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You'll be using this soon: Karma social gift-giving

New Facebook-connected smartphone gift catalog and app gets it right where it counts.

Now playing: Watch this: Karma launches new way to send gifts

Karma is one of the most well thought-through gift-giving services I've seen. It combines smart analysis of users' Facebook streams, with a carefully curated storefront and a unique payment cycle.

The experience starts with an app that does some semantic analysis of a user's Facebook content. It watches your friends' updates and walls for messages that are likely to fit into certain emotional categories. For example, you'll see someone pop up in the "Tough day" category if they're getting a bunch of "I'm sorry to hear..." notes on their walls. The service also watches for birthdays, new jobs, and relationship changes. It gives you a decent dashboard of events that matter in peoples' lives.

This is smart thing No. 1, since Facebook by itself doesn't always do the best job of bringing forward the social updates we should be seeing, especially as our networks grow unmanageably large. So you might want to use this app regularly.

Karma blends a social dashboard with a good gift catalog. Karma

Karma is a gift-giving platform, though, not just a dashboard for your friends' passages. There's a curated store in the app. The gifts, at least to this middle-aged white guy, seemed well-chosen; they're the kinds of things I like to give. They're certainly well-represented in the app. (And there is, by the way, no non-mobile way to give Karma gifts yet.)

The whole gift process is slick. The catalog is easy to navigate and it's easy to create the gift notification with an electronic card. Writing the card itself is easy, too. There are drop-down menus for the greeting and sign-off, for example.

Recipients get the electronic card (a Web address) delivered to their SMS number, Facebook wall, e-mail address, or any combination of the three. Any browser can display the gift notification; recipients don't have to have the app.

One of the cool things (smart thing No. 2) about the service is that you don't have to know your recipient's physical address to send them a real gift, nor in fact their precise taste in the gift you're giving them. When you send a gift, the recipient puts in their address and can get the option to select a gift option (like color, or in one example I saw where the gift was a stuffed dinosaur, species). All gifts arrived wrapped.

The recipient can even swap out the gift entirely, if they choose to, including changing it to a donation to charity.

Finally (smart thing No. 3), first-time Karma gift givers don't have to pay for the gift or enter in credit card info until recipients actually confirm that they're accepting it. At this point, Karma will send givers an alert and ask them to update their account with credit card info. This would be a bad time to abandon the transaction.

The whole process is simple and straightforward for both giver and recipient, and enjoyable throughout. And this is despite a fairly complex transaction cycle and the presentation of a ton of options along the way. I'm amazed at how painless the process is, especially considering that it runs on a smartphone.

I recommend the app. Karma should be live in the iPhone and Android app stores now.

A good retail business
I also like the business. The revenue model is straightforward: Karma is a reseller. But, CEO Lee Linden tells me Karma was able to negotiate better than usual margins on the items it "stocks" since it gives its item providers not just money for goods, but data about the goods its selling.

Karma can tell a chocolate manufacturer, for example, which demographic groups like milk chocolate over dark, which items are more frequently swapped out, what a particular demographic likes to give, and so on. This type of information, Linden says, is usually unavailable. "All retailers normally get is an address. We can tell them more."

Linden told me that Karma is studiously avoiding selling digital goods. If it did, it'd have to run its transactions through either the Apple or the Facebook payment system, and accept one or the other (or both?) of these company's 30 percent transaction fees. By selling only actual goods, it can run its own payment system and avoid that rent.

To size the market, Linden uses the gift card business, which he says runs at $100 billion a year with $12 billion in paid-for value going unclaimed (the "breakage"). Karma's competitors include Wrapp (only available in Sweden so far), which looks like it has good integration with Facebook. In the gift card space, see also GiftRocket and Giftly.