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Facebook Acquires Mobile Social Gifting App Karma

Facebook just went public with a market cap of $104 Billion and it has already made its first acquisition post IPO. Facebook has acquired Karma, a mobile social gifting app. The exact terms and details of the deal are not yet disclosed but the entire team of Karma with its 16 employees will be joining Facebook post the acquisition.

Karma, founded by Lee Linden and Ben Lewis, has raised $4.5 million from from Kleiner Perkins, Sequoia Capital, Caulfield & Byers, Felicis Ventures, CrunchFund and Obvious Corporation. Karma, a social gifting app lets users decide whether to receive the gift or donate the cost of exact same amount of the gift to charity instead.

From Karma’s blog:

We’re thrilled to announce that Karma has been acquired by Facebook. The service that Karma provides will continue to operate in full force. By combining the incredible passion of our community with Facebook’s platform we can delight users in new and meaningful ways. As we say … only good things will follow.

Simply put, together we can celebrate life’s important moments in ways we could not before. A word of heartfelt thanks to our partners, customers, and our incredible team for helping us share Karma with so many people.

This acquisition makes sense for Facebook

Facebook, previously, had a feature called Virtual Gifts where Facebook users could send virtual gifts to people in their network. However, Facebook closed it down in favor of Virtual Credits that let third party developers use it as a currency for selling virtual items on the social network. Social gaming platforms like Zynga makes use of these virtual credits to sell in-game goodies to their users. Virtual credit is Facebook’s second only biggest revenue source after Advertising.

Facebook in their S-1 filing stated that Mobile is an increasing risk factor for the company:

We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.

Although the company company had 488 million monthly average unique users of its mobile products in the month of March, it hasn’t figured out a way to monetize those mobile users yet.  Karma’s founders, Lee Linden and Ben Lewis are experienced in monetizing mobile apps, which might help Facebook in a long run.

If you expect Facebook to stop their acquisition spree here, you might be wrong. Facebook has identified their weakness and now with their $16 Billion of cash they can fix the problem with such acquisitions, if they can’t do it in-house.

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Apurva Chaudhary

Apurva is a tech enthusiast, works at ClassMatrix , cycles on her Firefox Cyclone, and runs a newsletter at Techknots . Follow her on Twitter