Facebook is testing a new virtual gifts product that allows users to give “credits” to other users. The idea is that you can give other users these credits in addition to or in lieu of commenting or liking a message or status. So if for example I say “out walking the dog,” other people can throw some credits my way. VentureBeat has an exclusive overview.
Here’s why Facebook likes the product – you pay for the credits with cash, to the tune of $1 per 100 credits. That’s enough incentive for them to test this out, despite the fact that anyone who looks at it for more than a moment will realize it’s doomed to fail. There’s no real world parallel to this gift, like Facebook’s existing (and reportedly underperforming) virtual gifts product that lets you give someone an image of a cupcake or whatever on their birthday. My strong guess is very few people will use this, I can’t imagine someone saying “nice status update, here’s some fake money.”
But it’s another weapon that the giant will use to try to eke out a profit during these tough financial times. And it’s far better than having to return to the capital markets to raise money at what’s likely to be an embarrassing large discount from that ridiculous $15 billion valuation that Microsoft gave them in 2007. Maybe if enough users buy credits that can never be redeemed back for cash they can stretch their runway a little farther.
It’s been a rough week for the fast growing network. They fired Gideon Yu, their third CFO in less than two years, on Tuesday. Facebook’s PR group flat out lied to the world about it, telling everyone who’d listen that the reason was they wanted to go public and they needed a CFO with public company experience. In rushing to get the message out they failed to note that Yu already had public company experience, at both Yahoo and Google, and is one of the more respected CFO’s in Silicon Valley. All Facebook succeeded in doing was to cement their reputation as an organization that will say anything they like, damn the truth, even going so far as to unfairly trash their own employees. Not much backbone there, and it’s no surprise that they can’t hold on to executives. Any future candidate worth their salt would do well to think twice before joining.
very bad week. but i cant blame for trying to find a way to make money.
But don’t *all* press releases concerning executive firings “lie”? I mean come on, how many executives really leave a company “to spend more time with their family” as so many companies claim?
Anjali Sen
trolling for bottom feeders
I love the post’s pic!
“All Facebook succeeded in doing was to cement their reputation as an organization that will say anything they like, damn the truth, even going so far as to unfairly trash their own employees.”
-> What ethics did you expect from a founder who has no problem ripping his colleagues off (stealing code) to start a company?
Who is “You”?
http://www.smartbloggerz.com
“You” would be Mike.
And any FB user.
This could be the start of a great venture for Facebook. Facebook could start their own payment gateway (alert for paypal), i imagine users can buy n sell inside fb’s platform. That would rock!
SOCIAL NETWORKS BEWARE: BUENO.COM LAUNCHES ITS TELECOM-RICH SOCIAL NETWORK – YOUR COMPUTER MAY BE THE NEW PHONE AND IT’S FREE.
MAY 1ST, MIAMI, FLORIDA
Bueno.com may be the newest entry into the social network scene but it’s got something everyone is talking about – a free USA number and a virtual phone empowering site users to make free calls to their friends as long as they have a microphone and speakers and both parties are members of the BUENO network (which is also free of course).
there has to be a better way! Seriously, that’s what they came up with?
maybe their employees could think up better products if they weren’t so frightened of being fired and publicly trashed.
I thought Zuckerberg’s new motto was “fuck what the people think. this is my company and I’m gonna cry, er, do what I want to.”
is that LOREN FELDMAN on the picture?
Why cannt facebook just start charging third-party developers a fees for using their platform? most platforms do that – the video gaming industry is full of such examples – look at the hundreds of games developed for the nintendo platform?
If they’re going to take money of people to give as gifts to friends, why not go the whole hog and let people give real cash gifts / by real products?
A product like that could be used as an alternative to Paypal and be genuinely useful.
someone angry that venturebeat got the exclusive?
no, we declined to test this product based on the rules they asked us to agree to.
yeah, the tone of this article as well as comments from Michael seem angry. What’s the background story Michael?
just very disappointed in how the company has handled itself all week. The Gideon thing was shabby.
