Social Commerce Is Commerce With A Social Layer

I've thought this for a long time but never really articulated it publicly until the Q&A session at ad:tech last week.

There are a ton of social services that sit on top of the world of e-commerce and allow users to curate items they like and may want to buy in the future. These experiences can be highly social. And there are services that allow for transacting and payment inside of large social platforms like Facebook, Twitter, Instagram, and Pinterest. They bring commerce to social platforms. This entire category of services is called Social Commerce.

I have not been particularly bullish on these services because I think social commerce is most naturally e-commerce with a well implemented social layer built natively into the commerce platform. When you look at conversion rates in e-commerce broadly what you see again and again is that the more friction and overhead there is between discovery and transaction, the lower the conversion rate. Something as simple as logging into a commerce platform to complete a transaction can lower converstion rates by an order of magnitude.

Conversion rates are critical. They tell you what systems perform best for the end user. When a system converts north of 5% of users visits to a transaction, it is working extremely well for the end user. When a system converts 0.1% of user visits to a transaction, it doesn't work as well for the end user.

When a retailer or e-commerce service implements a highly social layer into their service with hooks into the major social platforms, the conversion rates can be significant. I have seen this first hand. This is an indication that users enjoy and benefit from social commerce when it is built into a native e-commerce service.

When users start in a social system that is divorced from the e-commerce platform, I believe the conversion rates are significantly lower, often by an order of magnitude or more. This, to me, suggests that the overhead of multiple systems reduces the effectiveness of the experience for users and is suboptimal.

So this is the thinking that led me to say what I said on stage at ad:tech this past week. I've felt this way for a long time and I am glad that I got the question and had an opportunity to address this issue publicly. I am eager to hear the discussion of this issue in the comments.


Comments (Archived):

  1. Aaron Klein

    The biggest issue is user intention.When I’m on Twitter, I’m there to find out what’s happening. When I’m on Facebook or Instagram, I’m looking at the photos of friends. When I’m on Amazon, I’m there to shop.It’s like trying to put racks of clothes into my local bar. I’m not really interested in shopping while I’m schmoozing with friends.But I’m glad to tell friends at the bar when I bought something cool, or discover cool things my friends bought and put them on a list for me to buy tomorrow when I’m sober. 😉

    1. fredwilson

      Right. But this is even true on Pinterest and The Fancy

      1. Aaron Klein


    2. christmasgorilla

      Generally agree. That said, almost all of my Kickstarter backings start on Twitter.I think there’s another category of commerce which is as much about personal identity / expression as a utilitarian transaction—and that seems to be growing.

      1. Aaron Klein

        That’s my point. Social is awesome for discovery.

        1. FAKE GRIMLOCK


          1. Aaron Klein

            Yep.I think it’s coming. Twitter Cards. Pinterest Buy button. Facebook Want button. The first player who does this simply and cheaply for merchants is going to build up a huge lead.

          2. FAKE GRIMLOCK


          3. Aaron Klein

            Agreed, but doubtful it will happen.

          4. FAKE GRIMLOCK


          5. fredwilson

            sadly true

          6. FAKE GRIMLOCK


          7. Chris Teso

            In-stream native transactions without leaving the social platform. Not attention rerouting social advertising, but true in-stream social commerce:

          8. Aaron Klein

            I think the platforms are going to do this themselves to monetize, and the user experience is going to far outpace anything that can be done third party.

          9. Chris Teso

            Agree, down the road platforms may attempt this themselves. However, we’re going to do this across them all. Brands/merchants will use us because we’re the central hub in which to distribute commerce across the entire social web, while enabling their consumers to purchase in-stream without frictions. To your point, I don’t think the user experience can get any more frictionless than we’ve made it. No shopping cart, no linking off, one reply purchases with fulfillment and payment occurring seamlessly. Our transactional process is essentially native as we’re invisible. Like walking away from your Uber Cab. Payment happens, effortlessly.

          10. fredwilson

            exactly, that’s what i said above to Chris

          11. fredwilson

            yup. see my reply above re:chirpify

          12. fredwilson

            they have to integrate payments right into the experience too

          13. Abdallah Al-Hakim

            Yup. It needs to be native

          14. ShanaC

            i’m not sure only because I am not sure what pushes people from discovery to transaction….

