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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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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While their tactics win them few friends — even Russian superinvestor Yuri Milner apparently turned down the chance to join their latest fund over concerns about their approach — there is at least an obvious method on display. So far, the Samwers have targeted established, well-funded, American services who have yet to gain much of a footprint in Europe.

But today a report about their latest venture seems to show that they’re changing tactics.

According to Berlin blog Silicon Allee, Rocket is gearing up to launch “Dropgifts”, a rival to the gift-giving service Wrapp:

Rocket Internet’s next clone startup will be called Dropgifts and will be modeled on the Wrapp gift-giving service, Silicon Allee understands. Two Facebook pages have already been set up for the new service fromRocket, the Samwer brothers’ investment vehicle, a hint that it will launch sooner rather than later.

[…]

The site also includes three bullet points: “Surprise your friends with free gift cards”, “Choose from a variety of awesome brands” and “Sign up and start Dropping free gifts today”. The “awesome brands” include some names from Rocket’s very own stable, such as Zalando and Wimdu.

Wrapp essentially allows people to send gift cards to their friends on social networks — sometimes paying from their own pocket, sometimes passing on offers from retailers and other businesses. Groups can also use Wrapp to club together and send joint presents.

While it’s not entirely clear what Dropgifts will look like — the sites are currently password protected, and the Facebook pages were taken down over the weekend — the report appears to be accurate. Indeed, when it does launch, the service seems to plan on going big: a search of domain records appears to show that individuals linked to Rocket have lined up Dropgifts sites in countries across Europe, from the U.K. in the West to Russia in the East, and from Finland in the North to Italy in the South.

The difference between Dropgifts and the other Samwer clones is that unlike previous targets, Wrapp is not an established, well-funded, American service: it’s a young startup that only launched in Sweden at the end of last year. As it says on its website:

Wrapp is based in cold and dark, but sometimes warm and bright Stockholm, Sweden. We also have an office in sunny California’s Silicon Valley. Currently we only partner with retailers in Sweden, but other countries will be added very, very soon!

True, Wrapp isn’t necessarily an entirely run-of-the-mill startup. It has a great founding team, including serial entrepreneur Hjalmar Winbladh, the former CEO of Sendit and Rebtel, and Andreas Ehn, the former CTO of Spotify. It closed $10.5 million in funding at the turn of the year, from well-regarded investors including Reid Hoffman of Greylock and Skype founder Niklas Zennstrom through his company Atomico. And it’s ambitious, with plans to launch in America and the U.K. this year.

But unlike most of the businesses that Rocket clones, Wrapp is barely out of the starting gates.

I spoke to Wrapp’s Winbladh today, and he told me that he was “surprised” by the rumors.

“At this point we don’t have much information about them — so it’s premature for us to say anything,” he said. “But it’s surprising that they would clone something as young as Wrapp.”

Wrapp already has sales people working in Germany and the U.K., both markets that Rocket appears to have lined up for Dropgifts, he said — and added that he believed the company was well prepared for a battle on German territory.

“I’m used to competitive situations, and there are lots of things with this product that make it hard to copy,” he said. “And because of the situation with clones in Germany, companies like Wrapp have to launch with strategies in place for the German market.”

So have the Samwer brothers crossed the line this time?

I’ve written recently that cloning and copying is a fact of life for most significant businesses, and heard from experts who say that it practice happens more often than we would like to admit, often in our own backyards. But while they argue that the best way of fighting that sort of copying is to go international earlier and execute better, what do you do if you are the underdog? Where do you draw the line?

Compared to the Samwers, who are currently pitching investors for a $1 billion growth fund to pump up their businesses, Wrapp is very small fry indeed. Rocket isn’t just hoping to build a copy of an existing major site and exploit a geographical market it has yet to enter, as it has done in the past with eBay and Groupon: it’s looking to elbow its way past that competitor before it even gets going.

Under the antitrust laws of many countries, using market dominance in one area to force out competitors in another is considered anti-competitive practice. By this token, the Samwers — who control one of Europe’s strongest Internet companies and have a massive war chest — are starting to tread a fine line.

Rocket did not respond to a request for comment. I suspect its employees may simply scoff and suggest that Wrapp for not growing fast enough, the question is how far and how fast can a very young startup be expected to expand.

“Of course I’m paranoid about it — I am an entrepreneur, which means I am paranoid about everything,” said Winbladh. “I won’t say I am not concerned, but they will actually help me to execute even better because it will help me galvanize the team.”

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