Monday, February 04, 2013


A few days ago, Facebook announced the launch of their own gift card program powered by the folks that brought you the ever-popular Discover Card (is that even still around?!).  The basic gist is that it's a  re-loadable and re-usable "mega card" that  you'll be able to use at a variety of retailers, and which will eventually replace all those gift cards that you buy, get or likely have lost somewhere in your house. Oh yeah, and you'll be able to manage any and all gift cards you get - provided of course that the retailer is part of Facebook's program (more on that later).

So looking at this from a consumer's point of view, it sounds pretty good in theory - a single card that I can use to manage my balances across a number of retailers (they announced 4 pretty big ones as part or their launch). But it quickly starts to make less sense when you consider the realities of how customers - both on the giving and receiving end - interact with gift cards (having witnessed this behavior first hand during my time at GameStop) as well as the new friction that Facebook's card brings to the table.

First the customer realities. Gift cards are, for the most part, a present of last resort when you either have run out of time, ideas or energy to buy something specific or more creative. It's one step above stuffing cash in a envelope on the creative gifting scale - at least with gift cards you're telling the person "hey, I know enough about you to know what you like/where you like to shop but not enough to get you something specific that you'll likely end up returning or re-gifting so here's some free credit to use as you see fit." And more often than not these gift cards are given in denominations that are conducive to a single purchase as opposed to bankrolling your buying habits at a retailer for a month or two. So the reality is that most gift givers today prefer giving branded cards from a specific retailer.

For those folks that get these lovely gift cards, it seems like it would actually be more confusing to use Facebook's card when you go into a specific store as opposed to the store's card - because after all, how many of us will really be able to remember which cards we connected to our Facebook account?!  Plus, most folks use the card well before they'll take the time and effort to go online and connect the card.

Another point of friction is that, unlike the recently shelved Facebook Credits universal currency program, Facebook's gift card doesn't allow you the ability to load cash on it and spend it as you see fit across the spectrum of participating retailers.  This is one instance where taking a universal approach would actually work.

And oh yeah, let's not forget the retailers themselves - perhaps the most important part of the equation!  It goes without saying that Facebook's gift card program will only be as strong as its stable or  retail partners.  Without having almost every tier 1 retail chain signed up to participate, I don't see the gift card program being all that compelling to consumers.  In addition to risking brand dilution by having their branded cards replaced with a single "mega card," retailers are loathe to divvy up the revenue pie any more than they have to.  While it's not clear from what's been talked about publicly regarding Facebook's program, my assumption is that they are looking to take a piece of the action for every dollar spent through their card/program.  As it stands now, retailers have to share a portion of every dollar put on their own cards with: 1) the third party company that processes and manages their gift card program; and 2) in those cases where their cards are sold at locations other than their own, that 3rd party gets a cut as well.  Imagine now having to cut Facebook into the mix -- I don't see a ton of retailers standing in line so sign up for this program.

This isn't to say that Facebook's gift card program won't have some measure of success eventually - I just don't see it being a game changer anytime soon.

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