Facebook Expands Virtual Goods Business with Licensed Music and Sports Gifts

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For those tracking the expansion of the virtual goods economy in the US, the explosion of the virtual goods market on the Facebook Platform has been nothing short of remarkable this year. We expect the total US market to reach $1 billion in 2009, with social applications and games leading the charge, based on research from our recently released report, Inside Virtual Goods. However, while Facebook hasn’t focused on its own direct virtual goods business as much as it has growing its brand and performance advertising businesses, it has been steadily rolling out more features over the last year, including its own virtual currency, designed to lay the groundwork for Facebook’s future e-commerce growth.


Today, the company took another step forward in those efforts, announcing the availability of licensed music and sports gifts in the Facebook Gift Shop. Here’s how it works:

– When users go to the Gift Shop, they’ll be able to choose gifts from one of several categories: Music and MP3s, Charity, Sports, Virtual Gifts, E-Cards, and Real Gifts (i.e. physical goods).

– If users choose Music and MP3s, they’ll have two options: 1) “Web songs,” which can be played from the News Feed and wall, will cost 1 Facebook Credit, and 2) Full MP3s, will cost 9 credits. Facebook’s music gifts are all licensed from LaLa.com, and are only available in the United States. Users can also access their purchased music gifts on LaLa.com by creating a normal account or logging in through Facebook Connect. MP3 recipients can also download their songs. Friends who see the music gifts in the News Feed or on a friend’s wall “will only be able to play the song in full once, after which they will be able to play a 30-second clip.” See more details from our earlier coverage today.


– If users choose Sports Gifts, they’ll be able to select officially licensed branded virtual gifts, like jerseys or mascots, from the NBA, MLS, and “a number of major U.S. colleges.” Virtual gifts have proven very popular inside sports applications on the Facebook Platform for obvious reasons – people love to brag about their favorite teams and smack talk their friends when they win. (Update: Facebook is licensing content from the NBA, MLS, and universities through Virtual Greats.)

– If users choose Charity Gifts, they’ll be able to purchase items whose net proceeds are donated to the organizations. Charities already involved include Kiva, Project Red, TOMS Shoes, Charity Water and the World Wildlife Fund. Starting today, gifts from the Facebook application Causes will also be included in the Charity Gifts section of the Facebook Gift Shop.

E-Cards will allow users to send gifts from developers like JibJab, Real Gifts will allow users to send physical items, and Virtual Gifts will allow users to send the virtual gifts that have been in Facebook’s gift shop for a long time.

Overall, Facebook’s BD efforts to sign licensing deals with LaLa, Virtual Greats, and more coming soon are meaningful steps toward expanding the company’s digital goods library through partnerships with various rights holders, and reflect the company’s desire to make e-commerce an increasingly important part of its revenue future.

Facebook has recently expanded the availability of its virtual currency, Facebook Credits, for purchase in more currencies and through more payment methods. We expect those tests – as well as tests of Facebook’s platform payment system – to continue to expand in the months ahead.

To dig deeper into the virtual goods market, check out our new report: Inside Virtual Goods: The US Virtual Goods Market 2009 – 2010.