RealTime IT News

Facebook Tests Branded Virtual, Real-World Gifts

Facebook is expanding its efforts to turn its online Gift Shop into a money-making opportunity through sales of other companies' virtual -- and potentially physical -- goods.

Until now, gifts in the site's Gift Shop consisted chiefly of colorful, generic icons that recipients could embed in their profile. Users could buy the gifts using the company's currency, called Facebook Credits, with most of the icons generally costing 10 Facebook Credits, equivalent to $1.

But now, Facebook is looking at ways of tying the Gift Store into third-party brands and real-world goods.

Virtual gifts created by third-party brands are tagged with the creator's logo. So far, companies offering gifts through the service include American Greetings Interactive, GreetBeatz, Somecards and Real Gifts, Facebook said.

"Our primary goal is to create a good user experience on Facebook, so we are exploring ways to offer more options to users in the Gift Shop," Facebook spokesperson Brandee Barker told InternetNews.com. "As we often do, we turned to a small group of developers to participate in the alpha test. This initial test is being conducted with a limited number of users."

Brands with major licenses are also now turning to the Gift Shop to offer goods as part of their promotional marketing efforts. Britney Spears last week began selling virtual gifts, icons and birthday cards, to coincide with her latest tour, marking one of the first instances a high-profile recording artist has branded virtual goods on Facebook.

"We will continue to explore licensed gifts, such as the Britney Spears line, and other promotional opportunities," a Facebook spokesperson told InternetNews.com.

Let's get physical

The move also marks the first time that Facebook has integrated the sale of physical goods into its platform -- though at least one company, 1-800-Flowers.com, recently opened up an e-store on its own page on the site.

For now, the types of physical goods -- being sold in partnership with Real Gifts -- are items that people might normally send to friends and relatives on special occasions, like flowers, candy and stuffed animals.

Physical gifts, naturally, will cost more than virtual goods -- for example, a dozen roses may be 450 Credits. The purchaser will be asked to enter delivery information and other data, similarly to a regular e-commerce transaction.

Through the latest tests, app developers may also get a piece of the action -- they can create virtual gifts that users then buy within the app. Barker declined to comment on details of any revenue-sharing arrangement with Facebook.

Overall, Facebook is remaining tight-lipped about any other details pertaining to the Gift Shop tests. "As with all our product tests on Facebook, we will monitor results over time and determine a plan based on those results," Barker said. "We have nothing to add regarding future plans."

The news marks the latest sign that Facebook is looking for ways to encourage and capitalize on transactions on its platform, particularly in area of virtual goods payment processing.

In mid-July, Facebook began offering developers a new set of ad-targeting technologies to better help them monetize their applications and expanded its own virtual currency program across the Facebook Platform.

[cob:Special_Report]At the end of May, Facebook began rolling out its virtual currency payment service for applications called "Pay with Facebook." While buying virtual goods within an app, users now see the option to purchase with Facebook Credits. If a shopper does this, the amount is billed to a credit card on file, or users can enter the number of a card.

Though only live now in a handful of applications, the "Pay with Facebook" service could signal another way Facebook aims to make money -- since it could potentially get a cut of every transaction made through its payment system. The company has declined to provide details on the business model, however.

Industry observers say the Facebook Platform economy could net as much as $500 million in total transactions this year -- the premise being that even if Facebook realizes only a slim cut from all of the frantic activity across its site, it could add several million dollars to the company's coffers.

Virtual currency and e-commerce aren't the only areas in which Facebook's been making headlines lately, with the past few weeks seeing the site expanding services and site functionality. Facebook this month introduced a new search service -- powered by Microsoft's Bing -- that it had been testing for several months. The service enables members to find status updates, photos, links and videos.

Additionally, it just bought FriendFeed, a start-up seen as a competitor to Twitter. Facebook also is testing a stripped-down version of its service for overseas markets with limited broadband.