Facebook closing Gift Shop – but not for entrepreneurs

Facebook has announced that they will close their Gift Shop on August 1st. But their exit will not end party for others. The company made it clear in their announcement that third party gift applications such as Birthday Cards and Hallmark Social Calendar etc. will continue to work, and gifts received through their own application will continue to be visible on user profiles.

Facebook’s Gift Shop launched around 2007, but the model was not unique to that social network – Ning and a few other networks use it. The way it works is that users buy credits starting at 10 for a $1, and use the credits to pay for gifts in the form of cutesy icons that they post to their friends’ profiles publicly (or privately). I’m guessing that users’ security concerns and the plethora of 3rd party applications sank gift sales. A dollar was a great entry point for FB’s millions of users, but I doubt sales volume was enough to justify further development.

Over the years the company took two innovative steps worth copying to keep the cash coming in through this product, they –

1. Added mobile phone payment and doubled the price for credits purchased through mobile phones.
2. Added an incentive for users to earn “free credits” by shopping for third party products (and yes, they get a cut on the back-end).

The Gift Shop is still is a great model for generating revenue in social networks, but the company said they are going to concentrate on “improving other products.” Can’t wait to see what those products are!

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