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WalmartLabs, (s wmt) the new social and mobile commerce research lab created out of Walmart’s acquisition of Kosmix, is formally launching its first product, a gift-finding Facebook app called Shopycat. The app enables Facebook users to take the likes, shares and interests of friends and turn them into intelligent gift recommendations.

This is a well-timed product release that’s good for the holidays and addresses a pain point I feel year round. I find it’s often tough to find the right gift for friends, even when I know them well. Shopycat tries to get at this by absorbing a lot of social signals from your intended gift recipient and forming some smart suggestions about what they might like. The app will see what a person has liked in the past and who they are a fan of. And it looks at things that a person has shared and not only organizes those into interest topics but applies semantic analysis to ensure that it’s something they actually like. It then uses an algorithm to lay out the best suggestions with links to buy them.

Creating a diversity of suggested products

WalmartLabs quietly pushed out an alpha of Shopycat last month and I gave it a whirl. It was underwhelming in part because there wasn’t a great diversity of suggested products. But Walmart Labs has made a lot of improvements in recent weeks. Instead of pointing to just Walmart products, it incorporates items from many other retailers like Barnes & Noble (s bks), RedEnvelope and ThinkGeek. Shopycat also does a better job to find “giftable” items, products that make good presents, not just align with interests. That also means keeping items to around $10-50 dollars. If a user doesn’t have a lot of activity on Facebook, Shopycat defaults to suggesting gift cards.

Shopycat doesn’t just rely on algorithms. It’s got a simple tool to message friends and ask them about the appropriateness of a potential gift. And if a user knows about an interest of a intended recipient that’s not listed on Facebook, they can just search by that interest to call up a list of related gifts. Users can also help their fellow Shopycat friends out by updating their “My Info” tab with gifts and interests that they like. One cool feature is that products that are in-stock at nearby Walmart stores are also marked so users can go out and buy last minute gifts.

At least one “Wow” suggestion

Anand Rajaraman, the SVP Walmart Global eCommerce and co-head of WalmartLabs, said gifting is a tough job to tackle because people often go shopping before understanding who they’re buying for. And it will take a long time to perfect the process. But he said Shopycat is already robust enough that it should be able to produce at least one “wow” suggestion for each person.

“Gifting is hard to get right because it’s a combination of their interests and your interests,” said Rajaraman. “That’s why we try to show a diversity of gift suggestions so there’s at least one we thing that will be a good fit for a person and will fit a price range.”

How social and commerce come together

Shopycat shows where WalmartLabs is going and why it picked up Rajaraman and his fellow Kosmix co-founder Venky Harinarayan. The application builds off the work the two started at Kosmix around a “social genome” platform, which was able to parse social messages to understand trends and sentiment. Harinarayan talked at GigaOM’s Roadmap conference and explained how the challenges of mobile and social are prompting big retailers like Walmart to think about how they stay ahead of the changes in commerce as it evolves in the coming years. WalmartLabs has been gearing up for the challenge by recently acquiring OneRiot and Grabble and starting a new technology center in Bangalore India a few weeks ago.

Shopycat is only available on the desktop version of Facebook. Plans are in the works to bring the service to mobile through it’s not settled if it will be a Shopycat app or something incorporated into Walmart’s existing mobile apps.

I like where the app is going. It can definitely fill a need in my life and hopefully as it gets smarter and absorbs more signals, it will be even more of a trusted tool for gift buyers. It’s shows that social can have a big influence on commerce and when smartly processed, it can help spur on spending in a lot of ways.