To me this article just shows that Mike is passionate and knowledgeable about the subject. In other words, its a great post.
The credit system does seem like it doesn’t stand a chance. I suspect this is just the beginnings of a bigger plan for micropayments. More like a proof of concept that can be carried out to bigger and better things (ie. third parties).
Anger is a strong emotion and I just don’t see it emanating from this article. If anything, the tone of Michael’s posts are markedly improved after his much deserved break in February.
Is this the best that they can do? I think it is time for Zucky to do like larry and Sergey. Bring in an Adult to run the business.
For monetizing I would recommend offering premium accounts. e.g with ability to upload clearer pictures and tag groups to notes. I will write a blog post on how I think Facebook can make money.
Virtual gifts? That is for Facebook Apps!
True. The try to steal the piece of bread from your own developers ecosystem – is like stealing from the beggars cap with quarters. Disgusting.
Mike, if you posted a query to your readership simply asking “how do you think facebook could best monetize?” I think you / they would discover hundreds of better ideas. I don’t even use facebook and I think I could come up with 10 in about 8 minutes.
I was thinking the EXACT same thing.
Baba yi, Lo jeba!
@ babalawo: Nna gi!
Major BURN FaceBook, BURN.
Social networks have made money like this (Charging real money for users to send virtual gifts) for years overseas. Why not here? There is a model. (Draugiem.lv)
The key is you have to tie the micro-charges to people’s mobile phone accounts.
Good luck with that in the U.S. Better, might be to partner with iTunes for the payment processing. They have perfected the art of the 99 cent transaction process.
This article is a bit harsh. All things considered, Facebook has been one of the biggest innovators in the social space and has a rock solid product that over 200 million people use. There could have a been a myriad of reasons for letting Yu go and just as many reasons to avoid any sort of legal liability by saying anything beyond a plain vanilla “we need someone with more experience.”
They’ll figure out their financial woes in due time and everyone reading this post will continue to have a Facebook profile – because I guarantee that every single reader of techcrunch has an FB profile.
” because I guarantee that every single reader of techcrunch has an FB profile.”
not true. I deleted mine after the redesign. People will follow.
you know that you can’t actually delete your profile, right? You can only deactivate it =P
well, they said they delete it after 14 days. of course, you can’t trust them.
i just don’t want that they sell my data to some spammer (which is maybe the only way to monetize fb, after all) before they go bankrupt.
fb = zero trust
True, I deactivated my Facebook account after the redesign also.
My feeling was: Facebook should have stayed more like Facebook and tried less to be like Twitter. So I buggered off to Twitter (and, yes, I’m aware that the FB and Twitter platforms are fundamentally different).
If Facebook would have deleted my account data 14 days after deactivation that would have been a result – but somehow I think my (quite personal) data belongs to them for ever more.
Strangely enough, I haven’t missed being able to throw a sheep once.
I already noted above that I don’t have a profile.
My ex created one for me…but I never actually logged in and don’t even know the pw to it. Not everyone uses FB. We’re not all in college.
hey – one, not everyone on Facebook is in college and two, slounded like a slam on college ppl, like they are silly or something
“Any future candidate worth their salt would do well to think twice before joining.”
Facebook doubled in size in 8 months, from huge to ludicrous huge. You have little verifiable information as to the implications of Yu leaving.
I think your conclusion is extreme.
i’m guessing it wasn’t because he didn’t have public company experience, since he has public company experience. whatever the real reason, facebook lied about it.
The group of individuals who started by stealing other peoples ideas and implementation JUST WON’T STOP… ever. They will keep these lies going till the end of their days, be prepared.
eXtrEmeLy KoOl, tHat iS
Moving away from trashing Mike… I think the point is that this is a really dumb idea.
i’m all for trying to find a revenue stream, but this model is kind of dorky.
