Facebook Closing Gift Shop, Getting Out of Direct Virtual Goods Business

In a move that will likely be surprising to some, Facebook has just announced that it is closing its Gift Shop for virtual gifts in three weeks on August 1st.

Facebook launched virtual gifts a little over three years ago, and has done a variety of e-commerce experiments since. For example:

However, Facebook was never seemingly able to get its direct-to-consumer virtual goods business over the hump. While other niche social sites have increased virtual gift monetization by integrating gift content more heavily into the user experience, Facebook has kept integration to a relative minimum, primarily only displaying them on a user’s wall as just another type of rich feed item.

Instead, Facebook has focused more on its core value proposition as a communication and identity utility, while letting third party developers on its platform develop the rich application experiences that have proven so potent at monetizing through the sale of virtual goods. Now that virtual goods on the Facebook Platform have become such a large business, Facebook is getting involved through its universal virtual currency, Facebook Credits, around which there are a variety of sentiments in the developer community.

In our latest estimates of Facebook’s revenues, which we put at $700 million in 2009 and $1-$1.1 billion in 2010, we estimated that virtual gifts made up less than $10 million in revenue for Facebook last year. Most of Facebook’s revenues in this category this year will come from the growth of its Credits virtual currency business instead.

Nevertheless, it is a symbolic moment in the evolution of the company. Facebook has decided that it doesn’t want to be in the business of creating virtual goods for users to buy, but rather to be the platform on which others can build applications within which users can buy virtual goods with house-issued universal currency.

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Leave a Reply

7 Responses to “Facebook Closing Gift Shop, Getting Out of Direct Virtual Goods Business”

  1. Closing the Gift Shop: Facebook Redefines Credits says:

    [...] Facebook's Justin Smith comes to a similar conclusion, saying that we're witnessing a symbolic moment when Facebook [...]

  2. Phil says:

    I didn’t know there was a Facebook gift shop. LOL

  3. Kevin Raffay says:

    I found the whole FaceBook virtual gift thing pretty ridiculous. I can’t believe people actually paid for those.

  4. Blough Mee (China) says:

    Hahaha I spent 3 bucks on three “birthday presents” It was sort of fun to find someone a “trinket” that matched their interests etc.. a puppy….a boat…. whatever. I actually think it could have been a great business if they had better-integrated it and made it easier to deal with.

  5. guest says:

    I never paid. Sent a gift way back in ‘-6 and it was free. Didn’t know it was a “trial” period. And I’d never pay.

  6. This Week’s Headlines on Inside Facebook says:

    [...] Facebook Closing Gift Shop, Getting Out of Direct Virtual Goods Business [...]

  7. FACEBOOK naujienos ir patarimai #48 | Komunikacija FACEBOOK'e says:

    [...] Facebook‘as uždaro dovanų apps‘ą. Atrodo, bus pelningesnių naujovių šioje srityje. [...]

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