Many blame Facebook's (NASDAQ:FB) lackluster IPO for the lack of hype around Twitter (NYSE:TWTR). Many also blame Twitter's lack of profitability, and think social media companies are in a second dot-com bubble, with single applications like Snapchat valued at $3.5 billion. And with just advertising as the dominant source of revenue for these companies who offer their services for free, the skeptics seem to have a point.
But Twitter's latest project with Starbucks (NASDAQ:SBUX) shows it has potential far beyond sticking ads between your tweets.
Starbucks now has a program that allows users to send a $5 e-gift to each other simply by sending a tweet. A user links their Starbucks account to their Twitter account, sends a tweet to "@tweetacoffee" with the Twitter handle of who they want to send the e-gift to, and the recipient can print it out, load it onto their own Starbucks Card, or load it on their mobile device to use.
Such gifting functionality was already available through Facebook and its mobile application, but the informal nature of Twitter along with its much more public-facing accounts allows for greater potential. Anyone could send any other Twitter user a coffee, with no need to be connected in any other way, and all it takes is a quick tweet. This reduces an incredible amount of friction to send a quick gift. And, such a platform feeds into the already lucrative "gift card" system, where Starbucks receives the cash but the customer redeems it at a later date, if at all.
An idea from the past
This idea of social gifting has already happened, just in different forms. In 2011, Jonathan Stark created an experiment where he shared his Starbucks card with the public, tweeting out its balance and allowing people to put money on it or use it to buy coffee. At one point, more than $20,000 circulated on the card in a week. Starbucks eventually had to shut down the project due to worries of fraud as someone began transferring the balance to their own card.
Facebook launched its own gifts platform in 2012, and then closed it less than a year later. Users could buy a gift for a friend, whereupon that person could choose their size, color, or whatever options might be available, or even switch out the original product for something completely different before entering in their own shipping information to receive the gift. Facebook found that 80% of the gifts given ended up being digital gift cards, as opposed to the physical gifts like teddy bears.
The right social gift network
Where Facebook failed, though, is where Twitter could prosper. Users protect their Facebook privacy much more than their Twitter, which allows any Twitter user to tweet at any other Twitter user. Additionally, Twitter isn't dealing with physical goods, just facilitating the digital transfer of value.
Many other companies could easily jump into this market with their own card networks. Square, the start-up created by Twitter founder Jack Dorsey (which Starbucks has invested in), recently came out with a service to send money through email. Think how easy it would be to send some cash with a tweet to cover drinks or a meal. And it's those kind of revenue transactions that could greatly augment Twitter's future revenue beyond advertising.
Twitter has plenty of opportunities to leverage its low-friction social network, and Starbucks' Tweet-a-Coffee is just the first.
Fool contributor Dan Newman owns shares of Starbucks. The Motley Fool recommends Facebook and Starbucks. The Motley Fool owns shares of Facebook and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.