I cringed when I used the "2.0" term in the headline of this post, but I think it's useful. In the past year, when people ask me what I think is interesting in web technology, I often talk about emerging new commerce models. And I point out that two of the most exciting companies to come out of the NY tech scene in the past few years are commerce platforms, Etsy and Gilt Groupe.
This morning I read Josh Kopelman's post on this topic. Josh notes that:
More than half of today's top 15 most trafficked websites today did not exist back in 1999. That is not a surprise, as Facebook, Youtube, Wikipedia, Myspace, Blogger, Live.com and Twitter are all new — and are representative of the massive amount of innovation and disruption that has occurred in the last decade.
Yet, of the top 15 most trafficked eCommerce websites today, just one of them did not exist back in 1999 (NewEgg – which launched in 2001). Which means that over 90% of the top eCommerce websites are over 12 years old! That is pretty remarkable to me — and reflects an amazing lack of external innovation (and disruption).
But just as social technologies changed the game in the media web in the last decade, I believe social technologies will change the commerce web in the coming decade.
Josh mentions some examples of where we see this happening already:
group buying, demand aggregation, game mechanics, flash/group sales, leveraging the social graph for customer acquisition and mobile
So the question is who will the YouTube, Facebook, and Twitter of commerce be? Maybe they exist today and will emerge as large scale web services soon. Or maybe they are still ideas in the minds of entrepreneurs and will be hatched in the coming years.
It's an area I am excited about and will be on the lookout for. Clearly I'm not the only one.
Worth mentioning that mobile platforms will be a big driver of innovation coming to this space. Specially local-based commerce.
FWIW, I have never understood the “local shopping” value proposition of someone like Milo. Why would I want to buy electronics locally when I can use FedEx/UPS and Amazon? Maybe Milo + mobile works so that if I’m walking around in the real world and want something, I can shop for it that way?Aside from food, entertainment and clothing, I’m long FedEx/UPS and the web (on iPad, Laptop, Netbook, PC – anything with a largish screen) as the way people will buy.When online commerce becomes as content rich as going to a store, there are fewer types of stores that can survive in the real world: namely those with a real time component or a physical experience aspect. To me Apple is a good example of someone who has competed in the real world and won. They’ve made the experience of buying in their store compelling enough that it can effectively compete with a great website and the convenience of FedEx. It’s hard to think of anyone else who has done this in electronics? I’d almost rather go to the dentist than go to most any electronics retailer.
i agree with you
I think the edge of the wedge is focusing on the local services which can be definition only be deployed locally and have been underserved by web 1.0. Hair salons, dermatologist, gyms, dry cleaners.
Hey Elie. Great points.For large items like: Bicycles (speaking with some experience on this front), cars and motorcycles, furniture (especially vintage), or locally grown food – locality becomes very important. ebay misses the ability to search local – craigslist is overly focused on local listings.Shopping local, national, or international should (and will) be a simple feature of the search experience in ecommerce going forward I believe. Add ones social graph and the local aspect of shopping/search becomes much more compelling.
Hi Andrew -I agree with you on local being critical for those categories. In car shopping, there has been a local component for a long time since the goal of the car research sites is to generate qualified leads for local car dealers. Understanding geographic relevance is going to be a very important filter.One of the things that I worry about is the online to offline divide that has to be bridged in those purchases. You do all your research – using the geo filter – for a motorcycle on Site X and then you go to the dealer and the motorcycle research publication gets none of the transaction bc while the research happens online, the purchase happens offline. With all of the real money in the transaction – or in the lead leading up to the transaction – the economic challenges here are real. Making money off of the early phase of the planning experience using display ads is painful because even with the user having purchasing intent (vs no purchasing intent in Facebook or reading the NYT), the CPM rates are incredibly low.
Thanks Elie.You bring up another opportunity in ecommerce 2.0 which has long been part of the auto shopping process usually closely held by auto dealers which is pooled inventory. Giving shoppers a sense of where they can find what they are looking for to see it or purchase it physically without regard to vendor. For example: I want these sunglasses: http://svpply.com/item/25927 How many are available in my area and where are they? Shoppers win – retailers win and lose in surfacing pooled inventory.
Couldn’t agree more, I think the Best Buy is soon to be the Worst Buy
I agree. Only if I really need it now or if shipping is a major issue, will I go to a local store. What about the things that I can’t get online and only can get in person? We need to stop looking at ecommerce as an extension of what already exists, but as a way to enable things that just aren’t possible without the web.
I think what’s really interesting is the pendulum that we see in commerce models. We tend to move from fragmentation to aggregation back to fragmentation in ever increasing levels of sophistication. The most recent example is the tremendous growth in the private sale industry – Gilt, Rue La La, Ideeli, etc borne in part out of the challenges of aggregated fashion and oversupply in big fashion retailers through the early 2000’s. Now a new site has popped up called MyNines to aggregate all the individual private sales back. I think the same can be said for what’s happening to eBay. eBay rolled it all up and now small companies are picking off their share. Who knows if there will be another big roll up, but I think this phenomenon is something to pay attention to.
I’m betting on distributed complimentary solutions James
Absolutely! Add Redfin to the list. One way that Redfin is different is that we essentially function as our own media site, providing an addictive just-looking experience for millions of people who have no intention of using our service to buy a home. One characteristic of a commerce 2.0 company has to be that it generates its own traffic, by creating a sense of community, by publishing unique content or offering unique inventory. In this sense, the commerce sites have learned from the media sites. And the result is that you don’t have to pay advertisers, improving margins and ultimately returns; every e-commerce guru I talked to from the ’90s plays an arbitrage game of buying traffic for a few cents less than the lifetime value of the customer, which has never seemed like much fun to me.
“a commerce 2.0 company generates its own traffic”that is an excellent point Glenni love it
Excellence of the pride and poise Glen…the generation of a ‘community/marketplace’ own traffic without the advertising model is powerful and priceless. The first mile is brutal (as pointed out in March 12, 2010 HBR’s ‘What’s Stopping Innovation?”).At the end of the day people do not care about the stakeholders running the company or businesses…they search for the product or service and want to buy it now!Online sales habits are a moving target and always will be! Performing an environmental scan http://bit.ly/aJcdFI can be an early warning signal for shifts or to carpe diem in any market sector.Think Local :: Sell Global™
something I’d like to see (but don’t know quite how to implement) is the whole community review/feedback loop. Just today I purchased a networked hard drive online – and was looking at three different sites for reviews. On one site, the user feedback was almost unilaterally positive (as was the “editor review”), on one site the user reviews were all negative (hated the drive, support stinks, don’t even think about using it!) and on the third they were mixed. The biggest issue is I have no idea who any of these people are and how credible their feedback is. I think this problem is bigger than what a single eCommerce vendor can solve, since comparison shopping is a concept that eCommerce does not disintermediate.
You want Disqus for product reviews!
Interesting… hadn’t really thought about Disqus for product reviews, really more for moderated forums like this… thanks for the eye-opener! I still see some missing capabilities, but clearly the platform is there to expand Disqus to really support Commerce – is that part of their strategy? And it would have to become ubiquitous among the leading eCommerce sites to really be beneficial, since I want discussions of a particular product to have utility across different eCommerce sites, right?
