Facebook commerce startups get in on gift-buying season

A few weeks ago Teri Vaziri, of Walnut Creek, Calif., found herself in the common predicament of not knowing what to give a friend for his birthday. So she logged into the Facebook application Givvy, found her friend’s wish list and discovered he had digitally “registered” for a fancy coffee pot. A few clicks later, the coffee pot was on its way to the birthday boy.

Givvy is among the newest crop of social-gifting ventures that includes companies such as Let’s Gift It, GiftSimple and Wrapp. A few years ago, e-commerce stormed the holiday shopping season and gave rise to traditions like Cyber Monday. This year, entrepreneurs are taking online gift-giving one step further, allowing customers to shop for their friends and loved ones directly through Facebook.

“There have been several attempts at this in the past, but none of them have been super successful,” said William Rand, director of the Center for Complexity in Business at the University of Maryland. “This is the first year we’re seeing a concerted effort to pitch social gifting.”

“F-Commerce,” as the Facebook marketplace is sometimes known, has grown 9 percent in the past four months, according to British online research firm eDigitalResearch. That survey also found that 12 percent of people have been encouraged to make a purchase through Facebook. Even brick-and-mortar giant Wal-Mart has entered the mix with Shopycat, an app from Wal-Mart Labs that recommends gifts for users’ Facebook friends based on past likes or shares. Similarly, traditional e-commerce sites are now going social: In September, eBay bought the Israeli group-giving platform The Gifts Project, and Amazon and Etsy now too have Facebook-powered gift recommendation apps.

“This is the natural iteration of the Facebook platform,” said Asher Epstein, managing director at the Dingman Center for Entrepreneurship, also at the University of Maryland. “There’s enough information about us out there on social networks that people should never be getting anything as a gift that they don’t want.”

How it works

These applications tend to take one of a few general formats. The first are sites like Givvy and the just-launched GiftSimple, which essentially function like curated gift registries on Facebook. For example, Givvy allows users to not only create wish lists for themselves, it encourages people to suggest gift ideas and categorizes them into genres of recipients. (A vinyl-record fruit bowl for your hipster roommate, perhaps?)

“What I like best is the uniqueness of the gifts,” Vaziri said. As someone who buys dozens of gifts each year, “I run out of ideas sometimes. This makes it easy.”

Then there are recommendation engines, like Present Bee and Give ‘Em This, that suggest gifts based on your Facebook and Twitter contacts’ interests and likes. Give ‘Em This operates on technology built by ImplyLabs, an algorithm developer that analyzes social media “updates, events, likes and bios to find clues that are translated into gift ideas for you to buy from Amazon.”

Finally, there are the applications that operate outside of Facebook but nonetheless try to simplify gift-buying either for or with one’s Facebook friends. Let’s Gift It, which came out of the Dreamit Ventures accelerator program in August, aims to make it easier to split the cost of a large gift between friends. The site allows the gift-buyer to pool Facebook friends for one large present, and they’re partnering with 1800Flowers.com and We Take The Cake to try to simplify group check-outs on those sites.

Jessica Einreinhof, a customer service manager in Ringwood, N.J., used Let’s Gift It in October as a platform to raise $500 for a friend’s son, who was in the hospital.

“I liked that it took me out of the equation personally,” she said. “People didn’t have to tell me how much they were donating, they could do it on a credit card and they could see how much they were raising total. It was easier for people to do it that way.”

Then there’s Wrapp, a Swedish site that’s expanding to the U.S. early next year, which encourages users to buy virtual gift cards from selected retailers for Facebook friends on their birthdays or for other life events. Like with Lets Gift It, Wrapp offers group giving by allowing other Facebook friends to add value to a card. In November, the company raised $5.5 million from Atomico, the venture capital firm of Skype co-founder Niklas Zennström.

A crowded market

Epstein said these types of setups are effective because they allow users to combine their resources to give something truly valuable to a friend. Past pricey gifts on Lets Gift It have included a $1,375 video camera and a $1,700 honeymoon fund.

“Most of the time when people buy gifts they want to spend $50 to $100, for example. The fact that you’re within a certain price range is a limiting factor,” he said. “But if someone wants a trip to Hawaii or a new car, why can’t you have a collective group of people put in the amount they’re comfortable spending and collectively purchase that gift for you?”

Most of these sites get a percentage of the transaction when a user buys a retailer’s item using the app, and they hope the Facebook tie-in will allow people to discover gift ideas through the social network just as they would news articles or baby photos.

“Every traditional commerce Web site is built on at least some degree of intent to purchase that consumers may already have,” said Danny Leffel, who founded social commerce site Yardsellr after spending five years at eBay. “What they’re not great at doing is inspiring people to purchase products that they haven’t necessarily thought of already.”

But of course, no startup trend is without its foibles and challenges. For starters, parents and grandparents spend the most on gifts, not app-savvy young people, which might make it hard for these companies to gain traction among early adopters. Givvy, for example, currently has only about 300 monthly active users, according to appdata.com.

Some experts also wonder whether people will lose interest in the sites after the holiday gift-giving season passes.

“The challenge is how do you build this into everyday gifts versus having people come back one day a year,” Epstein said.

But Wrapp founder Hjalmar Winbladh, who previously founded multiple Internet startups, said that the sheer number of people who wish each other a happy birthday on Facebook could make his current venture worthwhile.

“One of the most common posts is congratulating someone on their birthday,” Winbladh said. “But there’s a big gap between saying congrats on someone’s Facebook wall and giving someone a real gift. We make it as easy to give a gift card that has real value as it is to write congratulations.”

So whose social-gift app will reign supreme? With so many similar startups entering the market, longevity will partly depend on which company is able to gain popularity among the most users. And we may not know who won that competition till January or February, when the dust has settled on gift-buying season.

“Because the network effect is such a critical component of this, it will take a while to flesh out who has the momentum,” Epstein said. “After all, not even Facebook was the clear winner overnight.”

 
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