Ever since Facebook had its IPO and its share-price effectively dropped off a cliff, the question has remain – how will Facebook make the profits expected from a company valued in the billion? Advertising on Facebook itself and within its own apps will only get it so far, but the company needs bigger, faster growth and now they are looking to get into the retail sector by launching “Facebook Gifts”.
The launch is US-only for the time being, but the basic premise is that as Facebook is the reminder most people use for Birthdays, parties, and other such occasions – then Facebook could be the place where people pick and send a gift to their friend or loved one whether that is food, wine, homeware, or even a charitable donation in their name.
Some blogs are getting overexcited and claiming that Facebook may be getting up to 20% revenue share on the gift sales and the programme could earn the company $1 billion a year. Firstly, if you look at the various affiliate programmes offered by retailers around the web for physical goods, then the revenue share on offer tends to range between 2% and 7%, and whilst Facebook may be a great source of customers, more than doubling those rates would likely make little sense for the retailers as it would take a huge chunk out of their bottom line.
Secondly, and more importantly – why would people buy through Facebook? Facebook is a company that is everywhere on the internet with around a billion users, but every time people are asked on whether they “like” or “trust”, rarely do people say that they do. They are a company that has made continued privacy grabs, and people put up with that because the service is free – but that does not make them a company with which I would be particularly keen to share my credit card details. And what does Facebook offer users for buying through the service? It may be less clicks, but if Facebook isn’t fulfilling the orders themselves, they are not guaranteeing the orders, and they are not discounting the orders, then other than being a storefront/advertisement for these retailers they actually offer little in terms of value.