Virtual Gifts as a Serious Business Model?

Posted on February 8, 2007

Facebook has added virtual gift giving to its popular social network. Sending your first Facebook gift, which is represented by a small icon, is free. All future virtual gifts cost $1 each. The icons designed by Susan Kare are very cute and the net proceeds for the month of February go to the breast cancer research charity, Komen for the Cure.

It is great while the icon revenues benefit Komen for the Cure but is there really any long term potential here for Facebook to bring in revenues by selling virtual gifts? Will people really pay real money to send a virtual cupcake or virtual roll of toilet paper to a coworker, friend or secret love? Michael Arrington at TechCrunch seriously thinks people are ready to spend their hard-earned money on Facebook icons.

In a brilliant marketing move to kick this off, Facebook is donating the February net proceeds from the virtual gifts to charity. After that, they're keeping the money. I would expect this to be a significant revenue generator for them by year-end.

The reason I say this is because "poking" is already such a big activity on Facebook, where you reach out to other users. When you pay money to do the same thing, it will mean more, and people will be sucked into doing it. If and when Facebook launches premium gifts, people will be buying those, too. I'd also expect them to sell really high end "limited edition" icons as well in limited supplies.

Are virtual icons really a serious business model when you can easily email images and photos at anytime; place photographs on your blog or profile and use icons during chat and IM sessions? A lot of social networks give you a lot more for free. Myyearbook.com is far ahead of other social networks in the Valentine's Day icons and images tricks department -- on their Pimp MyYearbook section they've got a v-day word generator, candy hearts, falling Valentine's Day objects and other graphics goodies -- all for free.



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