What Boomerang realized was that standing in the middle of consumer-to-consumer gift transaction was not the greatest business model, CEO Zach Smith said. It depends on massive scale, and other companies like Sweden’s Wrapp and Facebook’s Karma were coming to dominate the market while Boomerang tried to scale its local-merchant strategy.

“There’s a huge opportunity in social gifting, but it’s not in selling gift cards to consumers,” Smith said. “It’s in building viral ads.”

Smith discovered that businesses loved the idea of gift cards for spreading their brand awareness and luring in new customers, but they wanted communicate with customers directly — not just be an option in a growing menu of gift cards, Smith said. So Boomerang has been increasingly obliging them. It hasn’t abandoned its peer-to-peer gifting service, but it’s using it primarily as means of redistributing direct-to-consumer gift-card promotions.

Here’s an example: A customer like chocolatier Ghirardelli will send out an e-mail to its customer list embedded with a stylized $5 gift card redeemable on the company’s site or at one of its stores. If customers accept, they click a link where they’re taken to Boomerang’s site and given an electronic or printable gift card. Customers are then given the option to share that card with, say, five friends through on Facebook or over email.

There are some compelling reasons why brands like this approach, Smith said. First, one in five customers who receive a Boomerang promotion from a partner redeems their gift cards on the spot to buy goods online. “What other ad unit on the planet gets a 20 percent engagement rate?” Smith said.

Then there’s the viral distribution platform. People who receive the initial promotion re-gift the card on average to 3.1 friends. Though engagement rates can fall after that first wave, customers can spread a practically compelling gift card well beyond their initial friendship circles, creating what amounts to an ad hoc viral marketing campaign across a social network, Smith said.

The key is getting those gift cards into consumers hands (or inboxes), rather than depending on a consumer to initiate peer-to-peer transaction. To that end, Boomerang has been looking for more avenues to distribute those cards. It’s been working with a few online market research and promotion companies like Lab42 and Jebbit to make Boomerang gift cards rewards for completing questionnaires or engaging with their marketing content. This week Boomerang took the Rewards program out of beta, offering it to all comers.

One casualty of Boomerang’s new strategy, however, has been its initial focus on local business. National brands allow Boomerang to scale nationally. And while consumers say they like the hipness and flexibility of giving gift cards to a local bakery or coffee shop, Smith said, 90 percent of the gifts they actually give are for national brands like Starbucks(sbux) and Fandango.

Boomerang still offers gifts FOR about 100 local businesses in four cities, though most of them are in hometown Chicago. While Smith said it would continue to support those customers, it’s not pursuing any new ones. The startup has found that there is budding market for paid gifts — where customers actually buy a gift card rather than pass on a free promotion. But Smith said it’s not a business Boomerang will likely pursue for the simple reason that daily deal companies like fellow Chicagoan and Lightbank prodigy Groupon (see disclosure) have that premium coupon market locked down.

Having raised $1 million in July, Boomerang is still a small operation, working out of the Lightbank collective co-located in Grouping’s Chicago HQ building. Last month it had 300,000 unique users, but thanks to its new viral marketing approach, the company is growing quickly, adding some big national brands to its roster, including the Gap, Barnes & Noble and Wine.com.

Disclosure: The author’s spouse is employed by Groupon.

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So instead of sending someone a gift card to the Gap, they can send a donation in their friend’s name to the Red Cross, World Wildlife Fund, Operation Smile or Kiva.  Other charities include SOS Children’s Villages, Plan and dance4life.

Users can decide how much they want to pay to donate to the non-profit group. In the case of Kiva, Wrapp will provide credit for Kiva so a recipient can choose who they want to provide a micro-loan to.

Aage Reerslev, Wrapp’s co-founder and EVP, told me the donations are a good fit for the Wrapp service because not everyone wants to give gifts. For some recipients, who either have everything they need or value social causes, a donation can be more meaningful. It’s also helpful for non-profit organizations who can leverage social connections and the Wrapp’s gifting mechanic to raise funds.

Wrapp, which raised $10.5 million Niklas Zennstrom’s Atomico and Reid Hoffman, doesn’t make money from donations. But the core part of Wrapp’s businesses seems to be doing well. Users have sent 4 million gifts in its first year and Wrapp now reaches 40 million Facebook users in the US through its users and their friend network. Reerslev believes Wrapp can increase the number of gifts sent by 10x this holiday season.

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Yes, startups like Karma (which was purchased by Facebook in May), Wrapp and Boomerang already use Facebook as a platform for sending tangible gifts and experiences to friends. But Washington, D.C.-based Treater, which Wednesday launches to the public, doesn’t want to focus on formal occasions (as the aforementioned rivals do), it wants to offer a platform for sending casual, impromptu  gifts.

