Facebook’s Buy Button Could Add 5-10% Lift in Revenue, Analyst Says

NEW YORK (TheStreet) -- Facebook (FB) is expanding its trial that allows users to buy directly from ads, and according to one analyst, this could significantly add to the company's revenue.

That potential could significantly increase advertising revenue, according to SunTrust analyst Bob Peck, who holds a buy rating for Facebook with a price target of $100. In a research note on Thursday morning, Peck estimated that Facebook buy buttons could create a 5-10% incremental lift in revenue.

"According to our estimates, we think that this new ad unit (i.e., the Buy Button) could not only expand the activity of current retail/ecommerce advertisers but also open a new segment of advertisers that are more 'direct response' ecommerce companies," Peck wrote. "The buy button could be combined with ad units like the carousel to display sets of highly targeted products."

In 2014, Facebook reported $12.5 billion in annual revenue, up from $7.87 billion in 2013.

The Menlo Park, Calif.-based social media giant has been testing buy buttons since July, but as more and more tech companies adopt similar strategies, Facebook announced that it is expanding the beta program to more U.S.-based merchants on Shopify's (SHOP) e-commerce platform. Facebook's buy buttons let users purchase products they see in their News Feed or on Pages without having to leave the site.

The announcement follows Pinterest's launch of buyable pins, as well as Twitter (TWTR) and Google's (GOOG) (GOOGL) introduction of a buy button. All of these platforms realize the potential for monetizing an active audience with commerce features.

Jim Cramer analyzed when to sell Facebook stock on Real Money. Read more of his thoughts on Facebook.

Peck added that the opportunity on Facebook's platform could carry over to Instagram as well. Instagram recently  integrated advertising into its platform, and those ads are ripe for commerce features, especially since the platform is already so image heavy.

He also noted the significance of establishing buy buttons before the holiday season, when they could really have an impact on revenue for Facebook.

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