Why Online Gift Giving Never Took Off on Social Media

With more and more physical shopping malls closing down by the day, the proliferation of the digital marketplace has reached all-time highs. Consumers’ love of online shopping has even spurred its own designated event, Cyber Monday, which occurs just days after Black Friday, the unofficial start of the holiday gift-giving season.

But despite the wild popularity of online retail, social media sites that have attempted to join in the fun just can’t seem to get it right, according to research conducted by Willamette University MBA’s Assistant Professor of Marketing Jameson Watts.

For example, Facebook launched a “Gifts” function in 2007 which enabled users to send gift cards to each other via the social network. The company pulled the plug on the service in 2014, much to the surprise of Wall Street investors who lauded the feature as a viable competitor to Amazon, according to Watts.

Watts and his co-author, Yotam Shmargad, Assistant Professor at the University of Arizona’s School of Information, investigated the connection between online visibility and digital gift giving.**

They found that features like Facebook Gifts are “less successful in dense social networks” — in other words, the more mutual friends the giver has with the receiver, and the more visible one’s gift giving activities are on the social network, the less likely one is to use the gift service.

“The negative effect of density we uncover is relatively strong …” Watts and Shmargad wrote.

Watts and Shmargad used data collected from a social network that offered eCard subscriptions for $12.95 per year. When a user sent an eCard to another, it was displayed on the recipient’s profile page, and mutual friends were notified in their content streams. Watts’ study found that subscriptions to this service dropped from 2.25% of the network’s users in 2007 to 1% in 2009.

“We find that purchase rates of the service increased with the number of ties that users kept, but decreased with their density — the extent to which these ties were tied themselves,” Watts and Shmargad wrote. “Given the well-documented anxieties surrounding the gifting process, such social surveillance can discourage users from gifting digital goods.”

Watts’ advice? That “firms should take consumer network structure into account when designing digital products and promoting engagement online.”

This goes beyond just the act of digital gift giving via social media, but permeates into the general idea of consumers engaging with a brand online. In other words, “if targeted individuals feel like their interactions with companies are too visible, they may refrain from liking or retweeting promotions even if they have a generally favorable attitude towards the campaign.”

Generally speaking, Watts and Shmargad wrote, this research has strong implications for “the broader issue of practicing intimacy in an increasingly public, online world.” Thus, it is necessary for those running businesses “to be more strategic about the types of interactions they promote.”

**Watts and Shmargad’s original paper “When Online Visibility Deters Social Interaction: The Case of Digital Gifts” was published in the Journal of Interactive Marketing 36 (2016), 1–14.