CARL FRITJOFSSON: Gift cards in the US is a $110 billion dollar market annually. It’s a large market and it’s something that retailers are familiar with and have the infrastructure to support. I was part of launching Groupon in Sweden and co-founded the Swedish ad network AdProfit, and [with co-founder Aage Reerslev] we stumbled on the fact that gift cards are a massive market that hasn’t been digitalized to a great extent.
We realized that digitalizing gift cards is one of the natural evolutions of the gift card product, but what’s even cooler is when you digitalize a gift card, you’re able to track that and understand how this gift card is being distributed and to whom.
How does it work?
Wrapp is what we call a friend-to-friend marketing platform that’s available through a mobile and web application, where retailers can issue targeted gift cards to consumers from their desired demographic group. Our users access our platform and log into Facebook, where we automatically extract their social graph. So say I go into the Wrapp application and from my list of friends, I click on my friend Greg’s profile.
Wrapp looks at Greg’s demographic data and creates a list of digital gift cards that I could send to him. This list of gift cards is customized and created in real-time, based on the demographic group Greg belongs to and the advertisers who want to reach out to that group. I then select the gift card that I think is appropriate. Maybe it’s a $10 gift card from the Gap. I can also add more money – $40 for example – on top, just like a traditional gift card. There are no strings attached to this that I need to buy an additional gift card or for Greg to buy a specific item or spend a minimum amount to use the card. The gift cards can be sent through Facebook, text messages or email, and are redeemed by scanning a barcode.
What’s your business model?
We have two revenue streams. The Wrapp platform is a digital reseller of gift cards, so when that additional $40 is transacted, for example, we receive a commission of the value of that transaction. And since the platform is performance-based, we charge retailers when these gift cards are received by the friend or redeemed in the store, since we know that the marketing message has reached the targeted consumer. That’s when we charge the retailer a fixed fee for providing this service.
What was your reaction when Facebook introduced Facebook Gifts? Do you see it as a major competitor?
We knew the guys who founded Karma, which Facebook acquired and turned into Gifts, so it wasn’t unexpected. There are a lot of companies trying to tap into the gifting market and trying various businesses in that space. We see them [Facebook Gifts] as an extension of an ecommerce strategy where they have specific items that you as a retailer can push through the Facebook environment, and you fulfill that product transaction by shipping that item to the recipient. Wrapp is about bringing people into the store environment rather than creating the transaction somewhere else, like Facebook Gifts does on Facebook.
How many retailers are using your service?
Globally we’re working with about 200 retailers, and in the US it’s slightly more than 40. Victoria’s Secret just started doing a nationwide campaign with us. We also work with H&M, the Gap, Sephora and Warby Parker.
What kind of analytics do the retailers receive?
Each campaign can be targeted by gender and age demographics. We also add a bunch of behavioral data about how people use these gift cards. Are they sending and redeeming a lot of fashion gift cards? Which cards are consumers redeeming versus not redeeming?
Do you see Wrapp as an alternative to other types of paid advertising?
We complement other paid ads. When a Swedish retailer that’s similar to Home Depot, for example, opened new stores, they purchased ads on Facebook and Google AdWords and told people to send their friends gift cards on Wrapp for the new stores. We’re also looking into working with media companies to introduce a call-to-action element to TV commercials.
Is there anything in it for the person sending the gift card to a friend?
We do have some campaigns where if you send that gift card, you’ll get one too, but Wrapp is more about sharing with others. 18% of all gift cards received through Wrapp are redeemed in stores, which is pretty high compared to other companies [that distribute gift cards]. We think the friend-to-friend aspect is what makes Wrapp successful. It’s an extension of word-of-mouth marketing.