…unless with those credits i can buy stuff from other people. white papers, reports, junk they’d otherwise sell on eBay. brand can jump in and give us a chance to win credits for selling our souls to them… that might work.
i’d give you a “credit” to show my agreement with your assessment of the Facebook’s plan (it’s dorky), but that would effectively eliminate the need for me to open my mouth and say something about the matter, and the last thing I want to do is to keep my mouth shut
Christine,
If you show me your body full nekkid, i’m inclined to send a $0.50.
There’s a market … not sure if you going to “supply”.
You, nekkid, oh lalalala.
I’ll pay $20 a month to use a facebook that works. Speaking about the frequently inop video mail feature.
my favorite facebook screw up is mail. it’s broken half the time. I can’t turn it off so that people can’t send me messages, and then they get mad when i don’t return them (because I’m not able to read them).
$20 a month is too much! Make that a year for 2nd level users. That is $200M from 10M users.
i won’t pay $20 a month to anyone online to do anything… i don’t even pay Netflix that much anymore i pay ItsYourTurn.com $39 PER YEAR and that’s only worth it cuase i do lots of tourneys I would NEVER PAY FOR FACEBOOK
That was a pretty tough post. It is interesting to see how much your opinion of them has changed…a year or two ago it was nothin’ but love.
it changes with the foul smelling wind. I don’t like this product and I don’t like the spin and fabrication coming from that company right now.
yeah, i missed the falling out (between TC and FB)
it was right about the same time that tc started falling in love with twitter.
I agree with Mike. How can you trust a company your personal data that
1. doesn’t trust its own employees
2. lies
3. is trying to copy every idea that they’ve seen somewhere…
Why have all the co-founders left? Why have so many executives left?
Because this is a company you cannot trust. People will realize that sooner or later.
It’s been lies and fabrication all along, you just were in love, Mike. It looks like now you are not.
this website’s writers are too conspiratorial. they take things too literally and then when subsequently released information doesn’t conform to that, they suspect cover up. it might be true what they say, but I think the writers on this site need to tone down their statements a little bit.
on another note, I think facebook is feeling pressure not only because they might need money but also because, with the arrival of tweeter, they’re no longer the focus of everyone’s attention. The Economist said it best about a year ago, that the founder of Facebook should sell out before his bubble burst. I think Twitter should take the same advice
so many people would have said the same about google. but look where they are today. they need a sound plan to monetize their user base.
maybe
I don’t see why they can’t monetize by just advertising, if that’s not working well enough for them and they need to invent this goofy credit thing, then I think they have a problem
Brilliant. You should send them them a courier pigeon and let them know about this “advertising” thing you speak of!
David, you’re an idiot, I obviously wasn’t telling them something that they didn’t already know (because we all know they’re trying advertising), i was just saying that if advertising isn’t working, then they’re in big trouble, because the goofy “credit” thing seems like a looser
maybe you could get a pigeon to teach you how to read, you seem to need the help
aww, mike, did you get offended somebody didn’t think your “if advertising isn’t working uh oh for you facebook” analysis was savvy insight.
I will let your spelling of “looser” speak for your intellect.
my spelling of loser was a typo, as I’m sure your syntax in the following –”did you get offended somebody” I think you left out a word there unless you’ve got the mind of a gnat
I have no doubt they will make millions with this.
Anybody who doubts that people will pour money into this are simply wrong.
Uhm yeah. I don’t know if “millions” is enough. You know, the have 700 employees and I don’t even want to think about their infrastructural costs.
I am commenting with facebook connect so I am getting a kick out of these replies
I guess you won’t be getting invited to any more FB parties from now on Michael?
I’m just waiting to see what the next mistake will be that they make. It seems that there are rarely any positive articles written about FB any more … Only that they are growing very quickly – which can be taken as good or bad depending on your own point of view.
One *ekes* out a profit, One *eeks* when a ghost is spotted.
really? i’ll change it.
