Exclusive: Facebook to charge merchants to run offers

Thu Sep 20, 2012 1:06pm EDT
 
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By Alistair Barr and Alexei Oreskovic

SAN FRANCISCO (Reuters) - Facebook Inc said it will start charging businesses to run Offers on its social network, turning a previously free service into a potential revenue generator at a time when Wall Street is demanding new sources of growth and profit from the company.

Facebook launched Facebook Offers earlier this year, letting retailers and other local merchants send deals to their Facebook fans. Users claim the offers from their News Feeds and redeem the vouchers at stores to get discounts.

The service has been free, but in coming weeks Facebook will require merchants to pay at least $5 on related ads to promote each Facebook Offer to a targeted audience of fans and friends of fans. The cost will vary based on the size of a company's Facebook pages.

Since Facebook went public in May, the company has been under pressure from Wall Street to show how it can turn its giant social network into a money machine. Facebook shares have lost about 40 percent of their value since the IPO.

The commerce potential of Facebook, known as f-commerce, has yet to materialize, partly because retailers have been able to feast on a host of free tools on the social network to attract customers.

Tying Facebook Offers to a paid ad service suggests the company is working to change this.

"We think this aligns incentives nicely," said Gokul Rajaram, director of product management for Facebook's advertising and Pages businesses. "The best results on Facebook Offers will come from organic distribution plus paid distribution."

In the past, some Facebook Offers have not been relevant to all users, partly because some people saw deals in their News Feeds from merchants located far away from where they live, Rajaram added.   Continued...

 
A Facebook logo on a computer screen is seen through a magnifying glass in Bern in this file photo illustration taken May 19, 2012. Facebook Inc said it will start charging businesses to run Offers on its social network, turning a previously free service into a potential revenue generator at a time when Wall Street is demanding new sources of growth and profit from the company. REUTERS/Thomas Hodel/File