          15. fredwilson

            damn, i could have shortened my post to nine words and made the exact same point

          16. Dave W Baldwin

            To me, this is one to do again where the look needs to look forward 1-3 yrs, 3-5 yrs and edging 2020. To achieve the required ‘smooth’ requires the removal of walls inside the innovator thru user’s mind that doesn’t need to be there. Moving toward mid decade as the vehicles transferring opinion/product become more varied in size, interface, true labor involved and so on opens a big door.

          17. FAKE GRIMLOCK


          18. fredwilson


          19. Donna Brewington White


        2. weeSpring

          We’re late to the party on this conversation, but wanted to weigh in on the “social is great for discovery” aspect. In our experience, social commerce has been almost exclusively about discovery — The Fancy, Fab, Pinterest. It’s sharing cool stuff with your friends.Where social commerce falls short is enabling users to leverage their friends’ insights in their decision making process. If you’re in the market for — for instance — a new smartphone, you have to individually survey your friends (or post a Facebook status update or Tweet) to find out what they think of the phone they’re using. The big problem is compelling your friends to share that kind of mundane data in a systemized way; it isn’t as fun as sharing an LED skateboard.So we think the trick is catching people at a moment where they’re eager to share — when they’ve figured something out that was a complete mystery to them just a few months before, and they want to pay forward the help they got. And it also has to be a time when they’re in a buying state of mind — like when they’re about to spend (on average) $3k on stuff they’ve never considered before.(And yes, we agree the transaction piece needs to be simplified and streamlined, regardless of which buying stage your platform is focused on.)

      2. fredwilson

        kickstarter is an example of what i am talking about:”When a retailer or e-commerce service implements a highly social layer into their service with hooks into the major social platforms”

    3. ShanaC

      Clearly you don’t go shopping with your female friends :p

      1. Aaron Klein


      2. Donna Brewington White

        Yeah, I thought clothing racks in a bar sounded like fun. Although I get @aaronklein:disqus ‘s point. Also about purchasing while sober.

        1. Dave W Baldwin

          Actually, we could do that if you think about it… just a matter of being able to transition from racks to wheels to……and besides, drinking will help social/commerce interlock 😉

        2. Aaron Klein

          LOL. 🙂

  2. Andy

    Ecommerce having a social layer, and social commerce are not mutually exclusive (your definition of ‘social commerce’ seems to me as more of a ‘feature’ not a ‘product’ (You’ce got email)

    1. fredwilson

      Can you elaborate?

      1. Moe Ibrahim

        If I understand this last statement correctly, I would agree. At, we’re doing a few things. Simply, it’s a hotel booking platform for consumers and a wholesale booking platform for travel agencies. We make it social by allowing any user to interact with any other user socially. So hotels have direct access to travelers, hotels to travel agents, travel agents to travelers, or any other combination. Each identity has robust B2B functionality built into its profile, and users can switch between multiple identities seamlessly. Next, when a user makes a booking, he/she can see others staying at the hotel at the same time and the hotel can see all of its guests by market, booking channel and segment. We also have hotel reviews, messaging, etc. That’s ecommerce having a social layer. Next, there is social commerce, which I would say is a broad topic of its own. At Journeyful, we have introduced SocialRates where hotels can customize rate types and make them available to certain markets, channels within markets, segments within channels within markets, and further customized by gender, age and even down to the individual. Not only can any user interact with any other user socially, but they can also do so transactionally. Once again, Hotel and user, Travel Agency and hotel, travel agency and user, etc, and soon, we’ll complete all the links so it can be hotel and hotel, user and user, etc. Social commerce may also be rewards based (based on transactions), and we’re adding a reward system, where rewards are distributed between the person booking and the identity that invited them (which can be a business entity). This feature will enable business entities to generate new revenue streams from their social network. Sharing rewards, and rewards based on social activity (not only transactions) add a further dimension to social commerce. Finally, by linking transactions to user profiles (which becomes possible when social features are natively built into the commerce platform), SocialRates leads to dynamic pricing. In the case of a hotel, a SocialRate can be a function of a traveler’s complete spend at the hotel, not just the room rate, such that the hotel rates you see online are cutomized to you, based on your spending patterns, and based on your contribution to a hotel’s profitability, not just revenue. Integrating social into all elements of a commerce platform opens the door for some amazing new features.

      2. Andy

        …elaborated via email for now


    1. ShanaC

      pimp :p

  4. Via Duende

    Hi Fred,I worked on social commerce at eBay and this is exactly what we saw. I can’t agree more. Social networks are not inherently transactional. People go to Facebook to socialize not to transact. Facebook users get annoyed upon seeing commercial intent.However, adding a social layer on an already existing commerce platform makes it more engaging. The user intent on eBay is already transactional. The social layer delights users and opens new avenues for discovery and communication.

