From "Social Commerce" to "Social Shopping"

You want investors, call yourself “social commerce”, you want users, call yourself “social shopping.”

As brands and retailers roll out social commerce technology, the more consumer-centric term “social shopping” is taking off (again). Expect a new wave of social shopping apps, and expect to see copy changes on the sites of social commerce software providers in 2011 – as some rebrand as social shopping apps.

For example, if we look at Google Trends for the US, we see the rise of “social commerce” as a popular search term in 2009, but in mid-2010 the search term “social shopping” really took off – with a volume index weighting three times that of social commerce.

To a certain extent, this is all quite logical – social commerce is what retailers offer, social shopping is what people do.  In 2009, retailers and technology partners were busy hatching a cunning plan – and developing smart software – to add a social layer to retail, but few people were using them.  Now being widely rolled out, the consumer-facing side of social commerce – social shopping – is rising to prominence and becoming the mot-du-jour.

Of course, we can get into arcane definitional debates as to whether there is any difference between social commerce and social shopping – but we think the simplest way is to see the them as two faces of the same coin

• Social Commerce: Adding a social layer to retail
• Social Shopping: Shopping with social tools

Whilst the term “social commerce” is still the term investors want to hear – according to the Economist (archived below) “start-ups in “social commerce”, where there is a clear revenue model from the start, are more likely to succeed than those in social media, where no one knows where the profits will come from even when millions use the service (eg, Twitter)” – social shopping may emerge as the consumer term.

And whilst social commerce is broader than social shopping – adding a social layer to retail goes beyond offering social shopping tools, for instance CDI (customer driven inventory (more about this in an upcoming post)) such as on sites Made, NakedWines and ModCloth (see yesterday’s article by Pod1‘s Fadi Shuman) –  the media seems to be rediscovering “social shopping” – including in its original form of scrap-booking sites, where people collect and share shopping finds on the Web; this week the New York Times ran a story (also archived below) featuring Fancy and Svpply, two such sites that allow people to become and follow citizen tastemakers/style curators.

So “social commerce” or “social shopping”, which term would you bet on in 2011?

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Article Clippings:

Another bubble? Some tech start-ups look over-valued

Dec 16th 2010 | Economist PRINT EDITION http://www.economist.com/node/17733145

“I CAN’T decide what I like poking more: you, or these bubbles,” says bubble-blowing Kim Kardashian, a reality-TV star, in a new application for Facebook (see right). Cameo Stars, the company responsible for this innovation, lets Facebookers send to their online friends clips of minor celebrities mouthing generic greetings. Besides enriching the world’s culture, the firm may also make a fortune. But gloomy types wonder if the profusion of highly valued internet start-ups with lighter-than-air business plans is evidence of a different kind of bubble.

For the first time since 2000, internet and technology entrepreneurs can raise seed capital with little more than a half-formed idea and a dozen PowerPoint slides. “There is probably a bubble in the number of start-ups,” says Alan Patricof, a venture capitalist, though he is not yet convinced that there is irrational exuberance in later-stage valuations.

Yet valuations have certainly risen, especially for the leading firms in this latest, “social” phase of the digital revolution. Groupon, a two-year-old firm that offers group discounts to online consumers, reportedly turned down an offer potentially worth $6 billion from Google, prompting analysts to ask if Groupon’s founders had lost their coupons. A secondary-market auction of shares in Facebook in December had a minimum offer-price 77% higher than the price reportedly paid in a similar transaction three months earlier. Twitter is valued at $3.7 billion, up nearly fourfold in a year. The number of deals with (pre-investment) valuations of at least $100m is also increasing, according to Cooley, a law firm (see chart).

There are differences between today and the dotcom bubble of a decade ago. Then it was initial public offerings that were overpriced. Today, although the IPO market is reviving, it remains a shadow of its former self. Instead, the main way for the owners of a start-up to cash out is to sell their firm to a bigger one, such as Cisco, Google, Facebook or even Groupon. These tech-savvy firms ought to be less gullible than the stockmarket investors of 1999. But their owners may now be so wealthy that they care less about value for money than the coolness of owning the Next Big Thing.

The emergence of an active secondary market in shares of start-ups yet to go public has allowed founders and early investors in firms such as Facebook and Twitter to bank fortunes without waiting for a traditional exit by IPO or acquisition. These secondary-market prices feed hype about what these firms might be worth, were they to list on the stockmarket. Not many shares are available; many punters are chasing them. And those punters tend to be outsiders, such as fund managers and private-equity firms, who may not understand the tech business as well as insiders do.

