May 21, 2012, 5:21 PM

Facebook buys social gifting company Karma to gain talent and mobile expertise

The social network gets Karma’s mobile app and all of its employees.

Lead Photo

Facebook has acquired Karma, a social and mobile gifting app founded last year by entrepreneurs Lee Lewis and Ben Linden. The pair announced the deal via Karma’s blog. Lewis and Linden, along with all of Karma’s roughly 15 staff members are now moving to Facebook. The purchase price was not announced.

Karma integrates with Facebook  to notify consumers of gift-worthy events, such as birthdays. Users can then choose a gift, such as clothes or food, and inform the recipient of it via text, Facebook or e-mail.  Recipients can then select the gift’s flavor, color or size, and either have it shipped to them for free, exchange it or donate the value to a charity of their choice.

Karma announced the purchase just after the market’s close on Facebook’s first day as a publicly traded company. 

The acquisition is the most recent of several moves by Facebook to beef up its mobile expertise. Earlier this month, Facebook launched its App Center—a catalog of all mobile apps compatible with the social network. The App Center is designed to help users find new apps that integrate with Facebook, help developers showcase their apps via app detail pages, and drive more mobile use of Facebook. Facebook says it attracts more than 425 million mobile users each month.

“For the over 900 million people that use Facebook, the App Center will become the new, central place to find great apps,” Facebook says in a blog post. “Everything has an app detail page, which helps people see what makes an app unique.”

Facebook says it uses a variety of signals, such as user ratings and engagement, to determine if an app is listed in the center. The social network also launched a new app ratings metric that allows developers to see how users rate their apps over time. “Well-designed apps that people enjoy will be prominently displayed,” Facebook says. “Apps that receive poor user ratings or don’t meet the quality guidelines won't be listed.”

In addition to Facebook’s mobile focus, the social network also seems to be looking to acquire  talent from startups, says Greg Sterling, a senior analyst at technology advisory firm Opus Research. For example, it recently nabbed the team behind photo-sharing social network Lightbox.

He also says Facebook may be looking to Karma to generate new revenue streams. For example, Karma could start charging a transaction fee for each gift given or allow brands and products to advertise within the app to generate revenue from Karma. For example, a gift basket retailer could advertise its products to try to get gift givers to select a gift basket as a present.

Meanwhile Sterling cautions that Karma, despite already being integrated wit"h many of its users’ Facebook profiles, might find its further association with the social network a growth barrier. “A lot of people are just distrustful of Facebook,” he says, noting recent concerns around privacy and profile-based ad targeting. Karma may have had an easier time convincing customers to buy through its app as a standalone company," he says.

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