Facebook Gifts has had a rocky debut, say multiple sources

By Sarah Lacy , written on January 24, 2013

From The News Desk

The beauty of Facebook being a public company is that, once a quarter, they have to talk to the public and answer questions. And everyone has the thing they're hoping to hear more about during Facebook's upcoming earnings call.

Personally, I'm dying to know what they say about the first six weeks of Facebook Gifts.

Certainly, the anecdotes I'm hearing from users or vendors have not been positive. One Fab insider says that the amount of inventory moved over the holidays was substantially lower than inventory moved through Living Social-- catching at least this person by surprise. (Fab's CEO Jason Goldberg wouldn't confirm this and says he's "hugely bullish" on the partnership; more on this below.)

In two days of asking multiple sources close to Facebook and vendors using the platform, the best I've heard amounts to: Look, we're six weeks in. Nothing is perfect in six weeks. Facebook will get this right.

Perhaps someone should tell the tech blogosphere that.

Facebook Gifts launched amid great fanfare. It seemed a no-brainer move: Facebook is under extreme pressure from investors to find new ways to monetize users and gifts are a natural extension of how people already use Facebook to send hundreds of "HAPPY BIRTHDAY!" messages.

What's more, Facebook didn't go the cheesy Poke route of shamelessly copying a successful app. Ever the savvy talent scouts, the company purchased a nascent company called Karma that was hands down the best designed and thought through mobile gifting app in the market. That's a twofer for a company like Facebook: They get a team who built a stellar gifting app and some tremendous mobile designers and engineers. Two things the company needed.

It's no wonder the press was so effusive about the launch. It seemed like it could hardly go wrong. But according to multiple accounts, it hasn't been such a slam dunk in practice.

There are two big constituents here, the users and the vendors trying to sell stuff through Facebook Gifts.

Let's take the users first. We'll build from least substantial problems to the most worrying as we go.

First off, anyone who used Karma -- admittedly a tiny rounding error given Facebook's gargantuan size -- has been heartbroken to see a gorgeous gifting app killed and replaced with one that lacks most of the features that made Karma so innovative.

Karma's real insight was that you could grow the gifting market by allowing people to quickly and easily send a gift the minute they thought about it -- almost as if by reflex. The team assiduously strove to take out every gifting friction point. For instance, you could send a gift to anyone in the world as long as you had their email, phone number or were friends with them on Facebook -- no need to know the address.

And if your wallet was in the other room or you didn't feel like putting out a credit card on a subway -- no problem. You could send the gift while you were thinking about it, and the app would hassle you to fill in your credit card details later. These are just two examples, but both of these are gone in the current iteration. There's no pay later feature -- although it was tested with users early on -- and you can only send gifts to people you are friends with on Facebook.

Now, this is something that pisses off me and hundreds of others, maybe thousands if we're being generous to Karma as a stand alone company. But most people who will encounter Facebook Gifts will never know there was a version of this that was a jillion times better that got summarily destroyed as soon as the acquisition happened. This is a tech blogger nerd-fest of a point that matters little to how Facebook Gifts will perform for the company.

A bigger problem: Users new to Facebook Gifts struggle to find it on the overly complicated Facebook mobile app, and the service has been absolutely riddled with bugs. Rather than being a core navigation button on the left hand panel, "Give a Gift" is only found on a friend's profile page. In other words, the call to action isn't "Come to Facebook and give a gift." It's "Hey you're hanging out on Joe's page. Want to give him a gift?" Giving another gift after that one isn't easy either.

I've heard from people close to Facebook that this is the single biggest piece of negative feedback they're received, and that even in house they admit it's a problem.

It's harder to assess how widespread the bugs are. In PandoDaily's experiments, it's been almost comical. When Facebook first demoed Gifts for us, it crashed. I've tried for weeks to send a gift, but my Facebook mobile app crashes every single time I open it, despite several re-installs, so I can't even get close to it. I tried it on my husband's iPhone, which was slow, and none of the cards loaded images, but seemed to work otherwise. Meanwhile, I asked Erin Griffith to give it a try and she got three error screens in a row, and was about to try it a fourth time when she got a receipt. She wasn't sure if she'd bought 5 or 15 pounds of gummy bears, because it wasn't clear whether the "failed" transactions were actually going through or not. (It turns out just the one transaction went through.)

