Today, the â€˜book and the â€˜soft joined forces, and Microsoft gave Facebook $240 million at a valuation of $15 billion for an expansion of their advertising partnership.
A site that lets people poke each other and share pictures is worth $15 billion?
Yes; and hereâ€™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?
What are Facebook Gifts?
â€œFacebook Gifts allows you to send personalized messages with icons to your friends on Facebook.â€
Basically a .gif with a message, these â€œGiftsâ€ are a perfect example of why Facebook is worth $15 billion (and probably even more).
Take, for example, todayâ€™s Gift: A Unicorn.
Iâ€™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 theyâ€™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?
Thatâ€™s right, Facebook will eventually make $10 million from this crappy unicorn .gif.
Not bad for an hour’s work.
I have no idea.
To clarify: I do know why theyâ€™ll make $10 million: Because people will eventually buy 10,000,000 of these crappy unicorns. What I donâ€™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 donâ€™t see $1 as being a lot of money, so theyâ€™ll gladly skip their next iTunes download to let their friend know that they care.
If Gifts were free, no one would want one. Youâ€™d give them to your friends, and theyâ€™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. Youâ€™re spending your hard earned cash, and sending your friend something of value.
And hey, itâ€™s not like everyone else is going to get the same one, right? Arenâ€™t they at least part of a limited edition?
Yes; if you consider 10,000,000 to be a limited edition.
Thatâ€™s right, 9.999,999 other people are going to get that very same â€˜limited editionâ€™ unicorn, and Facebook is going to get 10,000,000 one dollar bills added to their bank account.
Like I said, they print money.
And despite my despising of the Facebook Gift idea, I will say this: Iâ€™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: â€œMy friend just spent $1, and all I got was this lousy Gift”.
Hey, a guy can dreamâ€¦