    1. William Mougayar

      Some users believe that eBay isn’t social enough. Can we expect more from them?

      1. Via Duende

        Can’t speak to the latest as I’m not at eBay anymore. I’m really hoping to see movement in this direction.

        1. William Mougayar

          In discovery for example.

      2. Brandon Burns

        eBay acquihired Svpply for this reason. the new home experience is already an improvement.

        1. William Mougayar

          Thanks. I forgot about them

        2. Abdallah Al-Hakim

          I remember reading that their mobile experience has drastically improved which also helped them

        3. Abdallah Al-Hakim

          This was a good ny times article about eBay

      3. Donna Brewington White

        The “social” potential that I got a taste of at eBay until some of their policies changed–possibly to become a more viable competitor in e-commerce rather than a buying and selling “community” — was as a seller more so than as a buyer. Seems as though there would be an opportunity in this.(edited to replace inadvertently deleted thought)

    2. fredwilson

      That’s great go hear and excellent validation

    3. ShanaC

      At what point are you getting more drive by social (aka windowshopping with the girls) and not discovery->purchase? The act of shopping is transactional in so much as far you know what you are looking for…

      1. Jim Ritchie

        If you know what you want to buy you will likely go to Amazon. However, if you want to discover and learn and share then a social site is great. This can be further refined via “curation” (don’t like that word, but it seems to be accepted). For instance, at we introduce new products to you via email every day and many are selected and curated by our Taste Gurus. These folks are chefs and food industry experts that are “in the know”. Don’t know what cheese to buy for an upcoming party, go see what Laura Werlin recommends here

        1. ShanaC

          Then you have a curation model, not a social model. It is like a magazine you can buy from…Not one where you cut out ads for your friends which they may buy from…

          1. Jim Ritchie

            Agreed if this is all you have. Our initial data is showing higher sharing rates for those items specifically curated by experts. Not sure of the reason yet. Our Craves feature is exactly the “cut out ads to share with your friends”.

        2. William Mougayar

          You are doing a good job with e-commerce discovery. It works well for that segment. But the social part is not dependent on it, is it? Social enters in the peer-to-peer referral between users.

      2. Via Duende

        Shana,Folks spend a ton of time on eBay just browsing. Buying decisions are primarily influenced by the five people who are closest to you. After thinking about the goods which were browsed users come back and buy. eBay’s ‘watch’ feature helps with this (though primarily designed for auctions). The discovery part of the funnel is crucial. Svpply was acquired to help with discovery where eBay in general does a pretty poor job.

  5. Tren Griffin

    Any friction in the process increases abandonment. Multiple platforms in that process (e.g., social and ecommerce) can increase friction (sometimes quantifiable at a rate via A/B testing). Net friction is what matters. For example, friction in entering personal information and credit card data can be greater than friction of using multiple platforms. Or not.

    1. fredwilson


    2. Joe Tareen

      Good point.

    3. Chris Teso

      Agree fully. Frictionless in-stream native transactions without leaving the social platform.

  6. Joe Tareen

    Great post. I am currently exploring the idea of introducing collective wisdom of a social network into a retail automotive purchase experience but unable to devise a solid business model at this time. Your post was somewhat helpful. Thanks

  7. William Mougayar

    I’ve never used Groupon or any other “social commerce” platforms. I don’t get it and I’m in your camp- that social is a layer on top of e-commerce. Social enhances e-commerce in 2 ways:1- It amplifies the “referral” process from friends who are a click away from recommending something, and you’re there on your stream listening to them. 2- It accelerates the realization of “group buying”. Group buying and friends referrals lubricate e-commerce as social catalysts, but that’s about it, as far as I see it. 

    1. Donna Brewington White

      I’ve never caught on to the social element of groupon or livingsocial just seeing them as a source of discounted offerings. Even though I guess there is a social underlayer that allows for the discounting to begin with. But it’s not obvious. I wonder if others experience this differently.

      1. William Mougayar

        Right. I guess Social Commerce is more elegant than “socially promoted group buying discount scheme”.

    2. ShanaC

      I don’t see groupon as social outside of the need to kickstart the process of getting a coupon. Now that there are so many groupon people, what is the point?

  8. Modernist

    so this explains Kickstarter

    1. fredwilson

      I hadn’t considered kickstarter in this context. Can you explain?