I see a number of problems with social reviews, with the biggest being the motivations to review and how each individual maps to a given community of users.Amazon’s reviews for books demonstrate the motivational problems, as politically contentious books get many no star reviews by people who dislike the ideas. People who care deeply about a given product will have a very different population makeup than the general public, so that products will get excessively high or low reviews. Small, motivated groups can overwhelm general desires, creating a distorted impression that will be disastrously revealed. Fringe Presidential candidates in both parties have excelled at this, especially when their supporters are not just more enthusiastic but also more likely to be digitally engaged.Community reviews have to be mapped from the community’s user base to an individual’s characteristics. If you’re looking for a new espresso machine, you need to find a community that maps to your specific desires – what do they view as entry level, what are they focusing on, how do their demographics map to yours? The reviews of a given product will vary greatly – an Olympia Cremina is a well priced precision machine, a high priced machine for the connoisseur, or an overly temperamental and obsolete torture device, depending on the user community. By dissociating reviews from their community of users, you diminish the utility of the review since the context is content.
agreed. sounds like a great application for disqus?
there’s a community for each phase we go through — getting married, buying a house, having children, back-to-school, off to college, birthday parties, etc etc etc — and there’s commerce logically tied to each phase. i’d like to see a combination of commerce + social graph + life stage, with equal attention given to the mobile implementation. that way, i can get self-selected credible and reliable advice on products and pricing, whether i’m planning or in the store buying. to your cashless point earlier, fred, i’d like to be able to use my mobile device to save product information and (one day) even buy as i’m strolling thru the aisles.i can see the gilt (and, similarly, ideeli) concepts evolving along these lines. i also think amazon has a good start in this direction.
yes. great point about tying to life phases, that’s where it’s at. i do think the winners in this model will be communities that focus on the life phase. a parenting community for first time parents seems like a mega opportunity.
Obviously there are loads of parenting communities/blog stars already…what is preventing this from happening now? Dooce+Magento seems like $$$, or is there more to it?Is perhaps one way to think of this as “commerce with editorial”? Editorial from the blog star, scaled w/ community input?Turntablelab.com kinda has this going on…that is an ecommerce site with very specific editorial over what is stocked in the store. And NYC based! Fred you should invest…then you could get your commerce 2.0 play and music play in one swoop 😉
Is it a turntable store?
No, it’s records, CDs, clothing, books, art…all kinds of stuff.They also added a blog, and a lot of the top dj’s work or shop there, so the community is super cool, definitely has a sweet meatspace component.But they started with vinyl and turntables. A bunch of the top dj’s curate what they stock in the music section…they don’t just stock everything.Not sure what their vision is but they’ve been around for a decade. There’s a storefront in east village and newer one in LA.The site http://www.turntablelab.com gives some of the flavorI used to spend HOURS at a time surfing the site, and I’m not alone!
Ethan you said something that got me thinking:
He does that to me too
OK that was totally weird. Disqus dropped my whole note from the email. And it was so profound…Let’s try again here:
You got it, Kid. So the key then is to capture that entry point.For that market, I particularly like what my friend Jennie Baird has done with babynamewizard.com.You may not know this, but the second a woman sees that stick turn blue, she’s thinking about baby names. They are an excellent entry point into the new parent market, and addictive.This is the kickoff of the transition period when they research and lock in on brands they will stick with for the next 5 years or more. Jennie built the best one out there.
i am single without any kids, but my brother and his wife are about to have their second child…..lol…..the only thing more fanatical than my brother’s wife during pregnancy is my brother’s wife during the first six months of the baby’s life…..when i saw that i was like “oh man someone’s going to make a ton of money off this”…..lol….i mean the cribs, the clothes, the infinite number of toys, and all sorts of stuff that is supposed to be for the baby but in reality is for the parents (highly doubt the baby is going to appreciate those $200 designer boots….the merchant sure will though!)
You’ve got your finger on the pulse of it, Kid!
‘Oh man someone’s gonna make a ton of money off of this’So true. I’ve been party to that three times
From the sounds of today’s blog you’re still at that party. Or the after-party.
Indeed. I’m trying to figure how to serve my crew cost effectively
Typo. Grrrr. Meant to say:
I didn’t mean the ‘crass consumer’ part. Just that once it starts the spending starts it doesn’t stop.
There are wonderful opportunities for an adaptive web. All kinds of opt in behaviorial information can differentiate our experience at virtual locations.
Yes yes yes yes!You hit the nail on the head.The way to exact higher margins is to delight customers, and the way to do that is to anticipate their needs and exceed their expectations. Many shopping needs cluster in lifecycle segments.
Thanks for the post, Fred. Vendor Relationship Management (VRM as opposed to CRM) may also help shape the future of commerce. Using their own definition, VRM tools provide customers with both independence from vendors and better ways of engaging with vendors. More info at http://cyber.law.harvard.ed…
Very interesting concept, thanks for pointing this out !
Something doesn’t make sense to me: Craigslist is #10 on the list of all websites, yet it doesn’t appear on the eCommerce list. Amazon is on the overall list below Craigslist, but #1 on the eCommerce list. eBay is above amazon on the traffic list but below it on the eCommerce list.Is the eCommerce listing ranked by $ of revenue of the online component of that business? In that case, I think its quite normal that it won’t change rapidly. Disruptive innovation doesn’t spin up to massive revenue that quickly, the wheels would fly off. Lack of churn in the rankings doesn’t necessarily mean we’re lacking innovation, it means revenue doesn’t advance at Internet Speed.
i believe josh is using alexa data. i’ll check it out
The note at the bottom of the listing says its from Alexa, but I don’t see how sites can swap positions on the two different lists. Perhaps the eCommerce list actually is traffic measurement, but from a snapshot taken at a different time than the overall list.
Expanding a bit more: the sites on the eCommerce list are themselves disruptive innovators still in their growth phase. If you were to plot them against the overall economy, WalMart would be #1. WalMart’s own online component is successful, but just a small fraction of their business.I think the fundamental issue is our expectations of timeframe are shaped by Internet Speed, but things don’t happen quite so quickly when they touch upon the real world. Car Sales sites would be similar: very interesting, very disruptive, but at this point in their growth cycle just a blip in the overall automotive market.
Atoms and bits, great point
The new auto industry is completely upside down as it relates to its products.I recently purchased a “commodity” type SUV for #1 son from CarMax. Son was in Athens, GA. I was in Austin, TX. Car was in Nashville.Entire operation worked like a charm. System worked to find the car and get it to #1 son. Car was exactly as advertised. All paperwork was completed absent almost any humans.Better still — CarMax was a champ to deal with on a minor warranty issue.While they indicated they did not negotiate, they called us when THEIR price hit our pricing point.I could not be happier.
Totally off-topic, but I’ll soon be needing a car in Austin. Are there any merchants aside from CarMax you would recommend?
Let me know what kind of car you are looking for. 512-476-5141 I am out of town on Th, Fri, Mon.
I think that’s a really good point about the speed – or lack thereof – of revenue migration. It’s on a different internal clock than the one that things like Twitter and Social Networks have told us to expect is the new normal.
I think that it will be very difficult to unseat a company like Amazon. They have an easy interface, great pricing, and the best reviews. Will they completely miss the curve on lettings users use their social graphs to making buying decisions? I doubt it. They’ve not only adapted over the last 10 years, but been ahead of the curve.But other less savvy companies are going to be knocked off the list by those that can harness mobile phones, knowledge of your location, and a detailed understanding of your social graph.This will be fun to watch!
Very much agreed – it’s unbelievable how much they have not only stayed with the curve in online commerce but actually defined it. But if you look beyond Amazon, the application of online commerce best practices, much less innovation, are the exception rather than the rule.
