Facebook: Manufacturing Scarcity and Minting Money

Sold out! How do you sell out a digital product? Why would you sell out of a digital product that can be infinitely reproduced, distributed at no cost and sold at pennies per transaction?

A few weeks ago the queen of social networks, Chazbot, pointed out a new feature introduced on Facebook called “Gifts”. These are small graphics that you can purchase and give to a friend to place on their profile. Facebook is charging a dollar for each 73 X 62 pixel image, which seems pretty high for what can only be an impulse buy. Perhaps even more interesting then Facebook’s brazen attempt to monetize its user base is the method they are employing to do it. Not only have they set out to sell online nick-knacks to the digital generation at a hefty price, they have tried to mimic offline notions of scarcity to do it.

screenhunter_002.jpg This is a pretty bold move by Facebook and its one that the other social networks should be watching pretty closely. If Facebook convinces even a fractional portion of it’s user base to purchase “Gifts” on a monthly basis it could add another $1 billion to Mark Zuckerberg’s valuation of his 3 year old company.

On the surface it may seem like a generation that is growing up with Wold of Warcraft, iTunes and Second Life, would be primed to purchase this items. However, I just cant see a demographic that grew up with Napster, Bittorent and Myspace forking over a $1 for a postage stamp sized graphic to place on a profile. In order to really get wide spread adoption of the system, my guess is that Facebook would have to reduce the price by at least 1/10th. At ten cents, “Gifts” are an impulse buy that I can see getting and distributing to a bunch of friends, at a buck each its a much bigger commitment.

I also cant imagine that putting a expiration date 73 X 62 pixel images and telling people that there are only 100,000 of them will make them more valuable. While their approach to mimicking scarcity seems likely to fail, it is at least different than the attempts by major media companies to do the same thing with DRM. Face book may fail to get users to fork over cash for digital products but at least they are asking and trying to create some value around a ubiquitous commodity.

2 Responses to Facebook: Manufacturing Scarcity and Minting Money

  1. Perry says:

    i agree i have fb (Perry JG) and thats retarded. its impossible to sell out on a digital product. Maybe their servers were over run but if so they should just say that!

  2. Mike says:

    Looks like Facebook is making $10,000,000 from those gifts per day now. People are crazy.

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