Facebook Tries Again with Gifts, Hopes to Improve Revenue

The last time I wrote about Facebook for the news of the day was back in August. There were concerns about Zynga’s execs leaving and what that meant for Zynga and Facebook. Zynga is a huge moneymaker for Facebook and keeps users on the Facebook site for hours at a time. However, Facebook has been catching a hard time from Wall Street ever since its IPO in the spring of this year.

And it’s not as if Facebook is innocent to investors’ criticisms. Since the IPO, Facebook stock has fallen almost 50%. That’s a big drop no matter what industry or business a company is in. Facebook hasn’t really been able to deliver solid sales numbers for its ads or other offerings even though it has over 900 million users! I tried to create with a clever analogy that conveyed the situation Facebook was in, but I just couldn’t.

Wait a minute! Here it is —I feel like Facebook is sitting on a gold mine with only a shovel, when it really needs a mining pick. Everyday millions of users don’t give up the gold, and Facebook doesn’t seem to have figured out the right way to get it from them.

Facebook’s Next Attempt to Please Investors, and find their Mining Pick

Last night, news broke that Facebook has, according to the LA Times, launched “Facebook Gifts, a service that lets users buy and send real gifts—not virtual ones—to friends.” If you think back a bit, you might remember that Facebook dabbled in gift-giving a few years ago, but it never amounted to anything but silliness.

Why Facebook Gifts might Work

When I first thought about this idea I found myself thinking, “How is this possibly going to work? We already have plenty of ways to get gifts for our friends.” But the more I think about this move by Facebook, the more I can actually see it working for the company.

Everyone assumes that Facebook needs to make its money in ads. That’s where, according to the LA Times, 85% of their revenue came from last year. But that doesn’t have to be the case. Finally, Facebook is showing us that they have what it takes to make money directly from their users. So why might Facebook Gifts work?

Because, as Wired writer Ryan Tate reports, “Facebook is trying to monetize common, naturally occurring behavior on its network in a way that feels more natural than other Facebook ads.”

Actually, Facebook Gifts is likely going to work

Facebook Gifts is a natural fit for the company. It can be used on any computer, but more importantly, on mobile as well. Facebook has been receiving a lot of flack and pessimism about its ability to engage mobile users, and now they have something, and it has a lot of potential. The whole purpose of Facebook is to connect people, and now people have a way to connect not only digitally, but with a physical message as well. Happy birthday friend, here’s a Starbucks Gift card or a bouquet of flowers!

Currently, Facebook is focusing on lower end products under or around the $50 mark. Businesses are going to jump at partnering with Facebook Gifts. Why wouldn’t they? Facebook’s 900 million users are a big market. Plus, Facebook Gifts has the potential to turn into a much larger sales platform for Facebook.

Business and Facebook Gifts

If you run a small or large business, it’s going to be important to keep an eye on Facebook Gifts. If what they’re currently selling on Gifts fits your product line, you might want to consider jumping on the boat as soon as you can. Otherwise, be patient because if it succeeds—and it probably will—you can expect to see the gift idea expand into something more of a traditional marketplace. Facebook might very well become another place to shop online like Amazon or eBay.

Ultimately, I guess what I’m saying here is, Facebook might have found that mining pick they desperately need. I’ll definitely be watching to see if Facebook Gifts delivers.

Do you think Facebook Gifts is what Facebook needs to impress investors? Do you see your business using Facebook Gifts in the future?

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Patrick currently lives in Somerville, Massachusetts, where he is studying for a Master's Degree in Intercultural Relations. Upon graduation from Penn State in 2008, he spent two years overseas in Kyrgyzstan with the U.S. Peace Corps. While writing is currently his chosen way to put food on the table, he loves fitness and exercise, which he believes makes up for his avid computer gaming habit.

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