I think the next wave of commerce will be implicit shopping. A store that shows me only products that have been recommended by friends. Maybe those products were purchased at Amazon. Maybe they were purchased at Newegg. It doesn’t matter – this ‘personal store’ contains everything I need to make a very quick and informed decision.Facebook Beacon was a start, but knowing what someone purchased is useless to me. I’m more interested in whether they’d recommend it. I have some ideas in this space, but I’m not sure how I should execute them yet.
Right on Robert. I’m working to build tools that can be a critical part of that solution, implicit processing of social web expression at Victus Media.
Interesting. It would be cool if you could login, and then have the system pull your feeds from social services like facebook, twitter, etc.. It could then use that data and populate a personal store filled with items that I might not have discovered otherwise.
Oh the ad is just one application. The bigger idea is an adaptive web that molds itself to best match user interests.How about when you hit a blog page if instead of seeing the most popular posts on the sidebar, you saw a list of posts with tags that match to your own interests?We’re swapping from a twitter app to a feed processing system. Tyler’s (chief hacknical wizard and cofounder) is busy getting Push/Pull working. He had a eureka moment this morning at 5am, I gotta get back to work on front end stuff. I lose shares with each comment I leave on AVC ;)We have an API on test, so you could easily get a post processed data or create your own adaptive web apps.
I think that Amazon and Alibris do a pretty good job of “learning” your areas of interest and providing one with a targeted list of books which are in the sweet spot.I have some odd reading areas and therefore it may be easier for them to do that w/ me.I have come to rely almost completely upon reviews as guidance for the purchase of certain fairly high priced commodities like tools.I am a huge fan of Amazon. And when they have free shipping, it is a real deal maker.
Agreed about Amazon, but I still think friend recommendations are extremely important. Knowing that my friends router has outlasted mine is also very important to me. In fact, almost every product that I purchase has some sort of friend recommendation behind it. Problem is, most reviews on the internet are largely anonymous or by people I don’t know. Another problem is that I’m sure most of my friends have never reviewed a product…If only there were some sort of global “would you recommend this product?” notification for all purchases.
Routers are a particularly good example because the average wood butcher is not as handy w/ a router as one would like to be.The ability to get an opinion from someone who has the exact experience you are looking to do is invaluable. I agree it would be nicer if you knew the chap but you can quickly ascertain if the reviewer really knows what he is talking about.The days of being a DeWalt or Milwaukee or Bosch or Porter Cable router loyalist are over. It is the application which is important.BTW, color me a Milwaukee fixed router guy and a Bosch or Porter Cable hand held router guy. But, hey, that’s just me.
Exciting and thrilling times indeed!Commerce 2.0 is the Deadliest Catch that integrates social media into social (e)commerce for the transactional web. A shift is occurring to products/services 1st, business/brand 2nd with new Commerce 2.0 innovation processes being the differentiator forming the power of partnerships for significance of shared goals and a slice of the revenue pie for all!How to go commerce 2.0 http://bit.ly/dBbQ9R crabbing!
How about commerce 3.0? The word-of-mouth inherent to social networking is the strongest driver to many acquisition intents. We are trying to tap into this potential, with Cascaad’s SuperTweet API (developer.cascaad.com) using real-time semantic processing to understand the named entities that people talk about (say a movie, a song, a restaurant) and allowing automatic association of in-context commerce services (e.g. watch on demand the movie, book a table).
Social status to semantic entity extraction is what we do at Vicus Media as well. We believe in the web moving towards an adaptive experience.Just moving off of our Twitter app now, enjoy the direction you folks are going.
I totally agree with you. If you look at travel commerce in particular, it’s hard to see any material changes over the past ten years. Does Expedia – and it’s online travel agency competitors – look any different than it did ten years ago? They have broader coverage (you can book airlines and hotels in places you could not previously) but the user experience has changed very little.Comparing the world of online commerce to the world of offline commerce is useful here. At first offline commerce was largely utilitarian and then over time it became much more of an experience – social, fun, and commerce wrapped into one. I think we will see a mirror of this in the coming ten years in online commerce.With the infrastructure for commerce (transactional systems, broadband, web servers, price compare, SEM marketing, SEO, etc. ) already relatively well understood, the differentiation will now be in the shopping experience. I believe that within reasonable tolerances for price discrepancies, a lot of online commerce will move beyond the “i need the best price” to the “i want a great experience”. It’s not a perfect analogy obviously – offline to online ones rarely are – but look at what Whole Foods did in food. Instead of competing on price (Costco already did that), they redefined what the shopping experience could be and they get to charge premium prices for it. I don’t think that the online world – where shopping compare is far easier – will have the same tolerance for premium pricing but I also don’t think we are going to have a race to the bottom where price is basically the only point of differentiation. Amazon is one of the few that has started to do this on a relatively large scale – they’ve been great at blending enhanced content (both UGC and editorial) with the shopping experience to make it more fun to browse and dream. Of course, they are still the easiest place on the web to “just checkout”.Net net, the infrastructure and nuts and bolts are become heavily commoditized and the experience is where companies will differentiate.
There are some interesting experiments in the travel space that may go mainstream: http://www.couchsurfing.org… doesn’t get more “2.0” than that, although it may not be considered “commerce”), AirBnB.com (a YCombinator startup), and LetMeGo.com (shameless self-advertisement).
I agree with you – both interesting new ways of buying travel or new travel products entirely.
airbnb and couchsurfing are also redefining what a “hotel” is
CouchSurfing.org isn’t a commerce site though, is it? As I recall from checking out the site, no money is exchanged (though they recommend guests offer to wash dishes, etc.). LetMeGo.com is a clever idea — congratulations. It’s sort of like a Priceline in reverse.
Online travel agencies have done a great job of commoditizing travel products (airfare and accommodations) with travelers reaping the most benefit as prices dropped. As a result the trip planning process has begun to focus more on the experience rather than the destination. The only problem is the value of a travel experience is entirely subjective. I’m working on an Etsy for the local experience with validation from your social graph and fellow travelers.
Could you please provide a concise definition of “social graph”? I Binged the term, and then zoned out before getting all the way through the Wikipedia opus on social networks.
Interesting thoughts. I have been to Costco, Sams and Whole Foods this weekend — all different experiences and different expectations but seemingly complementary or supplementary rather than competitive.Don’t know exactly what it all means but it is very interesting to see our buying patterns change w/ time.I would never buy salmon burgers at Costco or Sams but the meat and simple fruits (strawberries and blueberries) are just superb. I love the wine prices for really good wines at Sams.We are lucky to have all of them.
Here in Austin, try New Flower Market for fruits and vegetables. Its a really low cost in door Farmer’s Market.
Morgan, where is it?
Exactly ….. experience! Lots of open space here for e-comm. tech. Cos. 🙂
To add to Cacheop’s comment. Mobile platforms that use GPS / location based technologies and augmented reality for both web and brick and mortar businesses will continue to grow and have an impact on commerce. Especially as mobile networks scale to 4G speed.
totally agree — it’s easy to imagine how foursquare, gowalla and yelp could factor into that equation.
great insight from you fred and josh as well. there is no doubt that a new commerce movement is imminent. something near to my heart as i’ve been working awhile now on trying to disrupt the current model. someone will ultimately get it right VERY soon.
Providing the tools for creative people to create their crafts, the platform to sell it, and then the users to buy it will unleash some inventive commerce 2.0 companies. Minted.com has provided a great outlet for graphic designers, Graphic.ly will do the same for comic book artists, on-demand publishers like lulu and blurb for authors, and MeeGenius! will do the same for children’s books. Exciting times!
