Inside Facebook

New startup AdNectar is helping Facebook Platform developers monetize their applications by connecting them with brands who want to reach Facebook users through sponsored virtual gifts.

The company, founded by former Stanford Graduate School of Business students Nir Eyal and Michal Bortnik as well as Vlada Breiburg and Julie Li-Eyal, recently released a paper showing that virtual gifts delivered through applications in its network increased purchase intent by between 20-60%.

In a recent campaign with Godiva, AdNectar says Facebook app users sent 1.1 million branded virtual goods, yielding over 52 million total impressions for the brand. Those gifts led to 77,000 clicks to Godiva’s fan page, and over 12,000 of them became fans of the page.

The campaign ran in applications like Friends For Sale, where virtual gifting adds meaning to the application experience.

“We’ve used AdNectar virtual gifts and found them to be well-received by our users. Gift-giving is an important activity in Friends for Sale and AdNectar has provided us with gifts that are timely, entertaining, and engaging,” said Charles Hudson, VP of Business Development at Serious Business, the developer of Friends For Sale.

AdNectar CEO Eyal says a main reason virtual gifts are valuable is they’re a rare form of advertising that users actually like receiving.

“The users always know more than the marketer about what they and their friends like.  Virtual items let the users find our target audience for us.”

For example, in another recent campaign for Sunkist, Eyal says, “It is likely that the sender knows that the person being sent the virtual item, enjoys soda, loves the brand, or loves orangey goodness.  In any case, that’s a target customer for our client and is something you just can’t do with a traditional banner ad.  The best part is, it’s all voluntary.  The user chooses to send the virtual item because they enjoy doing so.”

AdNectar estimates that 5 million virtual gifts are sent each day on Facebook – 90% of which are sent through Facebook applications. Facebook has been building out its in-house virtual gifting business lately, having recently launched new features like scheduled birthday gifts and holiday gifts. Late last year, it converted its virtual gifting economy to a “credits” system from US dollars.

AdNectar, based in Palo Alto, has raised a small round of funding from private and institutional investors including Battery Ventures.