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Category Archives: Social

Waiting for Social Commerce

unintended-consequences-240x300Since the founding of Facebook and Twitter; pundits, VC’s and entrepreneurs have been predicting the second tidal wave innovation to transform the e-commerce business as we had known it. “Social Commerce” was supposed to be the biggest thing since Jeff Bezos turned the web from a replacement for brochures & collaterals into a virtual store front. Six years later, after some fits and starts, and even a few success stories, the reality has not come close to matching the promise once made by all of us. We had imagined a world where social platforms like Facebook would institutionalize word of mouth into a channel so frictionless that infinitely viral (and free!) acquisition machines could be created for every business under the sun that would render search irrelevant or atleast supplementary. That world is not here yet, and perhaps way too ambitious in the first place, but I believe we are only in the first few inning of the game and the potential is still there. For now, we are still chasing, failing, iterating, and . . . waiting.

There is no doubt that social has completely disrupted the content & media business (news, blogs, photos, videos, music etc) – that for increasingly more of these companies, social platforms like Facebook and Twitter has become a larger source of traffic than search. But for e-commerce, it just simply hasn’t been true. Look at round the web today – 99% of e-commerce sites looked pretty much the same as it had tens years ago. Google remains the largest expense line for 99% of e-commerce companies. Some of the most successful companies associated with “social commerce” are not social at all. There is no “Group” in Groupon or “Social” in Living Social for that matter – if there was, they would not need to spend a gazillion dollars on Google every quarter. Most flash sales sites are the same. Outside of incentivizing customer with discounts for referrals; most haven’t been able to create much incremental virality on top of social platforms either. This is not to say that these companies are not game changing; they are, just not game changing in the social marketing context.

There is; however, a bright spot in the social commerce movement – in women’s fashion – an already deeply social (in the offline sense) category. The newest wave of subscription commerce businesses in fashion (ShoeDazzle, BeachMint) and others in more traditional e-commerce (ModCloth) has come close to cracking the nut on social commerce. Polling, incentivized sharing, loyalty rewards, crowd sourced designs, celebrity marketing etc – all work to varying degrees and would not have been possible without Facebook & Twitter. Unfortunately, many of these social marketing strategies are far better for retention than they are for viral acquisition. (Thus the dependence on Google continues.) Even more importantly, outside of women’s fashion, the playbook has yet proven to be effective marketing tactics. Whether the floodgate has finally been cracked opened or women’s fashion will remain an outlier to the rest of the e-commerce industry is still up in the air.

This is not to say that all non-fashion e-commerce businesses should give up on social marketing and advertising. Search will continue to get more expensive and new acquisition channels will need to be discovered for many e-commerce businesses to remain viable. Both Facebook and e-commerce companies will need to continue to experiment and invest in social commerce given the potential for disrupting the existing ecosystem (just look at the media business). Facebook needs to focus on creating new social mechanics and ad product specifically targeted at e-commerce companies – a good place to start would be to institutionalize & productize many of the techniques popularized in women’s fashion to make them more accessible and cheaper to experiment for everyone. (I wanted to add something about Twitter here, but they have to solve a horizontal monetization problem first). E-commerce companies on the other hand need to understand that the low hanging fruit (and the ROI) in social commerce will come from driving customer satisfaction, increasing customer lifetime value, building awareness, and improving brand positioning- not in acquisition. At the very least, treat the social platforms like email – a channel to engage with your existing customers. The utopian future where acquisition, activation, and retention mechanics of an e-commerce business are all built on top of social platforms like Facebook will come . . . but it is going to take longer than we had all expected.

(On the flip side, it also means there are still plenty of opportunities in social commerce for startups to exploit. Both in augmenting the Facebook platform as well as in creating new e-commerce businesses.)