The topic hits home, thanks for posting Fred. With the commoditization of eCommerce platforms/technologies (such as our Magento platform and others in the market), the tools for innovation and disruption are now at hands of a larger ecosystem. The costs of going to market are lower than they’ve ever been and the tools (platform/technologies) are as sophisticated as ever. This is an exciting time for eCommerce and I absolutely agree that we are on the verge of something meaningful.
damn! droppin’ it like its hot roy. great insight.
Spoken by a true champion!
Hey Fred, you might want to keep an eye at what we’ll be doing in the coming months: http://www.enstore.com
i love the look and feel of your servicevery nicely done
ironic that you are asking this question boss…..for the answer lies in blog stardom: a network of fred-approved merchants, residing in fredland, accepting fredbucks (payments can be made via the fredphone….you can also find nearby fredland businesses using geofred, the mobile app for fredlanders).i wonder how scalable this is. i.e. how big can fredland really get? some may point to facebook as an example of a large community with some elements of ecommerce, though i think they will not be able to monetize ecommerce nearly as well as niche players with a focus. for this reason i find etsy very interesting. accordingly, in this niche commerce environment, i think scalabilty is about connecting niches. this is part of why i am on josh’s side in his beef with roger ehrenberg regarding the merits or lack thereof of the FRC entrepreneur exchange. i think that type of model will help connect niches, thus attaining scalability.of course, ultimately, commerce is now international, and i venture it will require game play as well. as such, virtual currencies will be needed. china has already acknowledged virtual currencies as an economic threat.should we ignore this and not talk about it at all? that is one strategy. i wouldn’t bet on it, though, and will likely unleash the next round of bizarre jokes, perhaps in song format, once this strategy blows up in the face of its perpetrators.
opensky is doing this but i think they have it backwardsit should run on my blog not require me to move to their platform
IMHO that’s why open source is where it’s at….like magento which was noted elsewhere in this thread
Hi Fred – you’re right and it will.today, the OpenSky platform empowers influential personalities (bloggers, authors, etc.) to merchandise their favorite hand-picked goods, create exclusive experiences and monetize their influence (yes, inside the OpenSky platform). shortly, the selling will be taking place in a distributed way, across blogs and other social platforms, with the crm tools for the sellers to maintain and develop their customers and enabling them to establish a community of sellers that they like. Twitter has a central platform and it is up to us (like it was for them) to make it distributed in the same fashion.To date: we have a community of 250 influential niche sellers connecting to over 500+ suppliers in our b2b platform and conversion rates of top retail sites. commerce is moving away from places and to people.stay tuned.- john caplan
Can anyone sell on your platform via their blog or do you have to be approved?
Theoretically yes, anyone can sell. We are building requirements to ensure quality.- john caplan
The currency already exists with comments, shared messages, feedback, marketing. Fredland already captured a small fragment of our attention and sends it to charity.I made a similar comment, but don’t think just a handful of companies will own this growth.
Etsy is a solid bet. But then I think that is accepted wisdom by now. I guess what I am saying it will grow a lot.
There’s also potential for Etsy to expand to disrupt the sweatshop model in parts of the developing world. Instead of women working for pennies in sweatshops making clothes, for example, they could make them at home, and then go to the local Internet cafe and sell them online for more money. Etsy could create a separate site for this and call it Sweatsy.
Very punny, Dave. 🙂 but seriously that’s a good idea.From a less altruistic but very profit-motivated slant, what I am most eager to see from Etsy is a front-end that is much more organized around lifestyle segments (per Andreaitis’ earlier comment).Etsy should be a perfect place to go to buy gifts, but it still takes too long to find things which they should anticipate my needing.For example, it seems Etsy could easily take a large piece of the Wedding Anniversary gift market with an entry point organized by Anniversary Year and For Him or For Her, serving up the leather/lace/paper/ceramic. Also should remember your anniversary and remind you each year. This is basic blocking & tackling.Similarly, toys need to be organized and searchable by age-appropriateness. Right now baby and 10-yr-old gifts are together. It’s totally frustrating. I go to birthday parties many weekends and frequently buy a good unique gift in bulk — e.g. 6 seven-year-old girl gifts. Why sell one if you can sell six?Lost opportunities that make me cringe!
E-toys did a good job of organizing toys by age-appropriateness (and had a separate category for educational toys), but they must have done some other things wrong because they went bust back in during Web 1.0.I should add: I still owned the stock when they went bust. If I’d known about the Altman Z”-score back then, I probably would have avoided it, because the model probably predicted bankruptcy for eToys ahead of time.
they are fixing that Tereza. this will be a big year of product innovation at Etsy
That’s good news. Eager to see. I’d categorize that under the “make them think your thoughtful” meme of gift-giving! 🙂
While Etsy may have some UX issues (who doesn’t) I love this story of a girlfriend of a coworker of mine (Angie Davis) who lost her job and built a company on Etsy: http://www.nytimes.com/2009…. Empowering individuals and companies to reach new markets without a middleman is definitely a key part of the rise of Commerce 2.0.
Totally agree with you on that Andrew. I saw that story and I’m a huge supporter of the access and reach Etsy and others provide to ‘the little guy’…creating opportunities that didn’t exist before.My issues are part UX, but really they’re bigger — part marketing strategy. What does it take to cross the chasm to much larger (consumer) markets, where they can catch more fish. And larger fish.By no means does it have to undermine the integrity of what the craftsfolk are doing. It can and should be good for everybody.
Etsy will cross the chasm and will bring a lot of competitors and like minded entrepreneurs with themIts a movement at the end of the day
Yes it is
You raise a very interesting point — the distance that labor resides from the market often exacts an “unfair” discount.Mexico and China are perfect examples of criminally cheap labor being leveraged, unfairly in my view, to replace runaway labor costs.The internet could nudge the discount back into the realm of fair pricing. All it takes is a bit of ethical concern from the penultimate buyer.”Fair trade coffee” is a perfect example of this phenomenon.
Actually, with respect to the question of how to improve wages and working conditions in the developing world, the DIY model of Sweatsy probably isn’t a viable solution (it was too tempting a pun not to write that comment though). Productive enterprises often need certain economies of scale, access to equipment and infrastructure, etc. Every woman having her own export-oriented textile business is probably no more viable than Mao’s old idea of backyard steel foundries.Your mention of the fair trade model, driven by ethical concern by penultimate (or ultimate) buyers highlights one sort of solution, but raises a question I’ve wondered about for a while. Coffee is a crop that’s only grown in the tropics, and yet it’s first world countries in the Northern latitudes that capture much of the profits associated with it. Not just Starbucks, with its ubiquitous cafes, but Italy’s Illy, etc. If I were a Kenyan, or a Rwandan, or a countryman of some other coffee-producing country, I’d be thinking, “WTF? To hell with Fair Trade. Why aren’t we capturing the profits from roasting the beans and retailing coffee to first worlders ourselves?”Why aren’t there, for example, Kenyan-themed coffee bars in America, owned and operated by Kenyan entrepreneurs with American partners, with Kenyan art on the walls, baristas wearing Kenyan-themed uniforms, etc.?
Actually, while there are huge economies of scale for some apparel manufacturers, with the move towards more customisation in fashion, economies of scale become harder to realise.This doesn’t mean that one woman operations are the future, but even very small units can be competitive. Many of the big Italian fashion houses use very small suppliers for their top-range stuff, suggesting that it can be a viable model.
Interesting, thanks for that informed perspective.
Fabricly.com has just started doing this, allowing small and micro manufacturers of clothes and other fashion items to compete on the global market.It’s currently focused on independent designers – but the supplier network could well be brought to consumers who want one off pieces made for them.
