Valuing Digital Goods

Social networks are brutally tough to monetize, especially when you consider hardware costs.

In response to Facebook's gift giving feature, Danah Boyd and James Hong both recently posted about gift giving and digital goods. Facebook's gift giving feature is time limited and donates the money to a charity, which allows them to collect market feedback without much risk, but there are ways they could improve it.

Danah posted

I think that Facebook is right-on for making a gifting-based offering, but i think that to make it work long-term, they need to understand gifting a bit better. It's about status. It's about scarcity. It's about reciprocity and upping the ante. These need to worked into the system and evolving this will make Facebook look good, not like they are backpeddling. This is not about gifting being a one-time rush; it's about understanding the social structure of gifting.

James, a founder of HotorNot.com, wrote

We found, last time we ran the numbers, that sending flowers increased the likelihood of a "double match" on our system by 4x.. meaning as a signal, they are well received and really work.

If we had priced them low, the flowers would have been worthless to everyone.