      1. Modernist

        “e-commerce with a well implemented social layer built natively” describes kickstarter

        1. FAKE GRIMLOCK


        2. fredwilson

          correct. it sure does. but i wasn’t thinking of kickstarter when i wrote it.

  9. Sarah Tavel

    Hi Fred – long time reader of your blog, but don’t think I’ve ever commented! Glad to have an occasion.I agree with your analysis if you’re just looking at conversion rates. But it’s worth noting that conversion rate is a very “last click” view of the world. Almost by definition “discovery” platforms like Pinterest and Facebook, or even comparison shopping engines, won’t fair well when looking at conversion rates. Google is king there. But if e-commerce companies only optimize their acquisition traffic on “last click”, they’ll be forever beholden to Google (and customer acquisition costs that erode most of their gross margin). Social commerce occurs higher up in the acquisition funnel. So while they don’t always “close the deal”, if you measured their impact on an “all click” or “multi-attribution” basis, you’d see there is a lot more value to that traffic than the conversion rate indicates.Obviously, now that I’m an employee of one of the social commerce sites you mentioned, I’m sure I appear biased. But this is a subject near and dear to my heart so I can’t help myself (blogged about this here a couple years ago:….thanks as always for posting your

    1. ShanaC

      Hi Sarah, Welcome.I think you are dead on when it comes to conversion rates as a last click phenonema, Which is why I think when we’re talking about social ecommerce, we’re talking about a whole other animal involved in casual shopping.

    2. fredwilson

      i think the retailers and marketplaces will have to integrate deeply into the social platforms in order to create experiences that convert effectivey

  10. kidmercury

    agree with basically all aspects of this post. but i dislike binary distinctions, i.e. social vs ecommerce. you need both and you need them native. you need to be One.the software world desperately needs to adopt apple’s philosophy. even though crapple sucks and i never skip an opportunity to bash them, i gotta admit this much.

    1. fredwilson


    2. andyidsinga

      which part of the philosophy exactly? surely not the vertically integrated part ..vertical and horizontal are yin and yang no?

      1. kidmercury

        apple believes they need to make the OS and the hardware. they dont want a bunch of stickers on the laptop and they want to be the sole architect of the user platforms need to mimic this approach. i.e. i don’t think you can just take a social plugin or some external social layer and slap it on your ecommerce platform. rather, the platform must be designed with both social and ecommerce in mind. i believe amazon understands this very well.put another way, i don’t think platforms should define themselves based on whether they are social or commerce-oriented. rather, i think they should seek to understand what type of customer/user they are serving, and create a platform that serves the social and commercial needs of that customer.

        1. FAKE GRIMLOCK


        2. andyidsinga

          Got it. Agree completely.

        3. Abdallah Al-Hakim

          Good stuff kid. I like and agree with what i am reading here. Serve your user needs rather than trying to fit into one category or the other

        4. ShanaC

          only works if you own your brand. Most people don’t feel that they do. Most brands don’t have enough soul to have ownership over who they are.

  11. Joe Tareen

    The Social layer can be used to engage in price discovery, product/service research, and vendor reputation with the help of friends who might have had similar experiences. Of course the objective is to get the best deal on the right product and doing business with the right vendor. In light of current outbound marketing method’s diminishing returns a platform where vendors engage directly with customers towards the end of creating a transaction might be the next big thing. But how to monetize such a platform?

  12. Iggy Fanlo

    I look simply at CNN (twitter) and QVC (amazon). You are going to these for different reasons, even if you are getting “entertained” by QVC. One is about discovery and information the other about shopping and transasaciton.You may be able to grab some small measure of impulse buying on twitter for example, but the real power of twitters momnetization capabilities will not be unleashed until a brad or influence marketing product is offered to marketers..

  13. Modernist

    sure, amazon has a great conversion rate, but don’t we spend more time on twitter? google is one of the top 20 most profitable corporations in usa; is that only thanks to searches made with the intent to buy?chris sacca said recently that twitter feels like google did. there were a ton of lucrative ecommerce sites “built over” google. why would it be different for twitter?or am i thinking about this wrong?

  14. Craig Nicholson

    “This, to me, suggests that the overhead of multiple systems reduces the effectiveness of the experience for users and is suboptimal.” This is a phrase I have heard but you just explained the process succinctly. At our company we continually have to continuously recommend vendors to work together and reduce the overhead of multiple logins for web products (enterprise).