HBO’s new show, How to Make it in America, would be a great place for Fabricly to try to negotiate a product placement.
Sweatsy. Ha ha!I guess both you and I see Etsy getting much, much bigger than it is today. And it is big today.
R. Bellman was quoted “Sometimes we find that a good question is more important than a good answer.”You have a good question.I would add to it: Follow the money. Or, look for an economic advantage.Moving toward Commerce 2.0 has a general problem: Capital. A Commerce 2.0 site may have actually to do ‘commerce’ and, thus, need more capital than Web 2.0, social media, etc.Broadly, the problem of ‘shopping’ to get each customer — person or business — the best value for them still has a very long way to go.More broadly, beyond shopping, both people and businesses need MUCH more information to do better reaching a major fraction of their goals.How to get the desired, valuable information? In some cases take available data and process it!Generally Commerce 2.0 sites could make progress on ‘recommendations’, e.g., that give each user what they will like best honoring whatever strongly drives what they like. How to do such things is not in computer science, and, if I explained how, then that would be “just an idea” which, as we know well, has no value!Generally the capital will be a stumbling block: The current norm is that the entrepreneur develops a Web site so that others can estimate how well millions of users will like it. Next, the entrepreneur gets users and revenue growing quickly. At least for this second step, the entrepreneur could need quite a lot of capital. The capital source, then, would have to evaluate the business prior to the measures of number of users and revenue growing quickly, and capital sources do not like to do that.There is a lot to do on the way to Commerce 2.0, and it should come in time.
At least one other person mentioned Airbnb and couchsurfing, which are imho the wave of the future in this space.Couchsurfing is a good example: social networking tech radically lowers the cost of finding a place to crash (both finding a potential host and doing a first-pass quality check). The 1.0 alternative would be a hotel — expensive! — or asking friends (or friends of friends) — which gets prohibitively time-consuming after more than a few calls.Obvious plays in a similar spirit I haven’t seen attempted (but might well exist) are, eg, websites to facilitate ad-hoc babysitting or petsitting or daycare cooperatives.Basically taking stuff that’s either done commercially (hotels) or within a “human-scale” offline social network (hosting guests) and ramping it up to internet scale. Monetizing these seems hard: the value proposition for users is to substitute favor-trading for spending money.
“The 1.0 alternative would be a hotel — expensive! — or asking friends (or friends of friends) — which gets prohibitively time-consuming after more than a few calls.”Hostels would be another 1.0 alternative.
“over 90% of the top eCommerce websites are over 12 years old!”That’s a really interesting stat, and it’s actually consistent with an analogy some investment folks were making 12 years ago. Back then, I remember a portfolio manager at a company where I worked explaining why he wasn’t buying Internet stocks. He analogized the beginning of the Internet era to the beginning of the auto industry in the early 20th century. If you go to a classic car museum, you realize that there were hundreds of car companies back then, and then they consolidated into a handful of profitable ones*. The challenge back then would have been to figure out which of the hundreds of car companies would survive that consolidation.*We have had some disruption in the last few years, of course, but the early winners dominated the industry for generations.
Incidentally, I elaborated on this comment in a blog post, if anyone here is interested: Web 2.0 versus Auto 2.0.
Looking for grand slam financial business structures is ecommerce 2.0. I’m sorry Fred but I don’t see only a handful of hotshot tech companies revolutioning transactions.My outlook is that 1000s of companies will negotiate virtual currencies between businesses distributing the problem and the solution to domain experts. There will be some big exchanges (Facebook, Apple, Amazon, Google) and many smaller ones (Second life, game companies, Fredland, RocketHub, Kickstarter, and other crowd sourced funds).Our trust in the lords of finance is fading, we don’t want or need to pay taxes of resource allocation to go through owned private channels. Our concept of value is moving away from national currencies which flicker in value based on political whim.
could icosahedron business structures serve as the answer to eschatological doom and gloom?
Uh, oh. Kid Mercury has drawn Mark to the dark side.
Hahah, I’m just hoping not to see another layer of taxation between me and purchasing a coffee.
Consider the possibility that the commerce web has been slow to change because there is a gargantuan, multi-tiered industry (manufacturing, distribution, wholesale, etc) in place with a vested interest in maintaining the status-quo; the top ecommerce sites are still around specifically because they aren’t disruptive. Group buying (et al) was tried years ago, and fizzled out… and it wasn’t for technical reasons.
You are absolutely correct Chris. This was the problem that many B2B hubs that started up in the last dot bomb era encountered. The suppliers/manufacturers did not want the potential disruption to their business that an on-line marketplace potentially provides.They like their cosy relationships and do not want to see their business model disrupted.
I don’t really know how to define “commerce” or e-commerce” any more…the reality is the line is blurring between commerce and ad models…”commerce light” looks an awful lot like performance based advertising models (CPA)…wrote a post examining here: http://bit.ly/aUOyU0
i think the blurring of CPA/ecommerce runs parallel to the blurring of production and consumption. at least, this has been my experience with my business (online community for active traders of financial markets). the producers are the consumers. and so, CPA revenue is shared with them, and serves in way as a subsidy for their ecommerce purchases. i think this is how the internet completely rewires niche economies, making them far more efficient.
That is spot on — blurring the line between commerce and ad models. And also between Direct and Brand marketing. It’s completing the loop of Marketing ROI…. at scale.I also hear talk here about redefined shopping experience, to re-orient online commerce from low price….which is a race to the bottom. That redefinition is critical.What “commerce 2.0” has to leverage is new capability brought by relationships, networks, conversations, customization, localization.It’s unique, clever combinations that feel very ‘native’ to specific consumer segments where alchemy will happen — and unleash massive value.
Great minds think alike! Inspired by Josh and Fred, I’d written something similar this morning too:http://blog.redfin.com/blog…
same analysis on commerce/ad models…same analysis on low cost brokerage models re: Redfin / JumpPost… i’m wearing a red shirt and blue pants today. let me guess what you’re wearing…
The problem with the commerce “state of the art,” is that the entire infrastructure is obsolete including the means of differentiating between buyer, merchant, payment method and location.For example, most commerce (including ecommerce) is built on the foundation of MERCHANT initiated transactions except eBay/PayPal which is BUYER initiated. Because of the de-facto monopoly granted by Visa/MC to PayPal to aggregate multi-party transactions in the same merchant account, we’re sort of stuck with PayPal being the limit of innovation.Until limitations like this are broken the business models will be limited.
outstanding point edward…..hmm, i wonder what the solution could be? well, there is one, but we’re generally not allowed to talk about it. too bad.
An area I have had some success in is B2B purchasing cooperatives for “commodity” industry specific electronics systems. This is for a highly regulated industry.I noted that I was getting very competitive pricing on the East Coast and less so in the center of the US.I formed a couple of purchasing co-ops (which interestingly enough require a bit of legal education to get just right), wrote up some specs/purchase order forms/contract forms and solicited bids.I was able to reduce the costs by in excess of 50%. A good part of this was the standardization of the contracts which provided for understandable and easily priced maintenance (by mail exchange for failed unit as well as a bit of free closet inventory which reduced on site maintenance to almost zero) and fair payment terms. This made the longevity of the contracts very, very desirable and allowed the suppliers to consume their physical plant and technology over the 3-5 year life of the contracts.All of the formation of the purchasing co-ops was done “old school” with a lot of personal solicitation.There is an opportunity for a better and more streamlined delivery system out there for many such simple systems.
