with e commerce. Currently 85% of Facebook’s revenue comes from advertisement, which is not surprising considering that even Google earns 96% of its revenue from Adwords and Adsense.

As per a Reuters report some of the tech world’s most crafty investors heading Silicon Valley’s VC firms like Accel Partners and Andreessen Horowitz, and Wall Street biggies like Goldman Sachs are persuading Facebook to enter the arena of e commerce like online retailers Amazon and e bay to start off an additional shopping revenue stream.

The logic for Facebook entering e commerce comes from it having the behavioral data on a membership platform of 800 million users. Amazon uses predictive analytics based on the buying behavior of its 164 million on line buyers to good effect. So the big boys of the investor world feel that it would be a great opportunity for Zuckerberg to use the Facebook social data for e commerce. Not to perhaps sell products directly like the world’s largest book seller Amazon but to act as a platform for online sellers like Fab.com, Yardsellr, Beachmint and Oodle on a partnership basis, more like a landlord collecting rents  . Facebook already partners Zynga like a landlord collecting 30% of the revenue of the world’s largest social gaming company that has developed block buster games like Farmville and Angry Birds on its platform .

The big question is whether Zuckerberg who is firmly focused on building the world’s largest relation building platform will be lured by the glitz and glamour of big biz and turn Facebook into a commercial district. Facebook today is more like a residential suburb today with a little mom and pop stores that sell goods that its residents really love.

However becoming a e commerce platform will change all that with a possibility that big banner sellers will chase out some of the current residents. Entering the e commerce segment with Zynga was easy and useful for Facebook where one was dealing with high margin virtual goods or services like games that engaged people for hours which was meeting FB’s social sharing objective. Entering e commerce will mean much more. Also whether it would be possible for Facebook to sell branded goods competitively that are already sold by high end retailers with glitzy brick and mortar main street stores supported by plush online services is tobe seen .

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