Will Facebook Gifts be successful? In another sign of the continuous morphing of companies in the digital age, Facebook launched a new pilot in the US for giving gifts, combining the physical with the virtual. Having bought Karma (a social-gifting company) a year ago, it is now integrated into Facebook. “Facebook Gifts” works by suggesting choices of gifts to your friends. Facebook entered partnerships with 100-odd retailers across the US (some brand names like BabyGap, Brookstone, L’Occitane) across industries such as food, fashion and kids’ toys. It has even rented a warehouse in South Dakota and created its own software to track inventory and shipping. The gifts are packaged with Facebook branding. Facebook doesn’t say how much it earns, but similar agreements with Amazon give it roughly 15% of sales. Another example of the morphing of companies into new territories (Facebook with a warehouse??). You never know who your next competitor will be.
Here’s my take. In my view Facebook Gifts is a way for Facebook to (in that order):
• Keep users on Facebook
• Leverage mobile (they’re weak here)
• Go into e-commerce (they’re weak here too)
Facebook wants to be “the internet”. It wants to be the starting place to search for everything, to communicate and share with everyone, to purchase, learn etc. Their revenue stream is largely done through advertising (more that 85% I think), and the more people remain on the site, the better, the more targetted and the more effective their advertising. By introducing Gifts, it gives one more reason for a user to stay. Facebook Gifts works well from a mobile platform (in fact Karma, started as a mobile app I believe). Facebook is struggling to monetise the mobile platform, as users find mobile ads more intrusive and mobile ads are not as effective as the desktop ones. And the jury is out on social commerce. But this is an innovative, non-intrusive, way of doing s-commerce, similar to an affiliate program, but much more tightly integrated (eg the packages are done under the FB branding).
The major differentiation from other etailers/retailers that I see is the fact that FB Gifts proposes gifts, based on your friends’ social behaviour. And then there’s the whole social aspect of sharing the experience with other friends (both the “sender” and the “recipient” of the gift).
It will be interesting to watch how this US pilot works out, and whether it will roll to other regions. At the end of the day, FB’s blessing — and curse — is the huge amount of private information it holds on users. It can pinpoint-target ads in a way Google can’t (or not yet/not as well). But in Europe there are many privacy concerns and I fear users are starting to become acutely aware of the dangers.