That’s a great example, JLM. Joint purchasing on non-strategic inputs us one of the (few) industry-led consortium activities that can yield real value.There may be more out there than you think, and more web-based as well. I worked on one in 1999 which I think is still alive and kicking, using an Ariba platform. But you are right a huge amount of work was around standardizing buying terms, along the dimensions you mentioned. A lot of up-front work. But they generally worked better for the seller in addition to the buyers.
I think this is a really important point and an area I couldn’t be more excited about. The way that I look at this is that of the new top 15 websites, most of them allows us to view and explore *content* that was never before available due to limited distribution power and technology. Think about it – most of what you view and see on all of those websites (blogs, Facebook statuses, twitter updates, youtube videos) simply were not even available.When you look at the top 15 e-commerce sites, most of them sell things you could otherwise buy locally, just with a bit more convenience and slightly expanded selection. Heck, many of them are just online versions of major brands and stores. Netflix is as at least a new model for something otherwise more-or-less available.Where I think the real disruption will come is in e-commerce companies that can make available products that simply were not available to us prior to the internet. I think this will be a bigger disruption than group buying, etc. which just gets us better prices on similar products. eBay is the one great success so far to crack the top 15 with entirely new inventory. Etsy is doing a lot of this – a real marketplace for one-of-a-kind handmade goods, and think about other companies that get us closer and closer to the point of manufacture to get something just right and customized for you. Zazzle and CafePress are leaders here and companies like them will become much bigger forces going forward.
what do you think of http://www.shapeways.com/ Josh?
Shapeways.com is a fascinating company that starts to go to Chris Anderson’s – “Atoms are the new bits” http://www.wired.com/magazi… idea and the emergence of companies like http://www.stratasys.com. Perhaps commerce 2.0 is a marketplace for products that are not produced until they are sold, be they clothes, vegetables, or in the @cr1sa example automobiles.
I’m with Josh on this. I like customization. Uniqueness and customization will be the margin drivers that get the focus off price and will transform commerce for good. I’d call Commerce 2.0 “Back to Bespoke”.The 1.0 e-commerce incumbents are mostly incremental extensions of the traditional batch-manufactured supply chain.Also, online product info generally still isn’t nearly what it could/should be. And the front ends are only as good as their sucky supply chains. Info they post from manufacturers stinks. God forbid you should have to call someone to ask a question. They read you the website. And they can barely read.If anyone here has ordered from Costume Express you know exactly what I’m talking about. The place freakin’ owns the Halloween costume category and yet 2 out of my last 4 purchases they have not been able to deliver what they promised in time for Halloween (FYI non-parents: letting down a 6-year for Halloween = NOT PRETTY). But since their catalogs are like catnip to our little girls, we keep going back to the poison well.I’d like to see online experiences that digitize pleasurable old-world shopping experiences. Such as the Old Town Shop (NY’s upper west — lingerie). You walk in and the little old lady quickly eyes your chest, shuffles to the overstuffed shelves, grabs a bra and says “Dis is de one”. And lo and behold, she nailed it. You buy three, pay full retail, and it doesn’t bother you one bit because they saved you so much time and aggravation.
Back to bespoke.I love it
I’m not sure I buy that (at least completely). What does eCommerce mean exactly? An online store selling physical goods? What about software like iTunes? Is it because iTunes isn’t technically a website? One of the big reasons why the face of “ecommerce” hasn’t changed is that ecommerce isn’t just about physical goods anymore. Commerce itself is evolving. When I was in university, I liked to buy CDs and DVDs. Now I buy and download music, movies, tv, and books. Commerce 2.0 is goods as a service.
Tom Pinckney from Hunch had a great post a week ago where he discussed improving the search experience for finding overseas manufacturers http://bit.ly/cGCB8wI think this is just the tip of the iceberg. I’m working with a couple friends on a brainstorming project with the running title Google 4 Globalization, to explore the potential of connecting small-businesses, manufacturers, distributors, and venders.
I think one of the critical ideas to think about is that we are still in the infancy of buying experiences on the web. This is largerly a function of how do we make the body and spirit interact highly with what we see on screen, which is probably why it feels like commerce is not being disrupted and why you barely see new areas of ecommerce being properly developed.How do you push experience a full body and spirit activity in the new days of media? I’m still waiting on that. I think it will have some answers of the old and the new, if only because you can’t detie the fact that I sit in a real chair somewhere, and that chair will affect my on screen experience.
You needed to have social media before you could build for social media. By some measures, there is more Facebook traffic than there is Google traffic. It will become increasingly viable to build for distribution through social media (Facebook in particular) and startups will be debating which strategy is best or whether they can do both at once.
If someone asks me what the future of commerce is — and it turns out that this happens often — I point them to Shopify.com.Shopify is an excellent choice if you want to have an online store; your presence can be designed to look great, the service is well thought-out and everything sort of Just Works because they choose to focus on what’s important instead of a laundry list of features which would just confuse the issue.However, what really excites me about Shopify is their API. Not only were they one of the first public REST APIs, period (the founder was a member of the Ruby on Rails core team) but they expose a metadata API and the ability to define Webhooks.I happen to believe that Webhooks are the next phase of evolution for the net, because they allow bi-directional notification of events without polling a server… and it uses plain old HTTP, so nothing needs to be installed or upgraded for it to work.
*So the question is who will the YouTube, Facebook, and Twitter of commerce be?*It might be facebook. fbConnect + fbCredits = social buying. Both of these exist but have yet to be combined.
that’s what facebook wants to see happen and to some degree it willbut i don’t think it’s the only game in townsmall companies still drive new models more than existing companies
A product at a time, a merchant at a time, and a city at a time http://bit.ly/5ch66f…the first mile is brutal….stay-tuned in a few weeks we bring online a major city….exciting times….
Cool. Good luck!
What makes a powerful commerce company (in hard or soft physical products) is a product the customer believes is relevant to her/him in tandem with a distribution model that makes it easier or cheaper to acquire the product (hopefully both). Amazon did both, they compressed the supply chain, so they could sell the same products as 4 wall retailers for less, while making it easy to order, track and receive your product. The products were already relevant, Amazon made them cheaper and easier. Wal Mart, Target and Costco make products cheaper by stripping cost out of the supply chain. The biggest retailers in the world drive value first and distribution a close second. So for a commerce 2.0 company to land in the top 15, they need to create a compelling and sustainable consumer value proposition and then execute the heck out of it. Then, like Amazon, they can innovate value added services on the core consumer value proposition to create a higher level of need and stickiness.
New stores (Gilt, Groupon, etc) and new stuff to buy (Etsy, Threadless, etc), are interesting, but I imagine the biggest innovations in ecommerce will come not from stores that sell stuff, but from services that help us decide what to buy and where. Arguably, the most disruptive company in ecommerce today is Google, which makes most of it’s billions by pairing buyers and sellers through commercial search queries. Ten years from now, I bet the top ecommerce company won’t actually sell products, but instead will help us see what our friends are buying, provide relevant recommendations, or reward us with points and other viral game mechanics when we shop at all those Commerce 1.0 stores.
