InComm, Giftango Deal Gives Both an Edge, Observers Say (January 2013)

By Adam Perrotta, Assistant Editor

Putting together a deal in the gift card business during the thick of the holiday shopping season is no easy  feat—just ask Giftango Corp. CEO David Nelsen, who spent the final weeks of 2012 negotiating the sale of his company to Atlanta-based prepaid distribution and technology provider InComm. “Let’s just say I didn’t have a lot of spare time,” Nelsen says of his December. But the hard work is likely to pay off for both InComm and Giftango, the Portland, Ore.-headquartered digital gift card fulfillment provider—each of which gained a leg up on competitors as a result of the deal, according to industry observers.

Acquiring Giftango—which enables merchants to sell digital gift cards from their own Websites and boasts a network of more than 150 brands—expands InComm’s reach into high-volume, e-commerce gift card sales and distribution, an area in which the firm has recently been trying to establish a foothold. Earlier in December, the firm acquired Adility Inc., a platform that enables retailers to activate mobile gift cards at in-store POS devices. “We have been steadily growing our portfolio of products and services with the digitally driven consumer in mind, and our acquisition of Giftango helps further our goal of transforming the shopping experience for consumers,” Brian Parlotto, senior vice president, InComm, tells Paybefore. He adds, “E-gifting via mobile devices and email is gaining great traction and popularity among shoppers.” Indeed, a recent report by Mercator Advisory Group predicted retailers would issue 8 million virtual gift cards during the 2012 holiday season, and according to Giftango, some 80 percent of consumers opt for digital gift card delivery over a physical card when given the option.

For Giftango, which will become a wholly owned subsidiary of InComm and continue to operate out of its Portland headquarters, coming under InComm’s umbrella offers a name-brand prepaid alliance along with many benefits of scale. “We wanted to be one of the first in the [virtual gift card] industry to combine with a leader in the prepaid space to create an unparalleled platform in the marketplace,” Giftango’s Nelsen tells Paybefore, noting that InComm’s extensive merchant relationships enable Giftango to expand its presence in the retail market. “Some of the challenges a startup would normally face are immediately overcome with InComm, whose server and hardware infrastructure and technological platform are unparalleled,” Nelsen adds.

John Grund, a partner with First Annapolis Consulting, says the deal makes sense in a rapidly evolving industry, in which diversification is vital to success. “Long-term winners will have scale, multichannel capabilities, digital assets and differentiated distribution,” Grund tells Paybefore. “[The acquisition is] an attractive and logical transaction for both InComm and Giftango,” he notes. “InComm gets access to an established technology solution for digital cards and incremental distribution in the B2B space, while Giftango gets access to an established player in prepaid with the ability to complement InComm’s current distribution model.”