If you’re hoping to launch a startup that will grow quickly,
Sweden’s Wrapp is one to look
to. After launching in Sweden in November 2011, the social gifting
service reached 1 million users within 14 months, hitting 1 million
gifts sent per week this past Christmas, and redeeming 100,000 over
the month of December.
According to Wrapp, that made it the most-used digital wallet in the world. With a fresh series B round of $15 million this June, from Greylock Partners, Atomico and Creandum, following two $5 million rounds in November 2011 and January 2012. The site has been able to beat out Google-backed Gyft, Facebook Gifts, and even its Rocket Internet clone, DropGifts, by building upon a few smart elements:
Integrating with Facebook in a manner designed to “squeeze every last drop of juice” out of Facebook’s Social Graph, as Whiteboard Mag puts it. Wrapp publishes news about gift cards friends send, notifies you about friends’ birthdays and major events, offers free giftcards, and suggests very targeted cards for specific friends. It’s designed to immediately turn receivers into users.
Securing a network of over 180 partners and keeping them happy doesn’t hurt. Facebook Gifts didn’t secure as large a network and perhaps didn’t allow brands to be as close to the customer experience.
Expanding faster than the competition, and
selling itself as a
more trustworthy partner than its Rocket clone. DropGifts,
whose mobile app had around 5,400 monthly
users this March, to Wrapp’s 500,000, has now retreated,
pivoting into a B2B platform that will help retailers launch social
Catering to women. “Seventy-five percent of Wrapp’s users are women, with an average age of 32 to 33,” TechCrunch reports. Users tend to spend 4 to 6 times the amounts on their gift cards, mostly at brick-and-mortar retailers like Gap and H&M.
Going mobile. “Everyone knows that tying transactions to smart phones is instrumental in driving revenue,” said CEO and co-founder Hjalmar Winbladh. “If we can be linked to them, it will drive more sales in our stores."
This year, the model has come to Dubai. Can Wrapp’s success be replicated in the Middle East?
Wamda contributors Khaled AlSaleh and Mo Ali Yusuf hope so. Along with cofounder Usman Khalid, they launched Just Gift It, a Wrapp-style social gifting platform, in the UAE this past Christmas. It now offers users the ability to send gift cards through Facebook.
Four months later, this past April, the Honeybee Tech Ventures team, which is known for adding its own twist to successful global models, launched YouGotaGift, a similar service that offers users the ability to send and receive customized gift cards over email.
Two competing models
One primary difference between the two is that YouGotaGift does not require login via Facebook, while JustGiftIt does. YouGotaGift allows users to send customized gift cards over email, a customization likely designed for a market with a low trust of online transactions.
Yet with Facebook penetration in the Middle East hovering around
40%, compared to a global average of 34%, JustGiftIt is
betting, as Wrapp did, that Facebook integration will be key to
“Deep integration with Facebook is going to prove to be a stronger business model in the long run. We have more reasons for people to come back to the platform,” says AlSaleh. Thus far, its Facebook app has over 300 monthly users.
Another difference is that Just Gift It is focusing move heavily on free gift cards, which YouGotaGift doesn’t offer. Just Gift It, says AlSaleh, sees the digital gifting business as a marketing channel rather than a sales platform. “Our competitors have gone the one-time major gifting route, but this means that their customer life span will be shorter. We focus on everyday, gifting-on-the-go,” he says.
That said, YouGotaGift is generally “tough competition,” AlSaleh
admits. “The fact that they’re going to educate the market is
Thirdly, Just Gift It has gone mobile, launching an iPhone app, while YouGotaGift is sticking to web.
When customers buy paid gift cards, Just Gift It takes a commission; for free gift cards, the platform doesn’t earn revenue unless the card is redeemed. Their target market is predominantly “expats and people who live abroad, who are giving to their relatives here,” says AlSaleh.
Since Christmas, the site has grown around 40% week on week,
says AlSaleh, and now sees around 30-40% repeat customers.
It hasn't been easy to port the model to the Middle East, says AlSaleh. Initially, JGI's userbase didn’t quite understand how to use their interface, which strongly resembled the Wrapp landing page. In early May, the team relaunched a new interface that the founders say dropped their bounce rate down to 55%.
By offering free cards, not coupons, the founders hope to avoid the pitfalls of the daily deals sector; social gifting, says AlSaleh, doesn't discount brands.
However, as in daily deals, AlSaleh doesn’t expect to see any
customer loyalty to the gifting platform itself. Launching a Wish
List feature might entice people to return, but, he says, “I don't
think there's going to be any loyalty at all. It’s all going to
come down to the stores.”
The race to secure those stores is on. YouGotaGift has 27 outlets; Just Gift It has 16, the newest of which is international beauty chain Sephora; more are coming soon, say the founders.
For Ramadan, Just Gift It is also catering to those looking to contribute zakat, offering a unique opportunity to support local laborers. Through a partnership with Adopt-a-Camp, users can gift care packages to laborers in the UAE for AED 125 (US $35) each.
“100% of the money raised goes towards the organization, with JustGiftIt absorbing any operational costs incurred,” says Yusuf. “We're really proud to be doing this.”