+1 to Jim…I like learning random new things.
hmmm….maybe facebook is turning into Mahalo Answers (without the Q&A)?
mahalo isn’t dead yet?
my understanding is that facebook is finally starting to provide a global virtual currency system. if they allow developers of apps with virtual currencies to access this system, that’s a huge market and it’s gonna be enormously profitable for both (facebook and developers)
Esperanto!
LOL
Worst. Idea. Ever.
I hope, for humanity’s sake, no one is stupid enough to purchase NOTHING – which is what they are selling – from facebook. Clearly I give their users more credit than they do.
Don’t forget how dumb humanity really is lest not forget that we all fell hard for bottled water.
5-10 websites a day. Special kb diet.
If I could charge people for oversharing their status updates or even pay them to stop sharing like 10 times every 5 minutes, then facebook would have a business model that I’d gladly pay for.
(Yes, I know I can “hide” or “unfriend” them. That’s not the point…)
Why doesn’t Facebook just charge for photo storage?
if it ain’t free, it ain’t for me
because then they would compete with flickr. and flickr is better in that business.
see, fb is a bunch of things mashed together, but in none of the things they do, they are #1 (it’s like yahoo)
for photos, flickr is better. for real-time messaging+search, twitter is better. for business contacts, linkedin is better. etc.
Since on the internet, everybody can link things together so easily, building a portal and trying to lock people in that portal is the wrong strategy.
flickr = Yahoo
Who knows if this will work. I’ve seen people buy virtual gifts and send them around. Who knows if they will buy credits and doll them out. Who thought that people would be willing to buy virtual land in second life?
Everyone knows they need a business model. At least they’re starting to try to actually make money!
Yes! Arrington, you are coming around! Hope some of my past incendiary comments provided some food for thought. Even the one you deleted last week (rightly so).
Hope you take another look at the revenue figures that Facebook leaks because I don’t buy them for a second.
I think the pic for this post is just about right. To get an idea of how well virtual gifts monetize, you should check out the dating industry. On dating sites, users have a much higher incentive to purchase virtual gifts than on FB. That said, I believe the results have been disappointing. I believe POF even eliminated them entirely.
Other than that. Hope you come up up with a great pic for the inevitable post on the crash of FaceBook. So have you thought about it? Don’t tell me you haven’t thought about it.
although facebook might be able to develop a business model to make it profitable, there’s no way (in my humble opinion) they will get the numbers that were once thrown around for the simple reason that they are no longer the latest thing. When they were partnering with ABC to host the presidential debates, it seemed like the world was Facebook’s oyster, and now they’re losing their lustre, and when they lose their lustre (which Youtube never did), the valuation goes down.
Wow, Arrington is one consistent dude. First anything FB does is pure gold, and now that he has his Twitter crush everything FB does is pure shit.
This is just ridiculous. If he really cared about companies having clear business models and monetization he wouldn’t be promoting steaming piles of useless like Mahalo, or touting Twitter as the second coming. The lack of any perspective, and the wild gyrations from love-u to fuck-u are remarkably unprofessional.
Mike, this is pretty sorry journalism, if your blog ever deserved to be called that. It would help if you had some clear guidelines and a consistency to your coverage rather than playing favorites like a 12 year old girl within her little circle.
TechCrutch poster, you are a loser
just because someone likes something one moment, and then, for possibly legitimate reasons, doesn’t like it another day, does not mean that the writer is being unprofessional, as you claim. On the contrary, it shows that the person is constantly re-evaluating a situation which is what any professional writer should be doing. Why should Mike Arrington be required to always say that he loves Facebook service or the company if he no longer believes it and if there’s some evidence to support his opinions
Third that
YES!
Good articles/thoughts here on TechCrunch.
Change is GREAT! It keeps ME on point.
Comment on TechCrunch posters (you know who you are)….this is a public site and obviously people want to learn. Why scold them for an opinion or a link.
If this is such an elite group why don’t you make it a subscription for those who are willing to pay.
Oh yeah…I visited one of the sites in China. Oops!
Bad move…thanks for all the widgets!
Second that
Nice try to remain anonymous Zuckerberg!
