Facebook Expands Virtual Goods Business with Licensed Music and Sports Gifts

For those tracking the expansion of the virtual goods economy in the US, the explosion of the virtual goods market on the Facebook Platform has been nothing short of remarkable this year. We expect the total US market to reach $1 billion in 2009, with social applications and games leading the charge, based on research from our recently released report, Inside Virtual Goods. However, while Facebook hasn’t focused on its own direct virtual goods business as much as it has growing its brand and performance advertising businesses, it has been steadily rolling out more features over the last year, including its own virtual currency, designed to lay the groundwork for Facebook’s future e-commerce growth.

new-facebook-gift-shop

Today, the company took another step forward in those efforts, announcing the availability of licensed music and sports gifts in the Facebook Gift Shop. Here’s how it works:

- When users go to the Gift Shop, they’ll be able to choose gifts from one of several categories: Music and MP3s, Charity, Sports, Virtual Gifts, E-Cards, and Real Gifts (i.e. physical goods).

- If users choose Music and MP3s, they’ll have two options: 1) “Web songs,” which can be played from the News Feed and wall, will cost 1 Facebook Credit, and 2) Full MP3s, will cost 9 credits. Facebook’s music gifts are all licensed from LaLa.com, and are only available in the United States. Users can also access their purchased music gifts on LaLa.com by creating a normal account or logging in through Facebook Connect. MP3 recipients can also download their songs. Friends who see the music gifts in the News Feed or on a friend’s wall “will only be able to play the song in full once, after which they will be able to play a 30-second clip.” See more details from our earlier coverage today.

new-facebook-music-gifts

- If users choose Sports Gifts, they’ll be able to select officially licensed branded virtual gifts, like jerseys or mascots, from the NBA, MLS, and “a number of major U.S. colleges.” Virtual gifts have proven very popular inside sports applications on the Facebook Platform for obvious reasons – people love to brag about their favorite teams and smack talk their friends when they win. (Update: Facebook is licensing content from the NBA, MLS, and universities through Virtual Greats.)

- If users choose Charity Gifts, they’ll be able to purchase items whose net proceeds are donated to the organizations. Charities already involved include Kiva, Project Red, TOMS Shoes, Charity Water and the World Wildlife Fund. Starting today, gifts from the Facebook application Causes will also be included in the Charity Gifts section of the Facebook Gift Shop.

- E-Cards will allow users to send gifts from developers like JibJab, Real Gifts will allow users to send physical items, and Virtual Gifts will allow users to send the virtual gifts that have been in Facebook’s gift shop for a long time.

Overall, Facebook’s BD efforts to sign licensing deals with LaLa, Virtual Greats, and more coming soon are meaningful steps toward expanding the company’s digital goods library through partnerships with various rights holders, and reflect the company’s desire to make e-commerce an increasingly important part of its revenue future.

Facebook has recently expanded the availability of its virtual currency, Facebook Credits, for purchase in more currencies and through more payment methods. We expect those tests – as well as tests of Facebook’s platform payment system – to continue to expand in the months ahead.

To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.

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Leave a Reply

7 Responses to “Facebook Expands Virtual Goods Business with Licensed Music and Sports Gifts”

  1. Jen says:

    They shut down the gifting app I had made without even giving me a warning. I’m really upset about this. My app was really popular and now it is gone. I don’t understand why they can’t expand their virtual gifts, while leaving the app I created alone! Ugh!

  2. Virtual Currency – Media Types for Online Games Applications | The Adsmarket Blog says:

    [...] I wanted to share with you a fast-growing media channel that you MUST use or at least try, for your upcoming campaign – Virtual Currency.  (If you don’t know much about virtual currency yet, I won’t go into it here, but two sites I like explain it really well. Click here or here.) [...]

  3. Add Me As a Frenemy: MySpace and Facebook Discuss Sharing Content says:

    [...] has looked into some sort of music streaming service, the closest thing to materialize, yet, is a virtual song gift that people can give each other through music company [...]

  4. Virtual Greats Supplying Licensed Virtual Goods to Facebook, App Developers says:

    [...] Facebook expanded its inventory of virtual goods in the Facebook Gift Shop once again, this time adding licensed music and sports-themed virtual gifts. Facebook signed an agreement with Lala.com for rights to distribute “web-only” and [...]

  5. A Look at Causes’ New Nonprofit Partner Center says:

    [...] As regards the first point, the company has been very smart in timing the release of these tools to coincide with the America’s Giving Challenge. Causes are competing for daily prizes and an overall prize based on number of donations, and it has already raised $1 million. Additionally, the donation page itself has been revamped. Causes can now do more to customize the graphic or photo to accompany donations of various amounts. Administrators can tailor the donation page for each Cause by creating up to 5 of these “Donor Choices.” Previously, the only customized graphics which accompanied donations (or named gifts) were the Charity Gifts, arranged by Causes headquarters and certain nonprofit partners. The Donor Choices now give every Cause the opportunity to create these icons to help users understand the value of their donation. Some gifts from organizations on Causes have also begun appearing in Facebook’s virtual gifts store. [...]

  6. Charity Gifts on Facebook offer Alternative for Christmas | m1m2creative says:

    [...] your credit runs out, but for those really really special friends I’m into facebook’s (newly expanded) gift area where you can give music, or charity gifts. Hit your causes app, go to gifts and [...]

  7. Charity Gifts on Facebook offer Alternative for Christmas says:

    [...] your credit runs out, but for those really really special friends I’m into facebook’s (newly expanded) gift area where you can give music, or charity gifts. Hit your causes app, go to gifts and [...]

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