Image: Brain Sins

Yesterday it was announced that Karma, Facebook’s new gift app, will be instrumental in its e-commerce success. No doubt social data is an incredibly powerful e-commerce tool yet there are many reasons both for and against for arguing that Facebook will become the dominant e-commerce force.

First off, here are 5 reasons that Facebook will dominate e-commerce.

1. Captive Audience: Facebook already owns the lion’s share of social media eyeballs and as platforms proliferate, more and more users will buy through the social network they know.

2. Social Search: As consumers become increasingly overwhelmed by amount of information and advertising available to them, they are turning to their peers (as opposed to Google Search) for purchasing recommendations, choices, and sharing.

3. Seamlessness: The ability to find, buy, share and be rewarded for what you buy is being baked ever deeper into the Facebook platform reducing the need to ever leave.

4. Real + Virtual: Facebook’s ability to sell both virtual goods and physical products using virtual and real world currencies creates a stranglehold on the growing merger of the on and offline world.

5. Targeting: While advertisers clamor for great and more dynamic advertising real estate within the platform, Facebook remains true to the wishes of its users by designing the size of the ads and leveraging data driven targeting.

Yet, with all this great opportunity, Facebook faces 5 equally compelling challenges:

1. Saturation: With almost every imaginable intersection between a person and product now covered within a single platform, users may tire of Facebook once advertising overwhelms the experience.

2. Mobile: Much discussed before and after the IPO, mobile remains a great challenge for Facebook despite the purchase of Instagram, Karma and Glancee.

3. Competition: Rest assured there are dozens of platforms designed purely for mobile consumers that are currently in stealth mode and primed to be the next Facebook.

4. Pollution: Shopping is an important but small part of the relatedness between people and the more that Facebook co-opts that relatedness for commerce, the greater the risk that the connective tissue it rely on will atrophy.

5. Shareholders: It is one thing to reinvent the way commerce is practiced and another to balance the competing demands of users and shareholders.

Stacked side by side, it’s easy to see why the jury is out on the future of Facebook especially in a mobile-centric marketplace. But their dominance and iterative business strategy bode well for continued success, as long as they never lose site of the fact that they must serve their users first.

Do you think Facebook will become the dominant e-commerce force? Or will too much advertising be its undoing?