I agree that Gilt/Groupon/Etsy/Threadless have a cap to their top line. But I guess where I struggle is in this question: What is more important, (1) revenues or (2) traffic? It seems like most, but not all, service companies struggle to generate significant top lines revenues, greater than $1B and especially $10B. For instance, Amazon generated $24.5B in revs last year and Google generated $23.6B in revs in the same period. If the next great e-comm company does not sell products, and only services, and Google (which owns a huge % share in an extremely large marketplace) does not generate more revs than AMZN, how big does this next e-comm market have to be and what % share does it have to own?I am not a technologist, so I am far away from my home base, but I believe that traffic is important, but monetization of that traffic is critical. Sometimes it feels like a less frothy versions of the late 90’s. Big multiples for eyeballs and eyeball growth, while revenues are well behind (not to mention cash flow). Will the public markets put the same valuation on these companies as the private market? Sorry, I have digressed…
i think both are important. it’s really hard to build a huge revenue business without a lot of customers
A couple of months ago I met with a well respected angel investor in the tech / internet space in my local community (Hong Kong), and pitched him on what we were trying to do in monetizing the successful business social platform we have built with e-learning programs, software and information services / products.While he was excited by the “traction” we’ve built in the niche we were targeting (banking and finance professionals), he was totally unconvinced that the traffic was monetizable in any other way besides advertising / lead generation. He believed that the social intent of our community will not translate well into a buying / commerce intent.Our current numbers could suggest that he’s got a point, but with all due respect to the merits of his views, we hope to prove him wrong eventually.
I think the biggest innovations in ecommerce will come from companies that learn how to (1) mine insights for what value propositions will soon be red-hot and then (2) rapidly evolve entire social commerce programs – I like your notion of gaming commerce – whose profitability coincides with the growth in social adoption of those new value propositions.For example, I think plays like airbnb are successful right now because they play on the current economic malaise and a general willingness of people to consider new ways of monetizing their residential real estate assets. When a different set of economic conditions predominates, it opens the door for an a entirely different game with slightly different rules and different rewards. The right company will know how to minimize development risk and will focus on the differences between base hits and home runs.
Thanks for sharing the thinking – while I believe you are spot on with the opportunity for ecommerce to become more real-time and look closer at emerging trends – there is also vast opportunity for development in areas like what foodzie is doing: better food – or locally sourced food: https://localdirt.com/ which would appear to be outside of faster moving “economic conditions”.
Google’s checkout keeps growin’ + growin’.
Great post and great comments here.Will there ever be another eBay, Amazon or Twitter of ecommerce? or is the future of ecommerce a thousand points of light shining in the long tail? Like: foodzie.com (locally grown and organic food), lushpad.com (vintage modern furnishings), audiogon.com (high end audio equipment), airbandb (home and apartment rental), fiverr.com (5 bucks), gazelle.com (reverse marketplace for electronics)?I’ve got a hunch that its more the latter perhaps with a potential giant powering the long tail.
what a great list of commerce 2.0 companies Andrew
These are all “long tail” companies serving very specialized markets. None of them will challenge Amazon or other major on-line retailers. I think Etsy falls into this category, too.Gilt is completely different. I don’t even consider it a retailer, as much as, a marketing or specialized advertizing company.
amazingly explained with stats…..thanksSachin
in a world and economy where so many online mentors scream fail fast build mvp, some deviate to build it right, then put the traffic on auto, mvi…
The real catalyst in growth will be when the online experience is more engaging in this context – more design and emotion encapsulated in the experience, leading up to the transaction commitment. It’s all pretty sterile, currently.If Foursquare is heading the way I think it is – could/should – this could be the start …. it’s capturing the physical participation with a vendor – whether it’s a bar, restaurant, shop, etc.Checking-in repeatedly with a physical entity is an act of ‘bookmarking’ one’s transaction habits/real-world lifestyle patterns and endorsing them by the very act of seeking Mayor accreditation, etc. This could lead to massive brand leveraging, as momentum grows.
Whenever I try to approach something like what should “Commerce 2.0” be, I like to start with “What’s broken with Commerce 1.0”.Before even attempting to go there, I’d like to push the boat out and say that Amazon is the Google of Commerce. They have absolutely nailed logistics & distribution to the point where the other day I ordered something (1 click) around 4pm and by 9am the next morning it had arrived (delivery included with Amazon Prime). PLUS, their inventory is massive. PLUS they are starting to make some great in-roads into eBay’s business with Amazon Marketplace.Pre Amazon, shipping, delivery & inventory were all problems with Commerce 0.9 Beta.Some problems today I can think of, and one was alluded to earlier with regards to reviews…1) Confidence in product. There are so many angles to this. With niche market products with few reviews, trust is an issue. For mass market products (think TVs) the overwhelming volume of choice makes it difficult to commit. One thing that Commerce 2.0 might look to do is leverage the social graph to give reviews more integrity and relevance to your specific tastes.2) Confidence in merchant. eBay nailed this within the walls of their marketplace. This is basically reputation. I’ve often tried to figure out how eBay could distribute their reputation model off of eBay.com. If you can crack this, I think that’s huge.What else is broken with commerce today?
In reply to Dave Pinsen – “the global mapping of everybody and how they’re related.” As a term it is a bit out there for me but I think it’s common enough that most people understand what you’re referencing.
Clearly Josh is missing CSN Stores. They run a series of niche commerce sites (like strollers.com), doing over $250MM of revenue. They’re not venture-backed, so they must miss the venture buzz. They make great use of SEO and drop shipping.
For media and content sites, social technologies made the biggest impact in terms of discovery and distribution. The numbers indicate that social nets are increasingly catching up to search as a major driver of traffic. I think the same will apply for commerce sites. All the new commerce models and social aspects make it easier to find the products and deals that matter to me most.
I think social media is huge when it comes to commerce. Whether it’s product reviews or P2P sales from someone closely tied to your social graph, the effects are obvious. I’ve seen several trends in my news feed on Twitter and Facebook. First is the request for product reviews (should I buy an iPhone? which is better, Dell XYZ or Toshiba ABC?)… and then there’s people selling things (I’m selling my old Mac for $XYZ — anyone want it before I list it on eBay?)
