Buy.com Wants to Steal eBay's Friends

Hoping to use social networking to compete with auction giant eBay (Nasdaq: EBAY), Buy.com on Tuesday launched Garage Sale, a service that lets users sell goods and services from within their home pages on sites such as Facebook.

The Internet retailer said its service would be immediately available to users of Facebook and would be rolled out for other social networking platforms in the future.

Through Garage Sale, users can post items for sale and buyers can complete transactions from a user's profile page.

Staying Put

The service aims to capitalize on the fact that many eBay users maintain profiles on popular sites such as Facebook and MySpace, often referencing their auction listings from those pages. However, anyone interested in buying from those auction listings must do so through eBay.

Buy.com hopes cutting out the middle man, and eliminating auction listings fees, will pay off in the form of eBay buyers and sellers turning to social networks to conduct their transactions.

"Garage Sale allows consumers to become personal online retailers," said Buy.com CEO Neel Grover. He described the so-called "embedded e-commerce" approach as the first of its kind. "We see tremendous growth opportunities in providing the millions of users on business and social networks with an alternative to eBay and the ability to transform their personal profile pages beyond information-sharing."

Facebook users sign up and download the Garage Sale program to their profile home page, where they can list items for sale. Buy.com will not charge a listing fee and charges a flat fee of 5 percent of the final sale price.

Many online companies have taken runs at eBay over the years, most without putting a dent in the company's stranglehold on the Internet auction market. In fact, as eBay has grown, particularly through international expansion, rivals such as Amazon (Nasdaq: AMZN) and Yahoo (Nasdaq: YHOO) have shrunk or shut down their auction offerings.

Social Commerce Arrives

Still, social networking has the potential to change the online retail game, especially when it comes to peer-to-peer sales such as those that dominate the eBay platform, said Gartner (NYSE: IT) analyst Gene Alvarez.

"Referrals drive a huge part of the economy in the real world and the Internet enables networks of friends to be leveraged in a whole new way," Alvarez told the E-Commerce Times.

With the program installed, Facebook users can display product photos and descriptions. If a sale is made, the program bills a buyer's credit card and credits a seller's PayPal account or issues a check for payment.

Buy.com says the Garage Sale platform is based on patent-pending technology, some of which Buy.com acquired when it bought startup Shoperion earlier this year.

Several social-networking sites offer widgets that will allow auction listings to be displayed on profile pages. However, completing those purchases still requires visiting eBay itself.

Bridging the Gap

eBay has recognized the possibilities that social networking offers as well. The platform has long considered its community of members its strongest asset and has done a variety of things to foster that community spirit, from an eBay magazine to a short-lived eBay reality TV show.

In May, eBay invested directly in social networking and search when it bought StumbleUpon, a firm that offers Web site recommendations based on what other people like, for US$75 million.

It's likely many more such social-commerce experiments will emerge as retailers seek to find ways to close the gap between social networking -- where recommendations from fellow Web users can be powerful motivators to buy -- and commerce, Forrester Research analyst Carrie Johnson told the E-Commerce Times.

"The big e-commerce players, particularly Amazon and eBay, have long recognized the value of connecting users with one another," Johnson said, noting Amazon's consumer recommendation features. Even more companies have sought ways to use blogs to drive traffic and build buzz about their products or sites. "Personal recommendations do carry a lot of weight with consumers."

Still, Buy.com's incursion into eBay territory comes as the auction giant has taken steps to build up its base of buyers and sellers, adjusting its own fee schedule and adding more features meant to make it easier for buyers to pinpoint the items they want in the vast array of items up for bid on the site.