  15. Brad

    We created with idea that commerce can be social. But I think it needs to be targeted, not universal. We call it a “commerce network” as a social network is just that, social.

  16. Jim Ritchie

    Ahhh, something near and dear to my heart. is really nailing the social integration with ecommerce with their real time feed, inspiration wall, tight integration with custom Facebook open graph actions, etc. IMO. We at are trying to do something similar for people that care and want to share their love of delicious, real food. One social feature we have added is a “Craves board” for each user where they can Crave something on our site for later and share it out via a custom FB open graph action or manually via tweet, FB, and email. You can see what is on my Craves board here… We are in public beta and testing a bunch of stuff right now, but we do have some awesome heritage free-range turkeys on sale for Thanksgiving! Lots more to come in the social area such as our Karma Kredits virtual currency.

    1. Adrian Salamunovic

      I agree. Fab does this really well. We plan on doing something similar with this page in the near future (current model is quite static)

    2. fredwilson

      yup. when asked for examples of this when i was on stage i mentioned Fab and Etsy

  17. Alex B

    would referly be an example of this type of additional social platform?

    1. fredwilson


  18. EmilSt

    Social commerce can be much more than just sharing already existing offers. I see the future of social commerce much larger.It can turn upside down the whole commerce as we know it, by putting the consumers in the driving seat. By giving them a chance to Invent things, share, gather demand and get vendors just to execute.”People see things and ask why. I dream of things that never where and say WhyNot”George Bernard Shaw



      1. Abdallah Al-Hakim

        This is a good teaser!

        1. ShanaC

          don’t tease the robot dinosaur. he tends to secretly eat people who know too much.

        2. FAKE GRIMLOCK


      2. ShanaC

        I think you are teasing us so you can decide which one of us you can eat for finding out the inside knowledge….

      3. EmilSt

        Ha! Now I need to know who are you…Please email [email protected] the way, I’m your true fan with a t shirt 🙂 (no one’s gonna eat this chicken)Cheers!

        1. FAKE GRIMLOCK


          1. EmilSt


  19. Nick Molnar

    Building social into each eCommerce store doesn’t seem optimal either.1) It’s highly fragmented2) The skillset to build a great community and the skillset to build a great commerce business are quite different. Etsy & Modcloth are perhaps the two exceptions. Most eCommerce stores run on antiquated tech stacks that get in the way of real innovation, and are a small part of very ‘top down’ organizations.What we really need is an oAuth for commerce, so that third party communities can form that are not tied to any one store. Svpply + 1-Click-Checkout would have been an order-of-magnitude better experience. The Fancy and Best Decision are both trying to build walled-garden versions of this. What we need is an open version so that 1000 flowers can bloom.We’d use it at Wantering in a heartbeat, and I’d bet there are a lot of other companies who would too. Otherwise, we’re going to have to go down the walled garden route, which only helps us and doesn’t move the industry forward.

    1. Adrian Salamunovic

      Nick- what do you think of companies like Janrain vs. just building this functionality yourself?

      1. Nick Molnar

        If someone like Janrain existed for transactions, we’d be all over it. Being the first likely means a lot of wearing suits and delivering Powerpoint presentations, which I’d prefer to avoid.

        1. Chris Teso

          We’re Janrain for transactions. We’re tying social identity to a portable wallet, enabling frictionless checkout across the social web. Ironically, like Janrain, we’re based in Portland.

          1. fredwilson

            the thing i worry about with chirpify and other social transaction services is the possibility that Facebook, Twitter, Instagram (facebook), Pinterest, etc build their own version of this kind of thing and force their users to use their social transaction servce

          2. Modernist

            What about PayPal (arguably a transaction service built over search engines)? Will Google build its own buy button (Wallet) and put PayPal out of business? (Not a rhetorical question, I would love to short EBAY)If not, do you disagree with the idea that Twitter is the next Google?

          3. fredwilson

            not sure about google. but it will interesting to see what facebook/instagram, twitter, and pinterest do in this space in the next 12 months

          4. kidmercury

            Totally. The platform is just waiting to see what works before crushing it.

          5. Patrick Walsh

            Hi Fred – I’m a long time reader but finally my first comment!One key downside to the above is that sellers will then need to manage multiple e-commerce accounts across different social networks. For buyers this can get difficult to manage also.Sellers want to upload the product to one place but leverage their full social media presence to drive sales i.e. a cross platform solution.What buyers want is not multiple accounts/passwords to remember, or even one account, they want zero accounts with a low friction checkout experience.A solution I’ve been working on is shortlinks + mobile payments: upload a product, give us a price and we automatically generate a shortlink that you can put anywhere. Fans are re-directed to a dedicated sales page where they pay in the with the credit on their mobile phone i.e. low friction.

