As of August 1, Facebook is closing its Gift Shop, which has brought in approximately $100 million for the social network. Facebook isn't giving up on the lucrative virtual goods business, however. The social network is positioning itself as an intermediary for selling third party products online.

Less than a year ago, Facebook was rehabbing is Gift Shop, and introduced the idea of Facebook Credits. Rather than paying for virtual gifts — like birthday cakes, troll dolls and campaign buttons — to put on their friends' Facebook pages, users could purchase credits that could be used for that purpose.

But now the company is doing away with the gift shop all together. According to the Facebook blog:

"Closing the Gift Shop may disappoint many of the people who have given millions of gifts, but we made the decision after careful thought about where we need to focus our product development efforts. We'll be able to focus more on improving and enhancing products and features that people use every day, such as Photos, News Feed, Inbox, games, comments, the 'Like' button and the Wall."

While gifts may be going away, Facebook is hoping to invest more in (and likely receive more from) Facebook credits. More from the company's blog:

"Out of the Gift Shop's "gift credits" came the virtual currency, Facebook Credits, that now makes it easier for people to buy premium items across the many games and applications on Facebook."

Credits is a long-term plan for Facebook. The social network allows third parties to use its Credits system, but takes a 30% cut of all transactions. That gives Facebook a pretty big stake in all transactions on the site.

The thing that is still unclear is why Facebook is doing this now. Credits may one day contribute impressive revenue to the site, but not for awhile. Ethan Beard, Facebook's director of the Facebook Developer Network, recently told VentureBeat that Facebook isn't going to be calculating profits from Credits for years to come:

"We expect to reinvest profits from Facebook Credits back into the product for the next several years, so it will bring very little or marginal profit."

Considering gifts generally cost $1 (or ten credits) to share on Facebook, the network is currently generating $35 million a year from the shop. That may be a small part of the $835 million in revenue that social games like Farmville will bring in this year, but virtual goods are big business online. Facebook just seems to think that helping to mediate transactions — rather than selling its own products — will be a bigger business for the company in the long run.

Meghan Keane

Published 9 July, 2010 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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Comments (1)



facebook may like to act intermediate or just to be known as social media site not want much ex posers into shopping

about 8 years ago

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