Sounds like a first step in building up their own micro-payment system. 5% sounds fair and undercuts anyone else out there.
we’re so far ahead of the game, umakeitcool.com, when you buy a song, video, picture, etc, you get to give money, REAL MONEY, to a friend.
oh yea, YOU can also sell stuff and make moeny; instead of giving it away for nothing except marketing pricks at facebook or myspace.
and guess what… we’ll have another top secret product coming out soon which let anyone make money just by running their computers.
welcome to the 21st century where bidness models are needed for reals.
Mike, is that you in the photo?
Th funny thing is *every* time I see something like this and say “This is ridiculous – it’ll never work…” sure enough a year later I see the reports how successful this ridiculous thing worked and made tons of money.
Sometimes people react positively to the most ridiculous things. But I’ll say it again no matter what: This is ridiculous – it’ll never work.
Facebook’s problem is having too many things mixed up: walls, super walls, poking, gifts, groups, pages, links, videos, blah, blah…
Its like a party with all possible food on the table, on first look you get very excited and you would like to try everything but in the end you get stomach ache and you wish you just had a glass of wine and few canape sandwiches.
Kids like lots of choices, it feels good, but older people with more clear life goals like to keep it simple.
When I compare my FB feed with Twitter feed, on FB 80% are completely useless comments made out of pure boredom, while on twitter 80% of tweets are interesting, useful and creative. Of course, depends on what kind of friends you have, but generally speaking, Facebook is offering too many things which in the end spoils the party and people lose the original purpose which actually made them to log in.
I didn’t really ever want to know that much about my former acquaintances anyway!
Maybe they wanted someone who had taken a company through the IPO process? Doing finance at a public company might be different than the lead up to going public. Also, one can only guess what is happening on the fund raising front given the last valuation.
I worked with Gideon at YouTube. He is a world class CFO and a great guy. He also has strong product sensibilities and operation skills. I hope he joins the next company as CEO.
Well, for me it still looks like they are trailing the online gaming industry, and the logistics of social games. Will this work on FB? only time will tell…
Zuck was on Oprah, next we’ll see him hangin’ with hollywood celebs. he doesn’t care what us tech crown think anymore. @robblewis
crowd
Jonathan Abrams
now facebook will get worse than its worst applications. spam, spam, spam.
At first I thought this idea was lame, and the description of the intiial product sounds pretty lame.
However, think about what this could mean for websites or apps that use facebook connect.
Facebook could become the central hub that everybody has too go through to access websites. Lets say NYTimes wants to charge 10 cents a article. Currently, this is difficult for them to do alone. They can instead charge 2 facebook credits. Users can then store up or purchase ‘credits’ on facebook to read nytimes. Facebook can then translate those credits into real money and pay nytimes while taking a small percentage.
The effect is a global micro payment system with facebook acting like the universal login and payment hub.
The web needs a new business model and people will have to get used to paying for things. Ads aren’t working out for anybody but google right now. If facebook goes this route the potential is huge. Of course, execution will be difficult but they have the user base to do it.
NYT rightfully would never allow their money machine to be dependent on a third party. Especially a fickle one, in a fickle market, with a fickle audience.
Not so sure about that. NYT might not be around much longer so I think at this point they’d be willing to try anything. Obviously advertising isn’t giving them the revenue they need to survive. This goes for a lot of content companies.
I think in 90’s and 0’s, people have gotten used to free content. Many companies lived of VC money and still are. But the current way is completely unsustainable. People are going to have to pay for things. Personally I think Facebook is on to something big here.
well good luck with that thought…. makes me want to take my pitchfork and band together all the newspapers to find a solution – ANYTHING than dependency upon FB
it would be better if we could also take credits away from each other for uninteresting posts…
news feed
michael arrington has extra snoop dogg concert tickets to give away to the first person to respond to this.
+10
john doe loves his family.
-5
jane doe is.
