Before its IPO, Facebook's leadership all but admitted that the world's largest social network hadn't figured out how to make money from its fast-growing mobile user base. Today, Facebook brass would have everyone believe that the answer to its mobile ad problems lies with Sponsored Stories: posts or pages that a business, organization or individual has paid to highlight on your computer or your smartphone.
That's Facebook's homegrown solution, but social gifting company Wrapp thinks it has a better option.
Swedish-based Wrapp turns giving a gift into an opportunity to advertise on Facebook. Retailers create a campaign on Wrapp to give away low-value gift cards – $5 to $15 – that are sent and received via computers, or increasingly, smartphones. Wrapp has attracted a few big-name brands, like Sephora, H&M, and Major League Baseball. Wednesday it announced a few more customers, including Office Depot, Levi's, and Zappos.
Using Wrapp's Android or iOS app, users send digital gift cards to their Facebook friends for birthdays or other celebrations. (Users can also choose to pay to fund a gift card of a larger amount or gang up with others and add value to a card as a group gift.) After a prompt to download and use the Wrapp app to get their gift card, recipients redeem the gift at the designated retailer. Retailers pay Wrapp a fee when a sale is made.
Instead of the seemingly random ads we see (or that barely register) on many websites, including Facebook, Wrapp counts on your judgment to put a brand in front of your friends that they'd actually like. You feel good that you gave a friend a gift for their birthday, your friend gets a gift card to one of their favorite stores, and the brand gets a new customer.
When you give a card, you can post it to your friend's Facebook page. Once there, what amounts to an ad for a brand becomes a jumping-off point for conversation and celebration. "From a brand perspective, we're creating honest and genuine content within the social graph," says Wrapp chief operating officer Carl Fritjofsson.
Sure, some people might be bothered by brands showing up in their Facebook feed, but Wrapp is hoping the gift card will make up for it. The way the brands see it, the $5 to $15 gift cards are the cost of bringing in a new customer.
Unlike Facebook ads or Google AdWords, companies don't have to pay per impression or click. They only pay up when someone uses their gift card. "Brands value that the service is more or less risk-free," says Fritjofsson. "They only pay for our services if we generate a sale for the company." And since shoppers are likely to use the lower-value gift cards Wrapp gives out toward making a larger purchase, the retailer is rarely losing any money on the deal.
Facebook isn't ignorant of social gifting. The social network purchased gifting app Karma in May, but it has yet to do anything with it. You can bet if Wrapp gathers real momentum, especially in the mobile world, Facebook's won't be looking gift cards in the mouth any longer.
