May 20, 2010, 4:18 PM

Social shopping provider Payvment gets $1.5 million, despite free model

Payvment, a social shopping service that helps retailers sell through Facebook, has secured $1.5 million in funding. The investment is led by venture capital firm Blue Run ventures, a firm that invested in PayPal, the popular payment service now owned by eBay.

In another vote of confidence for the social shopping trend, Payvment, whose technology helps retailers sell through Facebook, has secured $1.5 million in funding. The investment is led by venture capital firm Blue Run ventures, a firm that was an early investor in PayPal, the popular payment service now owned by eBay Inc.

Payvment markets a free Facebook application that allows businesses, organizations and individuals to sell through their Facebook pages using PayPal. Users create a Payvment account, sign up to accept PayPal payments and add products to their Facebook pages.  The company, which launched in November, says more than 20,000 businesses and individuals have started to sell on Facebook via the app and over 500,000 Facebook users have shopped for products using it. The app enables shoppers to add goods from several Payvement Facebook stores and check out all at once, the vendor says. Other features include the ability to offer discounts to fans and a reviews feature.

Payvment isn’t the only company hopping on the Facebook storefront bandwagon. Alvenda enabled the first Facebook sale, with an app for,  e-commerce software provider BigCommerce helps small retailers sell on Facebook through its SocialShop app, and ShopVisible offer similar services with its shopping cart software package. <p>
Paula Rosenblum, managing partner with research and advisory firm RSR Research LLC says she’s cautious about Payvment’s free model. “If the buyer doesn’t pay and the seller doesn’t pay, who pays?” she says. “How will the company make any money?”
Indeed most other companies feature Facebook storefronts as add-ons to the e-commerce software packages they sell. Payvment’s web site FAQs, however, clearly states its no-fee policy:
“Payvment does not charge anything nor do we take any cut of your sales revenue. No catch. It`s free and your Payvment account will remain that way. We like money just like everyone else but right now we are more concerned with building great technology and getting your feedback to help us do that.”

A spokeswoman for the company says venture capital funding pays for research, marketing and administrative costs and that Payvment feels that because  e-commerce on Facebook is new, it`s best to get its platform out to retailers and collect feedback so it can improve its product.

Nikki Baird, also a managing partner with RSR has other concerns about the Facebook commerce craze. She says social network members in general don’t necessarily visit sites like Facebook to shop.

“I have mixed feelings about it, overall,” Baird says.  “There should always be a way to connect a retail opportunity to a transaction, whether it is through fans on Facebook or banner ads to drive consumers to a web site.  But I’m not certain yet how much commerce needs to be available when people are in community mode.  “

If retailers aren’t careful, Baird says they could undermine the enthusiast nature of their fans by trying too hard to sell to them.  “Personally I see commerce on social networks as a small slice of the overall commerce pie—it’s a question in my mind whether it will be smaller than mobile commerce or not,” she says.

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