Do you remember Facebook Gifts? They were around cca. 5 years ago. You had the option of giving someone a picture for their Wall. We were generously given a couple of free gifts, which were promptly added to our birthday wishes for the first several friends who had their birthday after the option was introduced. Then we were supposed to go crazy about it and pay for the next picture of a balloon or a cake. Riiiight, like that ever happened. The service was, luckily, discontinued in 2008.
“Gift giving is broken”
“Gift giving is broken,” said Lee Linden for Forbes when he launched his company Karma.ME. Karma.ME allowed people to select real, actual gifts to be sent to their friends, all through your iOS and Android phone! You did not have to know the recipient’s address in order to send the gift – people would enter it themselves. If you did not like the gift you were about to receive, you had the option of changing it to something in the same price range, without the sender ever knowing!
Victoria Barret analized the gift giving business and concluded Linden was attacking a massive industry.
The business of giving not cash but almost cash, gift cards, has swelled to an amazing $100 billion in annual transaction volume. Some 15% of that value just goes unused.
Facebook recognized Karma.ME’s potential
Facebook needs ways to make money, obviously. Karma.ME was perfect for this social network because it was already using your Facebook friends and their likes and interests to suggest gifts. This was a perfect way of giving real gifts to your friends on the go, so Facebook bought Karma.ME in May.
One week ago, Karma announced it was integrated into Facebook and became (the new and resurrected) Facebook Gifts. The service started rolling out to US users and it offers over 100 brands (partners), but the number is supposed to keep growing rapidly. You can now choose whether you want to gift a digital gift card, or you still prefer to send a physical shipment of your gift.
With every gift purchased, Facebook will keep a percentage of the price. It is currently unknown how the split will be made, but it should vary based on the item and the seller. Josh Constine from TechCrunch analized what this could bring to Facebook’s revenue:
Facebook made about $9.51 per user in the U.S. in 2011. If it earned 10 percent on two $15 gifts per year, it’d instantly be making 30 percent more per user. If the margin is higher or Facebook can convince users to buy bigger gifts more frequently, it could score a year’s worth of ad revenue in a few clicks.
Amazon, Ebay and Etsy – watch out!
Could this work? In my opinion, yes. I played around with Karma app, but I have not had the option of testing the new Facebook Gifts, as you can see from the screenshot above. Still, I doubt Facebook would have made it worse. It would have either implemented it as-is, or (more likely) improve on it further.
I LOVE buying things online (as I am typing this, I have two tabs open with items I want to purchase). Constine wrote in his article that “some estimates peg the U.S. online gift market at roughly $38 billion a year”, which means there are many people like me out there. I’m not fond of stores and crowds you find there, but I like browsing through interesting stuff. Buying things online is convenient, simple and it saves time. This statement is even more true for purchases that you can make over your mobile phone.
Imagine doing all of your Christmas shopping during your train ride home from work. Imagine having a little helper that will know your sister just liked the new Twilight movie and will suggest something right down that alley. The best thing about buying a gift is making someone happy with it and this would be amazing help in avoiding the polite smiles and Thankyous people give when they receive something they are not really happy with.
Sure, there are stores out there where you can buy things and send them to friends. This is nothing new. Well, there were social networks before Facebook, but look what happened. We could message each other before, but most of our online conversations happen on Facebook. As much as I dislike it, Facebook is taking over the web. The online gifting industry might be just one more step on the ladder.