Our own woes aside, it's widely known that Facebook's mobile apps are bloated and overly complex, and Facebook is said to be working on them. Indeed, at the Graph Search launch last week Mark Zuckerberg said that they couldn't announce anything mobile-related because every mobile engineer was devoted to working on the core apps. Facebook is very defensive when it comes to mobile-- not surprisingly as it's the one thing Wall Street and techies both criticize them for. Insiders emphasize that they got better last year, and they'll get better again in 2013.

My point is two-fold. First, it's frustrating that Facebook killed a gorgeously designed mobile app only to deliver a sub-par one. Second, even if Karma's engineers are able to recreate the initial magic inside of Facebook, if the core Facebook app does't improve, how will anyone know?

The Karma team -- which is mostly still at Facebook -- wouldn't comment for this story, but clearly it's one that knows the difference between a good mobile experience and a bad one. This kind of feedback has to be frustrating them, and I know I'm not the only one saying it.

But, look, we're only six weeks in. Let's say Facebook fixes all of this. They find a way to make Gifts more discoverable to users, and stabilize the core app so that it works long enough for someone to buy a gift. After all, they still bought a talented team who is still there, and no doubt if Facebook can put the right placement and muscle behind this, the opportunity is still massive. It's still an incredibly intuitive extension of how a large percentage of Facebook users are using the product everyday. These may be merely the gripes of an early adopter -- clearly not Facebook's bread and butter.

Well, apparently there are mixed reviews from vendors as well. I've talked to three vendors who've all expressed frustration with Facebook Gifts. Two were on the small side. The gripes included general unprofessional behavior -- not getting calls returned and disappointment with how little inventory has been moved. In general, they had high expectations given the obvious promise of Facebook Gifts.

The third report I heard was that Fab -- one of the largest Facebook vendors -- was incredibly disappointed with the initial sell-through on the site. We were told that the company set aside a large amount of inventory and that over the Holidays, Living Social handily out-performed Facebook. I was told this off the record.

On the record, Fab's CEO Jason Goldberg didn't directly refute what I heard, but said, he wasn't sure where it was coming from. He added via email: "I'm hugely bullish on the Facebook Gifts opportunity. They've got a super smart team and like everything with Facebook, with a team that smart (and) one billion users, I think they are going to get a lot right over time. Facebook Gifts is in the early days, and I'm thrilled that Fab is a part of it. We're excited and ready to grow alongside them the next few years."

Similarly, I heard from sources close to Facebook that there was a lot of optimism about that particular partnership moving forward... but that doesn't mean it went as expected over the last six weeks.

When it comes to smaller vendors, it's clear that items that sold well on Karma don't necessarily work on Facebook. Karma was known in particular for having eclectic quirky gifts, which may not appeal to a mainstream Facebook audience. We hear that some of the griping may be due to certain vendors being discontinued or swapped out, and that other vendors are quite happy with how things are going. A certain amount of that is likely to be expected.

Confused yet?

If you step back and patch this all together, even the people who say the negatives have been overblown, still admit that the launch had its pitfalls, that Facebook certainly has not nailed this product yet, that Gifts has real challenges being inside a crowded and bloated Facebook app, and that the company is still figuring out what vendors work and what vendors do not work.

Facebook has had a comparatively good track record with acquisitions, doing exactly what it's done with Karma. In almost every case except Instagram, it shuts down what it buys and melds those developers into the Facebook borg. But it's worth noting, most of those developers had been primarily working on desktop products-- where Facebook is considerably stronger. The Karma team-- and any future mobile acquisitions-- are going through a new frustration that the Instagram team was spared given its size and special agreement that it would remain distinct. Lucky them.

All of these may be natural growing pains. This is essentially a new app built by a team that has done it before, but without the constraints of being inside a large company and a preexisting sandbox they can't control. But if any of this reporting is an indication, we're a long way off from Gifts being Facebook's financial savior.