Personally I think virtual gifts is a dangerous business model. In some scenarios it can work, but you need a really good reasons to create artificial scarcity or else you'll piss people off and be very vunerable to competition.
Raise your hand if paying $2 to download a 200k ringtone makes you happy. How fast would that business model disappear if people were able to upload whatever they wanted from their PC or iPod?
Making money from virtual property is a great idea, but it can definitely "go against the flow" just like ads. You have to be really careful to only charge for things that people will buy because they want to pay for them.
Actually, on a site like Facebook, this idea will obviously be challenged to work AS well as it would on a site like Stardoll or Gaia. That said, the poster is absolutely right, this model is making money hand over fist. For many of these sites, VCs are superfluous. Even Angels are superfluous!
I still say that the first kid to come out with a FULLY hardware accelerated 3D game world in the browser WITHOUT security warnings or downloaded plugins will be very rich indeed.
I've read in a number of places that facebook is profitable. Siince their ad revenue is so low, you've go to imagine flyers + gifts are making up for the difference. Seeing that they've hired so many engineers, you've got to reckon they're racking in tons of $$$.
I personally know no one who has bought one of these gifts. I can certainly envision people doing so, but not really on a large enough scale to be highly successful with it. Of course, this is all based on personal experience and supposition :).
Raise your hand if paying $2 to download a 200k ringtone makes you happy. How fast would that business model disappear if people were able to upload whatever they wanted from their PC or iPod?
Making money from virtual property is a great idea, but it can definitely "go against the flow" just like ads. You have to be really careful to only charge for things that people will buy because they want to pay for them.