-20
As cheap and illogical as it sounds, i wouldn’t write off this idea too quickly. Some communities do seem to do well from a’premium tier’ and premium virtual gifts. With the direction FB seems to be taking, it might work for them. Human ‘need’ is a funny thing
This introduces a risky overlap between financial and social norms.
http://www.yout...re=channel_page
Please hire a proofreader. They’re not expensive. You have errors like that eeks/ekes thing in every post I read.
Try relaxing. Who cares if there are a few grammatical errors. It’s a blog post written on the fly.
The key difference between Google and Facebook is Google leads people away to where they want to go, Facebook tries to keep them in. If Facebook led people away to where they want to go e.g. allowing people to discuss .. which it does .. and go to where they feel their need is fulfilled based on their group recommendation e.g. hotel in NY .. and monetize .. charge the hotel per transaction by allowing it to integrate reserving from within facebook .. extend this to multiple business ie make transacting easy once user has expressed a specific desire and let user thank / inform group if he so wishes about the transaction.
Why would I need or want to reserve a hotel or anything through Facebook? Why not just do it direct?
A lot of hard work obviously, but then there are probably good acquisition targets who do this thing already esp. in the travel niche
this is EASILY the best idea i’ve ever seen on the internet. i used to think it was espn.com and then maybe that cnn site, but this is totally like the BEST idea. i am buying a credit totally.
Dear editor,
i have read the above article in clear mind.i am a member of both social network sites.i am getting all prevailing benefits from them.i am regularly writing comments in Facebook.
this social site gives more freedom to its users.Now a days, lot of ups and downs in silicon valley.We have to accept reality.
If i get good packages,benefits from other well known,good finance base,surely i will join it.
This a trend in corporate sectors.
Only owners will be there.Others are mobile for green pastures.
Huh?
Kichu mama! What were you trying to say!!? LOL!
I went for an interview with facebook in London. They were totally unprofessional, rude and quite arrogant. I took a day off work to go to 4 interviews with them (after already having been to one interview and had one phone interview).
They then told me they’d get back to me by a certain date, but surprise surprise no word. I waited another week, no word. I sent emails to the recruiter, to one of the guys who interviewed me, nothing. Then 2 weeks later, the cheeky bi*ch sent me a copy/pasted canned email.
So good luck facebook in trying to monetise all those pageviews, or convincing non-asian social networks to buy images of cakes to send to their friends. Check out Facebook’s awesome monetization strategy in action here:
http://www.whatbosh.com/?p=11
You’ve obviously never interviewed at Google.
No but I bet they aren’t half as arrogant and unprofessional as Facebook.
Even if they were arrogant tw*ts like Facebook, at least they have something to be arrogant about. They actually make huge profits and run a great business. Facebook make losses and are more concerned with their image, PR and their ridiculous dotcom style valuation.
…and I’m sure if they had offered you the job, you would have turned them down and thought exactly the same as you do now…
I would have taken it, but I would have had reservations after the behaviour of the people at interview. Id probably hate them even more if I had to actually work there. Seems like their CFO agrees as he just left.
Er, …as no-one heard of Tencent / QQ? http://ventureb...n-revenue-mark/
70% of Facebook’s users fall outside of the US, where this has huge potential to succeed.
Also stop being so short sighted in your thinking of this product. jjguy is spot on when he talks about what this product could evolve into if executed correctly.
It sounds like Mr Arrington has got over his feud with Myspace PR and has now turned his attentions elsewhere. Tut tut.
mike this is probably the one of the interesting post you have written in a while…you take a strong stance but i have to agree with what you have written about after reading about facebook this week on different blogs and news sites. anyway, facebook aka fakebook aka adress book is yesterday news…does executive sheryl sandberg even know how to code in basic html? what’s going to happen when mark gets kicked out after the next round of vc funding? does anyone at fakebook aka address book aka plaxo really care for the direction that sandberg will lead them with? the end is near…it all about twitter and not fakebook aka address book.
best,
jason
and they didn’t even make an effort at an april fools joke.
true indicator of a company in chaos