August 1, 2010, 12:00 AM

As Facebook closes its virtual goods store, Twitter makes its move into e-commerce

While Facebook works on e-commerce alternatives to its shuttered Gift Store, Twitter is moving into e-commerce with the launch of @earlybird, its own take on daily deal sites like Rue La La and Gilt that offer limited-time sales at deep discounts.

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The world of social shopping is evolving rapidly, as last month’s events made clear. Facebook announced plans to shutter the doors to its virtual goods store, the Facebook Gift Shop, on Aug. 1, in a move to focus on other ways of promoting shopping on the social network. Meanwhile, Twitter launched @earlybird, its own take on popular daily deal sites such as Rue La La or Gilt Groupe that offer limited-time sales at deep discounts.

Facebook’s Gift Shop allowed members of the social network to purchase virtual goods using Facebook Credits, Facebook’s virtual currency, which they can purchase by entering their payment card information and receiving 10 credits for $1. For example, consumers might purchase a birthday cake icon for a friend to post on his profile page, usually for a dollar or two.

The three-year-old Facebook Store made up less than $10 million in revenue for Facebook last year, estimates Justin Smith, editor of the blog Inside Facebook. That’s a steep drop from an estimated $35 million in revenue that venture capital firm Lightspeed Venture Partners estimated in 2008.

Focus on credits

Consumers will continue to be able to use Facebook Credits to purchase virtual gifts from third parties such as Hallmark Cards Inc. The move indicates that Facebook is increasingly focusing on Facebook Credits as a currency that consumers can use on many Facebook stores, not just Facebook’s own.

“While the ability to give gifts will be gone, I am proud of the impact gifts have had on Facebook,” wrote Jared Morgenstern, Facebook product manager for games and credits, in a post on the social network’s official blog. “Out of the Gift Shop’s ‘gift credits’ came the virtual currency, Facebook Credits, that now makes it easier for people to buy premium items across the many games and applications on Facebook. So while we’re returning one gift, we’re replacing it with another, one that will be used to improve the experience of even more people on Facebook.”

Exclusive deals

Twitter, on the other hand, is diving in to e-commerce with a new program. Its @earlybird plays off the immediacy of Twitter to get shoppers to deals in a timely fashion.

“Many of you use Twitter to stay on top of timely, relevant information, and lots of businesses are already sharing special offers on Twitter,” Twitter said in introducing the @earlybird account. “We believe that surfacing deals through the @earlybird account will help you discover the best of those deals, as well as find and follow accounts that consistently provide exceptional value.”

Twitter has not elaborated on the types of deals it might promote, but it did say that initially the offers will be from large, international brands or focused on the U.S. market. Participating retailers will set the terms of the offers, including the availability, amount offered and price.

Twitter will control the @earlybird account, where it will post Twitter-exclusive deals on behalf of merchants. Companies will pay Twitter a fee for the service.

Consumers who follow @earlybird will receive these messages in their Twitter feeds, just like any other account.

While at launch the deals will be nationwide, Twitter says it is considering offering deals specific to a local area, such as cites or countries. Twitter has also hinted it might later add filters so shoppers only interested in fashion or music, for instance, could only receive offers tailored to those interests.

Part of its rationale for launching the @earlybird account is to create a new revenue source, says Augie Ray, an analyst at Forrester Research Inc. However, a side benefit could be a boost to Twitter’s relatively modest adoption rates. While heavily hyped, only 8% of the country’s online adults post and read updates on Twitter at least monthly, according to Forrester.

zak@verticalwebmedia.com

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