“It’s all the little things that are a little bit more meaningful than a like or a post to show you’re thinking about somebody,” said CEO and co-founder Jeff Ross.

In addition to coming out of beta, the company is announcing that it has raised $2.5 million in seed funding from several funds and angel investors. As part of the round, the company will add to its board Fred Schaufeld, managing director of SWaN Investments and founder  of NEW Asurion Corporation; Jack Davies, founder and former president of AOL International; and Gene Riechers, former general partner at Valhalla Partners.

In broad strokes, the service seems to work much like Wrapp and Boomerang.  Users select the Facebook friend  they’d like to send a gift and, through the platform, they can notify the recipient of the gift.  But while Wrapp and Boomerang are focused on higher-ticket items (with the former partnering more with national retailers and the latter working closely with local merchants), Ross said Treater is focused on lower-priced items, such as Peet’s coffee from Peet’s or a Chipotle burrito.

By zeroing in on the lower-value items, Ross said, the company hopes to expand the circle of friends to which people might gift from a handful of people who might get a $100 present to dozens who could receive $5 gifts.

Once gift-givers select a friend and an item to gift – from a cupcake or beer to movie tickets or a lunch – as well as a personal note, Treater sends a message to the recipients smartphone via Facebook wall post, text message or email. To redeem their gift, recipients show the “treat card” (a one-time-use credit or debit card) on their phone. Treater takes a cut of the transaction. Some of the merchants who accept treat cards include Peet’s Coffee, Caribou Coffee, Cosi, Chipotle and Urban Outfitters.

For gift-givers, it’s an easy way of sending friends a “thinking-of-you” treat.  And, for the merchants, it’s an interesting way to use social media to drive commerce and traffic, without discounting goods and services. I’m curious to see if Treater can encourage more spontaneous gifting, as that seems to be its biggest point of differentiation. But the startup is is entering a crowded field and, while its rivals play up formal occasions, they could easily shift their positioning. In addition to Wrapp, Boomerang and Karma, Starbucks offers consumers a way of sending redeemable digital gifts to Facebook friends, and CashStar and SocialGifts enable other retailers and chains to do the same.

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The startup, which has raised nearly $1 million from Lightbank, MediaBank, InnerWorkings and Echo Global Logistics, launches Tuesday to let Facebook users send digital gifts, including vouchers for restaurants, spas, sporting companies and other local businesses, to friends in their network.

“We think gifting is a massive space where [local merchants] have traditionally been left out of the equation,” said founder and CEO Zachary Smith. “We think there’s a huge opportunity and we’re ready to jump on it.”

American consumers spend $100 billion a year on gift cards, he said, but the lion’s share of that goes to national retailers because local businesses haven’t been able to get distribution on the platforms centered around gifting. Through Boomerang, local merchants can offer unique packages of goods and services, from free options (which get new customers in the door) to full-price dinners, movie tickets, spa packages and more.

Much like Karma, the social gifting platform acquired by Facebook in May, Boomerang scans a user’s Facebook network for gift-worthy special occasions, like birthdays, anniversaries, promotions and more, and then it personalizes options based on location and interest data. Swedish social gifting startup Wrapp also delivers gifts, in the form of gift cards, to Facebook friends. But Smith said Boomerang’s focus on local merchants makes it distinct.

The gifts are delivered digitally via links through email or Facebook and can be redeemed by showing a merchant the offer on a smartphone screen. While Smith wouldn’t disclose the exact percentage of the transaction taken by Boomerang as a fee, he said it was in the low double digits.

In addition to working with local business, he said Boomerang will partner with at least one non-profit in each city to let gift-givers make donations in recipients’ names. For now, the 10-person startup has partnered with 40 merchants in Chicago, including the Navy Pier IMAX Theater, Metropolis Coffee and Bike and Roll Chicago, but Smith said they have started hiring teams in two other cities and plan to go live in those areas later this month.

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The service offers retailers a way to drive measurable traffic into their stores, both physical and online. Retailers can offer gift cards with a small amount of value — perhaps $5 or $10– that users of this service get for free. Those users can add more money on to the card before sending it to a friend, or retailers can offer paid gift cards that a user can fill up and send to their Facebook friend.

Wrapp users get alerts for a friend’s upcoming birthday, prompting them to choose from a selection of gift cards. The retailer can offer the free cards based on who they’re trying to reach, but they don’t have to pay anything until the card is redeemed, which is usually part of a larger purchase. Users typically end up spending four to six times the amount of a free card. The “cards” are distributed via a smartphone app on iOS or Android, which they can use to redeem it in store. Some gift cards can only be redeemed online through Wrapp’s website.

Americans love gift cards

Winbladh expects the U.S. launch to provide a big boost because the U.S. has one of the most mature gift card markets, with the average American adult giving five gift cards a year. Americans also ask for gift cards more than any other gift.