Then there is the growth in “angel” investing, by rich individuals and small funds that provide seed capital to start-ups too small to interest a venture-capital firm. These angels make many small investments (say, $100,000 a time), in a strategy critics call “spray and pray”. That could certainly account for a bubble in start-ups. One prominent angel, Chris Sacca, has reportedly paused his investing on the ground that valuations have become overblown.

Other investors say this is alarmist nonsense. “For every firm that gets funded at a higher-than-normal valuation, a hundred are getting financed at a normal one,” says Ron Conway, a well-known “super angel” who has invested in many high-profile start-ups. Moreover, many young firms can tap into a thriving online-advertising market that was but a dream when the dotcom boom turned to bust.

Today’s entrepreneurs also have a deeper understanding of the industries they are trying to transform, says Nick Beim of Matrix Partners, a venture-capital firm. Fewer of them are engineers. More are “ambitious non-technologists with a business idea” to change industries such as media, advertising, financial services or fashion. These industries are concentrated in New York, which is why the new boom is as much in Manhattan’s Silicon Alley as in California’s Silicon Valley.

Mr Beim reckons this industry expertise will mean that start-ups in “social commerce”, where there is a clear revenue model from the start, are more likely to succeed than those in social media, where no one knows where the profits will come from even when millions use the service (eg, Twitter). Three of the leading social-commerce firms, Groupon, Gilt Groupe (a luxury-goods seller in which Matrix has invested) and Zynga (a social-gaming firm), are increasing their revenues faster than any start-ups in history, says Mr Beim. That is why this time may be different. Of course they say that during every bubble.

‘Arbiters’ of Style See It, Post It and Share It

By AUSTIN CONSIDINE New York Times January 7, 2011 http://www.nytimes.com/2011/01/09/fashion/09Noticed.html?_r=4&ref=fashion

NOT everyone can be a famous couturier. Or a paparazzi-flanked celebrity. But for us mortals, a generation of emerging Web sites could make a legitimate tastemaker of anyone with an eye for what’s fashionable.

Melding social networking and the style maven’s obsession with all things beautiful, sites like Fancy (thefancy.com) and Svpply (svpply.com) have emerged recently, letting users shop and fetishize while creating and sharing things they like with friends and followers, from clothes to art to gadgets.

Joseph Einhorn, Fancy’s founder, estimated that some 10,000 users had registered since September.

“The media industry has been really focused on trying to take the physical versions of their magazines and repurpose the look and feel to the Internet,” Mr. Einhorn said of the idea behind Fancy. “But what we thought they were missing was the action, the experience. And the experience here is really like ripping out a page from a magazine.”

To contribute, users employ a simple tool known as a “bookmarklet” in their Web browsers. When they see something they like on another site, a few clicks allow them to select the image, describe it, then add it to their personal feeds, where it’s automatically linked back to the page where it was found. Fancy’s iPhone app lets users photograph things they like on the street, linking them to the Web and to a geographic location.

Fancy takes cues from Twitter and Facebook: users “follow” others whose tastes they like. (Ashton Kutcher uses Fancy; his recent picks include a sundial ring and a “hand soap” dish holding hand-shaped soap). Algorithms that discern an item’s popularity among users and the track record of the person posting it decide what is on the home page.

Users who generate a lot of interest are rewarded with honorary titles like “editor” or “art director” for their curatorial prowess.

Fancy’s current “editor in chief,” Seema Hamid, a German-born photographer, stylist and designer, seems to have built her loyal following through a keen sense of taste and her frequent contributions to the site. And like any savvy social media user, she’s using Fancy to promote her own work.

“It’s a great platform to share my design aesthetic and photography with the rest of the world,” said Ms. Hamid, who is based in San Francisco. “I do a lot of fashion shoots, and Fancy comes in quite handy, since I can tag my subjects’ ensemble with the appropriate designer names and links and, if you really fancy it, you can purchase the clothes within a matter of clicks.”

Svpply.com uses a similar bookmarklet and has its own user-follower community, but is even more shopping oriented. The site tries to ensure that all its items are purchasable, relying on user feedback, an in-house editorial staff and tracking software. Users and shoppers can tailor browsing by category (shoes, tech, apparel, etc.) and prices.

Zach Klein, a Svpply founder, likened it to online window-shopping, in a store filled only with what a person likes. “People don’t go to Amazon to just browse for the fun of it,” he said. “It’s simply a destination for something specific. We’re finding that people are pleased to just sort of browse again.”