Tis A Gift To Be Social
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Amazon.com (NASDAQ: AMZN) is gradually creeping into your entire waking life. They'd be in your dreams if they could. Now they have teamed up with MasterCard, Facebook (NASDAQ: FB), Twitter, and Pinterest for their Friends and Family Gifting. It's sort of a wish list on steroids, remembering Facebook friends' likes, their birthdays and other gifting occasions, etc.
In the ongoing duel between Amazon and Wal-Mart Stores (NYSE: WMT), after Wal-Mart threw down the gauntlet with its Shopycat app (also linked to Facebook), Amazon accepted the challenge with Friends & Family Gifting. It's still in nascent stages and when I tried to check out the service myself the main hurdle is that your Facebook friends have to sign up to be Facebook Connected with Amazon first. There's also a confusing policy about shared and public wish lists and remembering them and clicking on links. Don't get me started.
The Wal-Mart Shopycat app naturally excludes Amazon gift cards as a recommendation and most gift recommendations come from Walmart.com and some twenty other online websites. This app was one of the first initiatives rolled out from their @WalMartLabs, a social media research arm created in 2011 and meant to dovetail online and in store Wal-Mart shopping with Facebook and twitter.
Response this holiday season to both Facebook's and Amazon's social gifting apps is likely to be minimal as both have only weeks to perform with the Amazon program made available on December 12. Facebook gifts were only widely available on December 11, cutting it awfully close for timely holiday delivery. Facebook must be steaming as Amazon cannibalizes their Gifts feature with the gifting feature on Amazon debuting the day after theirs. As social gifting apps gain traction over time next year's holiday season will be more telling. Even in this digital age, it's going to take word of mouth to win hearts, minds, and digital wallets.
Why Amazon's and Facebook's weren't rolled out weeks before Black Friday and Cyber Monday is a mystery as that would have been optimal. This year, Cyber Monday was record breaking as the busiest ever. Wal-Mart now has a year's head start on them. Another drawback to social gifting is that recipients can see what gifts they're getting but not from whom. The platforms still need tweaking, obviously. Amazon has one more advantage to Facebook Gifts in that adults can create wish lists for children under 13 who aren't allowed to have Facebook pages.
Comments from internet retail experts indicate that the gifting initiatives will only be incrementally accretive to sales at Wal-Mart, Amazon, and Facebook with its Gifts initiative. In the case of Amazon, every little bit helps as they whittle down their 3,115.25 P/E.
Social gifting aside, Amazon has also teamed up this season with Coinstar in a promotion in which people can gather up the coins from the sofa cushions and purchase gift cards from Amazon and other retailers without a coin-counting fee.
Amazon is still the hands-down winner in the e-commerce space, with over 100 million unique visitors per month, lagged by Apple's etail site at less than half that and Wal-Mart.com at third place with 43 million. Amazon also launched Brand Pages in November in which stores can host pages on Amazon and link to their Facebook pages. All these cross-promotions, with MasterCard, Facebook, and Coinstar, most directly benefit Amazon. In this case, like Apple derivative plays, the real trade is Amazon.
As for Wal-Mart, the world's largest retailer, it's not hurting this holiday season, up over 16.91% over 52 weeks, but neither is it outperforming by much with the S&P up 15.23%. The P/E at 14.33 and a yield of 2.30% are attractive for a value retail stock but their profit margin is only 3.57%. It's volume, volume, volume with Wal-Mart and they have grown their free cash flow 124% over the last five years. Analysts expect overall growth in the single digits over the next five years. To take away just 10% of Amazon market share they will have to double online visitors.
Facebook, not a retailer or etailer, raised analysts' hopes that they could monetize the social network with the Gift initiative, spiking the share price. As Fool Steve Heller argues people don't come to Facebook to shop. This bodes ill for the Gift app and barely changes anything for Amazon as their social gift app can also be accessed from other social media. The P/E is 142.74, pretty high for a company that's been trading less than a year.
Who Wins This Holiday Season
Facebook is the least attractive of these companies as its Gifts app is unproven and Facebook is not seen as an online shopping destination like Amazon. Monetization is an ongoing issue and ads on Instagram photos aren't enough to sway investors.
Amazon is still a growth name and analysts predict a 36% growth rate over the next five years. It has a great many moving parts and an investor has a lot of work to keep up with due diligence on this name with its cloud, Kindle Fire sales, etail, streaming, etc. RBC Capital Markets just initiated a price target of $300. Way to step out on a ledge as the stock is already at $260. I like Amazon the most although it can be just as volatile as Facebook.
Wal-Mart would be the safe choice, not exciting and not likely to move as much as it had the last two years. One wouldn't lose money, not with that yield. It won't make the online money as fast as it expects but it is the premier bricks and mortar store.
Of these three, Amazon is winning this holiday season but still a name to watch very carefully.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Amazon.com and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!