Social networks making money through giving presents
Written on 24th January 2008
6 COMMENTS 
Ernst-Jan Pfauth, editor in chief
Two weeks ago we ran a story about the main problem of Facebook: monetization. Dave McClure, an internet expert from the Valley, wrote an extensive post about this matter. Now Lightspeed Ventures discovered a good flow of Facebook cash: those corny digital gifts.
Lightspeed tracked the number of available gifts for a seven week period to better understand the sales rate of digital gifts. They excluded the free gifts, and found out that the average number of sales per week for a gift was 846. Since there were 322 different gifts available this means that 272.412 people are making other people happy with a 60 by 60 pixels birthday cake, hugging teddy bears or a freaky clown.
It’s easy to make fun of the concept, yet the numbers are pretty good. The price of a gift is 1 dollar, that implies an annual run rate of just under 15 million dollars.
My advice for European social networks, introduce this concept right-a-way. We have the euro, so you guys would even make more money per gift. Find a slightly different locally-adapted format and start monetizing. What about an (extended) cupid service on Hyves? For a few euros, the social network sends a iTunes love song to your secret love. I’m sure some users would be interested in such services.
Giving presents is an important aspect of the social discourse, so why wouldn’t the social networks make some money out of it?
[WebTipr: Yaniv Solnik, Israel]
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By Patrick on Jan 24, 2008
Virtual gifts are indeed huge. I saw a presentation of Cyworld once (one of the biggest social networks of Asia). They earn loads and loads of money on virtual gifts.
Also the Naughty gifts Facebook application earned a sh..load of money by selling over 33 million gifts!
http://broadstuff.com/archives.....works.html
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By beanieville on Jan 24, 2008
How about trading for a living? http://beanieville.blogspot.com
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By David Petherick on Jan 24, 2008
I made a few hundred dollars for charity by adding red noses to personal profile photos last march, for the UK’s ‘Red Nose Day’ and will do the same again this year.
Although I had to create each red nose on a one-off basis and send out images, the great thing about most virtual gifts and virtual drinks is that one is that the unit cost does not increase whether you sell 1 or 100,000,000.
I also have pioneered the idea of the ‘virtual bar’ where people buy me virtual drinks to thank me for my help or advice. I’ve created virtual bars for people in four continents now.
Buy Boris a Drink
Boris Veldhuijzen van Zanten’s Bar: http://www.buy-me-a-pint.com/boris/
And me:
David Petherick’s Bar: http://www.buy-me-a-pint.com/
Cheers!
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By Martha on Jan 24, 2008
Indeed the future of the social networking biz is the ability to turn a buck. Matt Mihaly (http://www.ironrealms.com/) was one of the pioneers of selling virtual items for real dosh a decade ago and has done well for himself with it. Smart companies (webkinz for example) have begun selling real goods (stuffed dolls) to children in exchage for access keys to their website, where the kids are introduced to the basics of social networking.
I think the future of this trend will be really interesting. How long will people be willing to pay for ‘lips’ or ‘drinks’ to be sent to their friends on FB, when will they tire of it and start to look for something else?
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By edial on Jan 25, 2008
Mashable has just released a ‘9-ways-to-make-moeny’ with your facebook account, some are very interesting indeed… personally I digg the GarageSale (beta) application, but what about the legal side of the story? is it all cool and okay? how must the developers feel about these things, or do they get their own share of the profits?
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By Marc on Jan 25, 2008
DING DING DING! This is exactly what I posted about this week for my new app coming soon. These gifts are simply defining what it is to play a game on a social network. I’m not talking about scrabulous, but game that allows one to attain digital assets in the fasion that World of Warcraft does with its 10mil subscribers.
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