Price-Point

Today, the ‘book and the ‘soft joined forces, and Microsoft gave Facebook $240 million at a valuation of $15 billion for an expansion of their advertising partnership.

$15 billion?

A site that lets people poke each other and share pictures is worth $15 billion?

Yes; and here’s why: Facebook prints money.

Facebook has created a product that turns a 99.99% profit, has incredibly (almost infinitely) high demand, and costs nothing to make.

What is this mystery product?

Facebook Gifts.

What are Facebook Gifts?

“Facebook Gifts allows you to send personalized messages with icons to your friends on Facebook.”

Basically a .gif with a message, these “Gifts” are a perfect example of why Facebook is worth $15 billion (and probably even more).

Take, for example, today’s Gift: A Unicorn.

I’m going to go ahead and assume that with a few MS Paint skills and a spare hour, I could crank out the unicorn image that they’re using.

And if I were Facebook, and I did go ahead and create this unicorn Gift; how much would I expect to get paid for my hour of work?

$10 million.

That’s right, Facebook will eventually make $10 million from this crappy unicorn .gif.

Not bad for an hour’s work.

Why?

I have no idea.

To clarify: I do know why they’ll make $10 million: Because people will eventually buy 10,000,000 of these crappy unicorns. What I don’t know is why people will eventually buy 10,000,000 of these crappy unicorns. I mean, it is a crappy unicorn after all.

I think part of the reason why Facebook can sell so many of these things is that they have hit upon the perfect price point. Users don’t see $1 as being a lot of money, so they’ll gladly skip their next iTunes download to let their friend know that they care.

If Gifts were free, no one would want one. You’d give them to your friends, and they’d simply add them to the pile of other free gifts. Put a $1 price tag on the Gift however, and suddenly, giving a gift is a momentous occasion. You’re spending your hard earned cash, and sending your friend something of value.

And hey, it’s not like everyone else is going to get the same one, right? Aren’t they at least part of a limited edition?

Yes; if you consider 10,000,000 to be a limited edition.

That’s right, 9.999,999 other people are going to get that very same ‘limited edition’ unicorn, and Facebook is going to get 10,000,000 one dollar bills added to their bank account.

Amazing.

Like I said, they print money.

And despite my despising of the Facebook Gift idea, I will say this: I’ll gladly plop down a hard earned Washington for one of these the day Facebook comes out with a Gift in the shape of a T-Shirt that says: “My friend just spent $1, and all I got was this lousy Gift”.

Hey, a guy can dream…

[Facebook]

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