I agree that where it’s possible, it’s useful to have the “social graph lens” to look at the world through. But there are two problems that need to be solved. The first is that for many many products, the chance that someone in your social graph can help you is limited; many of my friends own an iPhone but how many of them have been to a particular hotel. And something that Fred has alluded to in his comments on FB vs Twitter is that many people use FB for people who are not actually their friends. With no offense to the people I am linked to on FB, the opinion of most of them on an important decision is not meaningfully more valuable to me than the opinion of a random person who is within a certain demographic and from a certain geography. The second is that your real friends can’t react to these questions all day. A friend of mine did a study of the percentage of questions in Twitter that are answered and he concluded that it was some infinitesimal. I’ve seen slightly more questions in my FB feed but most of them go unanswered there as well. Maybe I am just friends with the wrong people?My take is that once you get out of the youngest and most socially active groups, many of the social graph promises currently break down. And I don’t think it’s necessarily a temporary thing. My peers – in their mid 30s – all grew up with email and high speed internet in college. Having used the Internet for email, social networks (back then we called them it usenet), research, and commerce since 1995/1996, they are by no means luddites. But it is the vast exception among that group that engages heavily with an online social graph. Most of them have kids, families, jobs, etc. and rarely go out to the movies or dinner and certainly have no need to “check in” when they do to see if their friends are. They have 5 to 10 actively close friends and they know where those people are on a Saturday night: at home taking care of their kids. I’ve alsp polled the 23 to 27 year olds who I work with and it’s the rare one among them who has continued to use FB the way they did in college. Point being that I think that human nature has social circles that are far smaller than the 100s of friends it is easy for someone to accumulate in FB. Don’t get me wrong, FB is an amazing enabler of improving our social lives – it allows for bigger social networks and more engagement with the tail of the network in particular. I am optimistic that societal norms will change somewhat in the coming 20 years. But I also think that social circles of average people 30+ will not be 100s of close friends. It will be 10s or even a hundred friends and family members – the people you would invite to a wedding or bar mitzvah as Fred has termed it. Those are the people whose opinions are most valuable to us and yet for many many things – particularly decisions that require a relative comparison – they won’t have an opinion. Should you buy a Honda Accord or a Toyota Camry? One of your friends owns one of each but neither has owned both. And if you go to Edmunds to research your decision and are looking to get the help of the the social graph laid on top of Edmunds research, how many of your friends will have alerted Edmunds to their owning the car (so that you can know that without their having to respond to a ping in FB or email). Multiply a relatively small number of friends times a relatively small number of products they are familiar with times a small number of posts they have made and you don’t come up with a very high likelihood that the social graph is going to tell you anything.In a day and age where social is one of the most dynamically evolving things anywhere – online or off – I know it’s a bit heritcal (or clueless) to argue that Social won’t take over the universe. Either that or my agenda – the role of the expert – is showing. BUT we’ve tried to use FB connect login to enable the social graph to be a lens through which our reviews are seen so I have an experience based perspective. I’m not saying we executed it well so that could be the problem but we’ve experienced two problems1) The likelihood that someone who comes to our site and looks at a product that a person in their social graph has also been to (and commented on) is very small. If we had a critical mass of users, layering the social graph viewpoint on top of our content would likely be much more effective so this strikes me as the kind of tactic that is useful once you’ve already built critical mass (Amazon scale) but far less effective as a way to build critical mass. 2) For users over 30, getting them to login with FB connect is hard. There is not yet an intuitive belief that overlaying the social graph on 3rd party content (meaning content not within your FB stream) is going to be all that useful. This may change over time but it seems that it changing is heavily gated by the statistics problem I mentioned above; to make it useful, you have to have a lot of friends owning a lot of products and commenting on a lot of them.Would love to hear the dissenting perspective. Sorry for the overly long comment but something I’ve been thinking about so looking for help expanding my viewpoint.
May have been a long comment, but it’s definitely worth the read. Much appreciated.
Elie that’s a very rich, thoughtful comment and has me thinking too.I’m imagining my wedding 10 yrs ago and it was chock full of people who know me well but by and large don’t really understand what I do or what I want to achieve.And it seems to me that an optimized purchase decision knows me really really well and also knows the product domain really well. And by the way, rare is the consumer who can crisply articulate their needs.Another note, and pardon me folks for being morbid but it’s reality — and I don’t hear anyone talking about it — is that people die, and it happens more the older you get. What does this have to do with social networks? Critical network nodes disappear.For example when my parents died I quickly lost touch with kids of their friends because I stayed in touch with them by proxy through Mom. It takes a very large effort to establish direct connections. And they are still never quite what they were.So is there value/opportunity in the maintenance and repair of social networks as the natural progression of the lifecycle is that they will erode. This is why elderly people are statistically lonely.As the baby boomer demographic tidalwave ages (and their boomerang kids, too), the need will grow and with it, some business opporunity.
Elie, I think you are on to something very important here. The market for marketing expertise operates on reaction. Mass media lost our trust. But that’s because Mass Media couldn’t continue to thrive financially without catering to advertisers and their needs. A once virtuous value chain became warped and broken.The reaction to mass communications has been to go in the opposite direction – to individual communication, creating the tension between who knows best: the established professional media with all their hidden agendas or your best friend. The truth is neither.We’ve tried paying a premium for access to alternatives to mass media – first cable, then the internet. But we’ve learned is that access to everything doesn’t necessarily mean we get what we want.The market is demonstrating that it is worth paying a premium for an objective medium to filter, edit, and recommend what we want. It will not look like a traditional medium.We think it will operate on the same principles that govern a thriving community in the “real world”.K–
email is still king!
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As many say, mobile might be the next thing, but I question location and augmented reality as the key change agents here (even if they are sooo hyped right now). Rather, if someone can blend:- showroom (real and virtual)- price comparison- social components/recommendation- instant (almost) deliveryit could be a killer. A tough questions is how the showroom (if real) could be part of the value chain as something else than a loser…?
The biggest opportunity will come from displacing Google Adwords which is unsustainable for two key reasons:- The price is now too high. In the days when advertisers could not track us with any accuracy it was acceptable to trade eyeballs for “free” services. It is no longer acceptable because they can now track us with biometric accuracy.- Google is betting that an information age model of procuring customers will not emerge and that the industrial-age concept of chasing eyeballs will persist.The second point is the more pertinent. What will happen if a new service is established which enables businesses to reach their potential customers in a more cost-effective, more efficient and less intrusive way?The first of these type of services are now emerging: http://www.customersatisfac…The implications of course are interesting to say the least.
sure … how about the Facebook Heath Insurance Coop?
Interesting article, I share your thoughts and I think we can see signs of that innovation of e-commerce 2.0 on some popular arising e-commerce sites based on Ning social networks.Hope to see more about e-commerce 2.0!
Hi Fred – I completely agree – there is a huge opportunity for unused inventory and assets that expire. I would love to discuss in detail with you. I’ll be in NYC on the 26th if you want to meet for coffee, or DM me. thanks.
I am on spring break vacation with my kids next week mike
thanks for the reply, Fred. Have a great spring break – we’ll catch up on it some other time. I’ll send an email to you. cheers.
I think we’ll see macro sector focused portals that will be born autonomously or come out from Facebook’s belly. These portals will integrate vertically from information to sale. E.g. Gaming ecosystem where gamers can read about games and gaming technologies, buy games and consolles and play; Travel/local ecosystem where people will search for inspiration and information about places to visit, will book and record their experience; Music ecosystem where artists will be able to get exposure, gain fans and sponsors and sell their records and promote their gigs and where fans will find everything about them, connect with them and buy tickets and merchandise.There will be a large number of new startups that will come up with clever payment solutions integrating into these vertical platforms and also helping independent retailers (the long tail of retail) create simple custom e-commerce solutions. Think WePay, Blomming, etc.
“Yet, of the top 15 most trafficked eCommerce websites today, just one of them did not exist back in 1999 (NewEgg – which launched in 2001). Which means that over 90% of the top eCommerce websites are over 12 years old! That is pretty remarkable to me — and reflects an amazing lack of external innovation (and disruption).”It does not really surprise me that they have been around since 1999. Commerce websites usually require a lot of investment on the actual real life infrastructure (a lot of pp&e). So it makes sense that the biggest ones (amazon comes to mind immediately) are relatively older companies who had the time to organically build the infrastructure. I don’t think it represents lack of innovation or distruption – i think Amazon is a great innovator.Sorry if this point was made before – couldnt read all the 173 comments..
Fred, I don’t think you’re going to see this list change all that much. I think you’re going to see a lot of the current sites incorporate social technologies. And they’ll have every incentive to do this to gain new customers and develop their communities. I think the big bet is which companies are going to be providing these social technologies to the existing retailers.disclosure: my company focuses on saas solutions that help retailers 🙂
Hi Fred, great post and discussion. I thought you might like to check out one of the startups I’m working on in the social e-commerce space, called Addoway (www.addoway.com). Addoway is a free social marketplace that helps you buy and sell with your friends and the people they know. The idea was to bring the level of openness and transparency found in social media today to the e-commerce landscape, by showing mutual relationships between buyers and sellers and recommending items in search that are being sold by friends and friends-of-friends that match the search criteria. You can check out more information about the social functions of the site at http://www.addoway.com/connect if you’re interested in taking a peek.Thanks again for the great post!