A $100 Gift Card Isn’t Worth $100, Says GiftRocket

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suggest a store or location where the recipient should spend the money, but the recipient can redeem the gift immediately, whether or not they choose to spend it as suggested.

That’s a big change from GiftRocket’s original formula. The company started out with an elaborate smartphone-based system that would only release the cash if the recipient checked in at the specified location. “Our friends thought that was cool, but a lot of people thought it was too complicated,” Kale says. “A lot of the time you don’t even know if the person you are sending a gift to has a smartphone. So now we’re just letting people redeem up front.”

In another shift, GiftRocket plans to add payment options this week that make it easier to collect a cash gift. In the past, the startup offered only one option: PayPal. Now recipients can also opt to have a gift deposited directly to their bank account, or to have GiftRocket cut them a check and send it by snail mail.

“The amount of negative e-mail we received about PayPal is stunning,” says Kale. “It’s not designed in a user-friendly way. It’s really designed for power users who are buying and selling stuff on eBay. For lightweight uses, it’s not really suitable.”

Kale says he hopes that the new redemption options will encourage people to think of GiftRocket as an easy way to send money for all occasions. “We are really a payments company,” he says. But he adds that “we don’t want to be the next-generation PayPal—the point is it’s an extremely convenient way to send a gift.”

GiftRocket makes money by charging a 5 percent service fee, plus $1, for every gift it handles—so a $100 GiftRocket would cost the giver $106. That makes a GiftRocket a bit more expensive than a big-box-store gift card, but Kale says the startup’s customer research shows that “people don’t mind” the service fee. “It’s a social product—when you go into a Hallmark do you really look at the price of a card? And it’s worth it, if it saves you a trip to the store.”

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Wade Roush is the producer and host of the podcast Soonish and a contributing editor at Xconomy. Follow @soonishpodcast

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  • Cardnomics

    This is only true if the recipient’s sole desire is to reap cash out of the gift card. And, the point about digital is there’s a higher likelihood these will go unredeemed because there is no physical reminder and don’t seem so much like a gift plus not everyone knows they can be redeemed for cash because there’s a retail brand name associated therewith–which just puts more money in GiftRocket’s pocket. PEOPLE: The gift card can be worth much more when spent after the holidays during the enormous markdown period. Additionally, there are so many gift card promotions this year, the purchaser likely got a bonus on top of face value initially anyway. Some will give to the recipient and some will choose to keep for herself, but the point is the single transaction produced a dividend.

  • I agree with you 100%. People don’t realize they are restricting others by giving a gift card of a particular store.

  • Jeff Sale

    did the co-founder intentionally want to look like he had devil spikes coming out of his head? haha

    • Fyne

      lol..i was thinking the same thing.

  • JohnMiller2013

    GiftRocket just wants to get rich by taking an additional 5% of the gift card price from you… what service do they really provide? They put the gift money in someone else’s paypal account (which you can do easily for FREE). It is quite ridiculous, really. But they’re hoping you will be in “gift giving mode” and just spend whatever it takes to send someone a fast gift card, stuffing their pockets with your hard-earned money, and doing almost nothing for you.

  • kpax aka prot

    yes whos paying attention to the photo being posted of the founder of the company? and where im from that hand gesture had a somewhat obscene meaning….what a dork. instills buying confidence!

  • valdeser

    What kind of business model is GiftRocket? You pay up to 10% for “the privilege” of sending an e-mail to someone that they have a gift, which has to be applied for and then they have to wait days to weeks to get the money on their charge card, Paypal or bank account–exposing all of that information to hackers and ripoffs. There is no charge to send a check or get a Restaurant or Retailer to send them a gift card. One logical use that does come to mind is to launder money, but this is still a stiff rate to pay for that purpose. Also to note, GiftRocket has a telephone number that is never answered and has absolutely no customer service.