Since the service launched in November, 165,000 people have gifted 1.4 million free cards to their Facebook friends. Wrapp has had 100,000 redemptions in its first four months, said Windbladh. Since getting started in Sweden, Wrapp has expanded to Norway and the UK and has opened offices in Germany, France, the Netherlands, Taiwan, Australia, Japan. The company is racing to stay ahead of Germany’s Samwer brothers, who are giving chase with their own social gifting clone called Dropgifts.

Wrapp has executives with a solid history, having been launched by Windbladh, and Andreas Ehn, Spotify’s first chief technology officer. Magnus Hult, another key early Spotify employee, Leo Giertz, founder of Barefoot Hackers, Carl Fritjofsson, strategy advisor to Groupon.se and Fabian Mansson, the former CEO of H&M are also part of the founding team. That has helped Wrapp attract $10.5 million in funding from Niklas Zennstrom’s Atomico, Greylock’s Reid Hoffman and Nordic VC Creandum.

Staying ahead of the competition

Windbladh said Wrapp will follow up the U.S. launch with a roll out in 15 more countries across Europe, Asia and South America. Not surprisingly, he’s bullish on the benefits of the service for both consumers and retailers. Consumers have an easy and often subsidized way to recognize their friends anywhere in the world on special occasions. And retailers can use the power of social channels to reach consumers and drive people into stores, with a way to track the efficacy of their free cards.

“This is a breakthrough model for sales and an elegant way to do gift carding,” said Windbladh. “You’re tapping into the most efficient marketing which is friends of friends.”

This is another interesting take on how retailers can tap social to drive commerce and market themselves. It’s still really early in the development of social commerce and there are a number of interesting ideas emerging. Wrapp has gotten off to a good start with its move to digitize and socialize gift cards. The U.S. should provide more momentum though it will no doubt attract imitators as well.

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Wrapp, which now pitches itself as “the world’s first and leading social gifting service”, had already reacted to the attack of the clone by promising to speed up its own expansion — after all, what Rocket lacks in originality it makes up for in execution. Wrapp opened up in the UK last month, and on Monday it will set up shop in Germany.

The Wrapp-DropGifts battle is now starting to resemble a high-speed (for the e-commerce world) game of Risk. Wrapp only launched in Sweden last November, and in the intervening months it claims to have had 150,000 users sending more than a million gift vouchers to their Facebook friends, using the iPhone and Android Wrapp apps, in that country alone.

Since DropGifts appeared in late February, Wrapp has opened in Norway, Finland, the UK and now Germany, and is still aiming to move into the USA, China, Japan and Brazil as well as Austria, Switzerland, Italy, France, Belgium, the Netherlands, Luxembourg and Eastern Europe.

It would do well to move fast. DropGifts has already opened shop in Italy, the UK, Germany, Belgium, the Netherlands, Japan, France and Brazil, and is soon to arrive in India, South Africa and who knows where else.

And DropGifts has also just received a chunk of investment from eVenture Capital Partners and New Enterprise Associates (NEA), Deutsche Startups reported on Sunday.

Of course, the battle is not just about who can open in the most places most quickly — although that’s a pretty big deal. Wrapp’s major selling point, it says, is that unlike Rocket it doesn’t operate a bunch of e-commerce businesses itself, so it makes for a more trustworthy partner for the brands whose vouchers it’s selling.

Rocket’s game is quantity first, quality later. Over time, we’ll get to see who wins on quality. But right now, it looks like it’s all about who can spread faster.

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However, those gift cards tend to be for a specific retailer or group of stores. Now a Munich-based startup called BonaYou is taking a less constricted approach, and it’s just closed a first round of financing to help it spread across Europe.

Like the other services, BonaYou also plugs into Facebook so the user can select who will receive the gift, but the gift comes in the form of a real or virtual pre-paid Mastercard, rather than a store card. Real cards, which can be redeemed in physical and online stores across Europe, get mailed out in a customizable box, while virtual cards get emailed in PDF form and can only be redeemed with online stores.

Funding came on Monday in the form of €500,000 ($650,000) from HTGF and an undisclosed amount from the Make a Startup Angel Fund. HTGF (High-Tech Gründerfonds) is a very active venture fund for German companies, backed up by the government as well as big national stalwarts like BASF, Deutsche Telekom and Carl Zeiss.

The cash should help with BonaYou’s expansion plans –- right now, the company is only operational in Germany and Austria.

“We are already starting the translation of the website and want to start in the UK, France, Spain and Italy this year,” co-founder Patrick Löffler told me. He said the company intended to expand across Europe, but has no plans to take it further just yet.

Löffler also indicated that BonaYou would soon be adding a collaborative element to its gift-giving service, allowing people to chip in on gifts. This kind of functionality is already available with some of the other social gifting firms, but then again those services are telling the recipient where they can and can’t spend their money.

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