Facebook Selling Virtual Gifts at $30-40 Million/Year Rate

Facebook has been pushing its virtual gifts prominently on the home page over the last year. Why? Because it’s becoming a nice secondary revenue stream for the company, doing somewhere around $3 million/month in sales these days.

That’s the conclusion Jeremy Liew over at Lightspeed VP came to after logging inventory levels in Facebook’s virtual goods store in recent months. Compared to the $15 million/year run rate he estimated earlier this year, Facebook’s digital goods business has appeared to double to between $30-40 million/year at the current rate.

While the assumptions Liew makes in running the data leave significant margin for error (data is only available for a small percentage of store items, seasonality, etc.), the fundamental trend shows a large growth in Facebook’s in-house digital goods business. With about 100 million active users, Facebook is doing $0.03 per user per month in virtual gifts transactional revenue.

The trend also bodes well for those application developers hoping to make a living on virtual goods transactions on the Facebook Platform. Like Facebook itself, many application developers are turning to virtual goods as an important secondary revenue stream to advertising – and many social game developers are creating sophisticated economies almost entirely based on virtual goods transactions.

Despite the existence of free alternatives, Facebook is showing that there is significant demand and payment infrastructure in place for its premium gifts. The company could become an even more important player in digital goods by providing virtual goods sales infrastructure for developers whenever its application payment platform is ready.

Related Inside Facebook and Inside Social Games Resources:

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17 Responses to “Facebook Selling Virtual Gifts at $30-40 Million/Year Rate”

  1. Nemanja Srećković » Blog Archive » facebook: znaci ne mogu da verujem says:

    [...] Čitam i ne verujem , jer se ovde zaista radi o pravim parama? Mislim, ako se i ne radi, vrlo lako mogu to i da pretvore u prave novce…  http://www.insidefacebook.com/2008/09/02/facebook-selling-virtual-gifts-at-30-40-millionyear-rate/ [...]

  2. Nick Stamoulis says:

    It’s amazing that a company can make SO much money in something so…. virtual. I have to admit – I’ve sent one before though :x

  3. Inside Facebook » Facebook Ads: Sponsored Virtual Gifts More Prominent in Redesign says:

    [...] offers some gifts for free (recent estimates put Facebook’s virtual gifts business at over $30 million/year). Gifts can normally be sent either publicly or privately, depending on the preference of the [...]

  4. Inside Facebook » Birthday Messages Are a Hit on Facebook says:

    [...] that Facebook’s doing $35 million a year in virtual gifts, these apps have the potential to do quite well for themselves. Who’s going to take one of [...]

  5. Inside Facebook » App Watch: SocialCalendar Growth Increasing Since Redesign says:

    [...] SocialCalendar’s business plans call for pressing hard into gifting and gift cards, and the app has full integration with Amazon’s API for gift giving and wish lists. Soon, the company will make a natural move into high margin virtual gifts for users who wish to send pixels instead of physical goods – a business that Facebook has been doing very well in lately. [...]

  6. Inside Facebook » Facebook Exchanges Dollars for Virtual Credits, Eyes Expanding Virtual Gifts Revenues says:

    [...] have been able to send virtual gifts to their friends for $1 each.  Now that Facebook is making millions of dollars a month on direct virtual gift sales, the company has decided to change the way it sells gifts to increase [...]

  7. eCommerce expo follow-up « Broadvision says:

    [...] that Facebook make $30 million a year from those stupid “virtual gifts” – more details from Inside Facebook from [...]

  8. Thoughts From The Cake Scraps » Blog Archive » Virtual Goods And How I Don’t Get Them says:

    [...] Viximo is a purveyor of virtual goods, more commonly called gifts.  While I would not say that they are common on Facebook, Facebook is the largest platform that they exist on (to my knowledge).  To be fair, while I might not think that they are common, Facebook is counting on it for revenue and not in small amounts.  It is estimated at $30 to $40 Million a year. [...]

  9. A Shopping Name for Every Day « marketing bean blog says:

    [...] And it still would be a P.R. coup for Facebook if its corporate communications folks find that person out of the 100 million-plus Facebook members who has made the full switch from the malls or e-tailers — and also makes for an irresistible news media pitch. It couldn’t hurt Facebook’s annual revenue for such “gifts” either. The run rate is pegged at $30 million to $40 million per year. [...]

  10. Internet Marketing Watch Tuesday 2 September 2008 | AffiliateDragon.com says:

    [...] Justin Smith reports Facebook is earning around $3 million per month selling “virtual gifts”. [Inside Facebook] [...]

  11. Facebook Pushing Birthday Virtual Gifts on Profile Pages says:

    [...] In addition, Facebook launched its own birthday notification service later that month. As we wrote at the time, “While this change also may appear minor at first, it’s a signal that Facebook is seriously eyeing the virtual gifts business.” Adding the gift store to profile pages is another step in that direction. It has been estimated that Facebook’s virtual gifts business ran between $30-$40 million last year. [...]

  12. Facebook Determined To Make Twice As Much On Gifts This Valentine’s Day | Profy | Internet news and commentary says:

    [...] In February, 2007 the social network introduced virtual gifts – small digital pictures representing some cute objects that can be sent to friends as birthday gifts or on any other occasion. Friends can demonstrate the gifts they have received on their profiles. Some virtual gifts are free to send but there are others, premium gifts, that cost $1 each. Users quickly realized that this low-cost way of expressing warm feelings to someone on a special occasion is something they are prepared to try and pay for – so it is no wonder the business of letting people send $1 gifts to each other reportedly generates $30-40 million a year to Facebook. [...]

  13. Facebook Platform Payment Providers Report Strong Growth in Q1 says:

    [...] and paid for via credit card in the Facebook Gift Shop. Facebook is rumored to have done between $30-$40 million in virtual gift sales in 2008, and the company has been conducting multiple experiments with [...]

  14. 7 Mobile and Micropayment Myths Debunked « daopay Blog says:

    [...] is making an estimated 15-30 million Dollars a year with $1 gifts that they sell on their [...]

  15. 4 Reasons Why “Pay With Facebook” Feature Will Work For Facebook » ZiggyTek » Blog says:

    [...] (You know you sent out some yourself). The virtual “gifts” made Facebook a fortune to the tune of over $15 million. And now Google has their sights on making more money off of the virtual [...]

  16. Facebook - JAYDAR! says:

    [...] goods business expecting to double in revenue to between $30-40 million/year at the current rate (Facebook Selling Virtual Gifts at $30-40 Million/Year Rate, [...]

  17. How many startups will Facebook Gifts kill? | PandoDaily says:

    [...] to do that too — the company at one point offered virtual goods, cards, and flair, and it brought in $30 million to $40 million in revenue at one point. They killed that in [...]

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