Gratafy is social gifting for food. Is that something people want?

By Carmel DeAmicis , written on May 19, 2014

From The News Desk

Gratafy is a gift-giving app, for food.

The company has formed partnerships with local restaurants and bars, deliberately picking out the hip joints with high foot traffic, ranging from beloved dive bars to high end, fancy locales. SF partners include Bar None, Perry’s and Southpaw.

Users can then gift their friends money to those establishments, with a twist. The giver picks specific food and drink items to give. For example, if you know your friend loves manhattans at Monaghans or fried oysters at Monk’s Kettle, you’ll give them a gift certificate for those specific items, not just the joint in general.

The idea is that it’s a more thoughtful gift with an emotional connection. You’re gifting someone an experience instead of cash. “When you give a level of specificity the psychological connotations are much better. I know you like this bar and you like vodka sodas,” Gratafy CEO Brian Erke offered up as an example. Receivers download the Gratafy app, where their gifts are saved, and show the restaurant or bar a three digit code when they’re paying.

What’s more compelling than Gratafy’s appearance is what’s happening underneath the surface. The company isn’t really about gift giving. It’s a consumer data play, disguised as a gift giving app.

Because of the way the technology is set up, Gratafy is collecting information about consumer behavior and predilection, for both local merchants and larger corporate entities. Just like how Birchbox is really a marketing and publicity ploy that looks like a subscription e-commerce company, Gratafy is a Trojan Data Horse.

Instead of just doing printable or emailable gift cards like many of its competitors, Gratafy integrated with on-site point of sale systems. Merchants track what happens with the gifts once the customer arrives. If they were given a gift for a Johnnie Walker whiskey, did they switch to Jack Daniels on the next drink once they were paying the tab? “We can tell a lot about what people are doing in a venue and associate it with their preferences,” Erke says. He claims that food and beverage brands and local merchants have shown a lot of interest in the data pulled.

The company has spent three years getting these data collection systems in place before trying to scale. As a result even though it was founded in 2011 in Seattle it only expanded to its second market — Los Angeles — this past August. Since then, it launched in Chicago and as of this past week San Francisco. It’s moving slowly and steadily.

If it’s obvious that gift-giving is an industry waiting to be revolutionized, it’s less clear who exactly will be the one to do so. Despite all the efforts of startups gone by — from Sarah Lacy’s favorite app Karma to social recommendation engines like Pickie — none has become a breakout hit. They plod along without much pizzazz, or disappear into acquihires, shuttering operations immediately, months, or years after being bought.

It’s possible that gift giving just isn’t a scalable realm. It's a complex endeavor. Partnerships must be forged with gift providers. Operational complexity, whether the shipment of actual goods or the distribution of gift cards, must be mastered.

Most of all, gift-giving may not be an industry startups can revolutionize because giving good gifts is not a task that can be optimized for the masses. Think about it: Good gifts are unique. They're tailored to a person's predilections. They're thoughtful.

What happens when you try to build a gift giving machine that every Tom Dick and Harry will use? It becomes Hallmark-ified. The masses won't all love weird New York City subway map socks. The masses will like -- but not love -- Starbucks gift cards. As a result, when it comes time to scale a gift giving company it just turns into the time honored tradition of boring gift cards. See: Facebook's efforts with Facebook Gifts.

Will its Trojan Horse business model help Gratafy avoid the curse of the gift giving startup? It’s unlikely. To really make money off its data collection, Gratafy will need to scale. And scaling is exactly where all the other gift-giving startups have met their demise.

[Illustration by Brad Jonas for Pando]