Facebook Hands Palo Alto Startup Big Break

We'll have to see how much money can be made 10-cents at a time

Wednesday, Oct 21, 2009  |  Updated 4:54 PM PDT
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Facebook Hands Palo Alto Startup Big Break

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Dad loves music but still has a cd player? Start him off with an mp3 player. Best Buy has them for only $39.99.

Facebook is about to give a peninsula company a huge new customer base.

The social-networking giant will soon allow friends to send each other 10-cent Web songs to stream online or 90-cent songs in the MP3 format that recipients can download as gifts from online retailer Lala.
     
The development, which both companies confirmed Wednesday, bolsters Facebook's existing gift offerings that include virtual birthday cakes and pints of beer, while putting Palo Alto startup Lala in front of hundreds of millions of potential new customers.

The offering will be available by Thursday afternoon, starting with a limited group of Facebook users and spreading gradually.

"Instead of just selling an MP3, we're selling an event for someone," Lala co-founder Bill Nguyen told The Associated Press.

Purchases will use Facebook's payment system, in which customers buy credits worth 10 cents each with a credit card.

Nine-credit song downloads will be of higher quality than one-credit streaming song gifts.

More than 8 million songs from all the major recording companies and independent labels will be available at launch.

Facebook, also based in Palo Alto, downplayed expectations for a big revenue increase from the new service.

"Some revenue is generated from the Gift Shop, but advertising is still our core business and we are focused on growing that," the company said in a statement.

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