Facebook Card’s Big Implications for Advertising, Shopping

New gift card business could help tie online ads and offline purchases

During Facebook’s earnings call on Wednesday, CFO David Ebersman said the company’s Gifts service contributed a “very small” portion of the company&rsqu

During Facebook’s earnings call on Wednesday, CFO David Ebersman said the company’s Gifts service contributed a “very small” portion of the company’s $5 million in miscellaneous revenue—and the expectation is that its future contributions would remain “very small.”

Then on Thursday Facebook announced a new Gifts-related service that could become very big.

Starting today Facebook is rolling out Facebook Cards to U.S. users. Here's how it works: when a user sends a Facebook Gift to another user from a participating retailer—Target, Jamba Juice, Sephora and Olive Garden are on board at launch—the recipient will be mailed a physical Facebook Card carrying the present’s value.

The recipient can then take that card into a restaurant or retailer’s store and use it to redeem the gifted item or a product of his own choosing.

Once a user has received a Facebook Card, they can keep the card, share it with friends or split its value among different brands. For example, user Joe could send user Jane $50 to be used at Sephora. Or Joe could split that into $25 for Sephora and $25 for Jamba Juice. However, in the case that Jane received the $50 Sephora gift, she couldn't swap that into $50 for any other retailer. And Jane couldn't end up giving herself any money.

Facebook's spokesperson said the company doesn’t have any plans right now to roll out a digital version of its gift card, though people can user their cards to purchase digital gifts, like a Netflix subscription or iTunes.

Facebook has partnered with financial services company Discover to serve as the fulfilment vendor for gift cards (a Facebook rep didn't shoot down the theory that other credit card companies could become involved down the road).

Facebook Card appears primed to tie in with Facebook’s Offers products—which nearly 42 million unique users have claimed, per yesterday’s earnings call—but that’s not the case at launch. A spokesperson declined to discuss whether a retailer like Target would be able to promote Offers to users with Cards holding balances for Target or for another retailer, such as a gym running an Offer to someone with a Jamba Juice balance on their Card.

Besides helping drive e-commerce on the site, Facebook Card have the potential to help the company better connect advertising and sales, assuming users adopt the product. For example, at a grand scale Sephora would be able to see how many of the users who saw one of its ads and ended up buying something. The brand could even theoretically track which ads influenced purchased, where and when they ran, what else they might have purchased, and what offline stores they visited.

As American Express has shown, the power of closed-loop conversion data is incredibly potent, and Facebook COO Sheryl Sandberg emphasized during yesterday’s earnings call the need for marketers to measure Facebook’s impact beyond the click, specifically discussing Facebook’s impact on conversions and sales.

That conversion data surfaced through Card could also be applied to ad targeting, which is something that has Amazon primed to rival Google’s online advertising dominance. The idea there is that a marketer could run ads targeting users with Card balances dedicated to his or her brand (or who previously had balances) and segment out the ones who redeemed and those who didn’t. Card data could also be rolled into a signal for Facebook’s existing ad targeting options, so that users with a given retailer’s card balance could be prioritized when that retailer runs an ad on Facebook targeted to a specific segment. Alas—and even though Sandberg repeatedly pointed to Facebook’s targeting capabilities during the earnings call—the Facebook spokesperson had nothing to share regarding these possibilities, stressing that the company is focused on rolling out the product and receiving feedback.

Interestingly, Facebook has christened the new e-commerce product Facebook Card, instead of Facebook Gift Card. That could simply be a preference for brevity or suggest larger ambitions. For now users cannot themselves add to their card’s balance and a card’s value is designated to specific retailers, but should that change, so too will the product’s significance. For what it’s worth, the Facebook spokesperson said the company had nothing to share when asked if it would eventually be possible for users to add value to their own Card and provided the same non-answer regarding any future ability to apply the Card to online or mobile purchases.

In the past two years, the mobile wallet space has heated up as companies like Google, PayPal and Square race to convert consumers’ smartphones into their credit cards, thereby conjoining online and offline behaviors. Though Apple’s introduction of Passbook last year could position it towards the front of the pack—should Apple ever choose to connect its users’ credit cards with the app—no company has yet emerged as a frontrunner in the space. Facebook might as well try.

Whether or not Google et al. have reason to be concerned by Facebook Cards, companies like Wrapp that have built their businesses on helping retailers promote gift cards to Facebook users are likely in a cold sweat.