Ok, so if you can’t be bothered to read all the metrics and culations below, the estimated answer is $34 million.

Now if you’re curious as to how this number is estimated read on further – otherwise why not read about how Google News makes $100 million!

For those of you who are still here, I assume you use Facebook and hence would know what I mean by ‘gifts’. They are those images like a teddy bear or a cake that you can buy for someone. They look like this:

Generally they cost US$1 each and there are limited stock on most items.

Before we start on the metrics, I have to go kudos to the guys at Lightspeed Venture Partners.

Now that the formalities have been done, let’s begin!

Facebook will create gifts based on seasons, holidays or general items. If predicted popular, they will stock at 10,000,000 otherwise at 1,000,000 or 100,000 and sometimes even 15,000 (for less or unique items). Each items is generally $1.

When the item drops below 100,000 in stock, Facebook puts it on the first page of the gifts homepage with the stock level (note: this is only done for 1 item per page).

So the guys at Lightspeed have been monitoring these items as the stock value decreases week by week. Using this average decline rate, they can assume the sales rate of these gift items.

The data was used from the ‘best selling’ category as defined by Facebook – but because the data is quite sparse they divided the data into 20 groups and took the average of each group – and then used that average sales rate for each item in each group. Lost? Have a look at the spreadsheet below. Each group band is like each page with 20 items per group.

By then getting the average and multiplying by 20 (number of groups) they came up with a sales figure range of between 390,000 to 600,000 per weeks.

Majority of the gifts bought on Facebook are usually from the first page of the gift homepage – almost 80% – i.e. the first 20 best selling items.

Next we need to consider seasonality. In some months there will be higher sales compared to the other months. E.g. Valentines day, Christmas period, Easter and so on can be popular seasons when even more gifts are bought. Hence, we add about 40% for the assumed last 8 weeks of the year to make up for the data. Hence instead of playing with the average numbers, we’ll play with the weeks. We assumed 40%, so 52 weeks + an additional 40% is 73.3 weeks. Multiply this by the ranges (remember 390,000 and 600,000) we get a sales range of 28,500,000 and 43,500,000 and the average of 34,500,000 per year.

Finally we need to consider the fact that we only get the stock level data for the most popular item per group, his is high estimated error. But even if we assume 25% error rate per group from our first spreadsheet – we would still end up with a range of 28,000,000 and 43,000,000 with the average of approx 34,000,000 per year.

With each gift worth $1 X 34,000,000 = $34,000,000 per year in gifts.

So that’s the estimated value, US$34 million.

Calculation and Images sourced from Lightspeed Venture Partners.