          6. Chris Teso

            Fred, understand the concern. Obviously I get asked this question almost daily :)My answer is that it would be unfortunate for users, brands, merchants, and for those platforms. For users, the experience and their payments would be fragmented. ie: FB would not implement the same system as Twitter as Pinterest as Google as Tumblr. So, you’d end up with a different wallet attached many places with varying user experiences. What we’re building is a much greater idea. A universal experience across all social tied to a single wallet that offers payment choices within. For brands and merchants the benefit of our platform vs. fragmented silos is obvious. We’re a central hub that allows them to distribute listings everywhere and consumers to purchase from anywhere. Cross chanel social commerce. Since we work on all platforms, we also have the potential to have many more users connected to payments than any single platform. Also, our data is better. We have insights into a consumer purchase intent across platforms.Secondly, for the platforms, I think they’ll have to overcome an identity crisis, and risk alienating their base. For example, if FB rolls out a selling and shopping experience on Instagram and asks user’s to connect their cc, I think the user base will begin to wonder what Instagram is. For a third party to do this is acceptable. It’s a different story when the platform fundamentally changes it’s core meaning/value. I don’t think this psychological impact is to be underestimated. People love Twitter as a real time media and information platform. They’re the best at that. They should be cautious changing their core value prop.Thirdly, we don’t just enable big brand commerce. We have thousands of individual sellers, and people using us for peer to peer payments as well as non-profits and congressmen for in-stream fundraising. I don’t think any of the platforms will enable these.Finally, I view Chirpify as a wonderful partner to these platforms. We’re building a lot of value inside their platform, not outside. We’ve solved a lot of the problems they’ll face if they go down this road.

          7. Dave W Baldwin

            Do be careful. The wallet side is what everyone in the commerce/social is going to be doing.



      1. Dave W Baldwin

        You know I’d like to make a wise crack re your last line 😉

        1. FAKE GRIMLOCK


    3. Brad Lindenberg

      Take a look at – Our platform is an eCommerce platform without the storefront but enables you to sell from any offline medium, as well as within the Twitter stream.You can manage inventory, tax, shipping, payments etc, and once you’ve checked out once, every transaction becomes a 1-click buy, outside of the browser.

    4. fredwilson

      yup. you are exactly right. until commerce and social are in the same service, you have a suboptimal experience for the end user

      1. Nick Molnar

        As the composition of a stores customers shifts from Direct/Search traffic to Social, they’re going to get more amenable to integration. Bad conversion rates cost them the most. Basic economics says they’ll eventually cave; and when they do, existing referrers are in the best position to take advantage. That’s our thesis at Wantering.

  20. johndodds

    It’s only commercce if users pay.

    1. fredwilson


  21. ShanaC

    I have this open question:Is it shopping that is social whereas purchasing isn’t? Is social commerce “the perusing at the mall with no immediate intent to purchase” layer?If there is such a thing as peruse + share the way one would go with ones friends to the mall/soho as opposed to “I have this formal event coming up and I need a dress and must ask my friend what is going to look better on me”If so , where does social commerce fall in that funnel?

    1. fredwilson

      right. shopping is social. buying can be as well when you are buying from a real person, like what happens at Etsy. i often follow the sellers i buy from on Etsy.

  22. Guest

    In a future optimized for conversions to consumerism, all commerce will be integrated with social, discovery, deals, rewards, dynamic pricing, low-friction payments, etc. How optimal would it be if all consumers were like the 43-year-old woman who spends all her money buying virtual sheep on FarmVille?

  23. sethberman

    Based on this analysis, it seems that you are not bullish on Pinterest, which depends on off-Pinterest conversion to monetize. What about products like BazaarVoice that are not native to each eCommerce site, but integrate into the experiences?

    1. fredwilson

      i think Pinterest will have to build a buy button into their platform and get retailers to implement it and i think they will. i am very bullish on Pinterest. but it doesn’t convert well right now. it can and it will if they integrate commerce directly into their platform.

  24. Jim Ritchie

    As a social ecommerce startup we always have to be thinking about how we will beat I will be writing a blog entry on this, but I’ll share it here first.Our Top 10 Ways We Can Beat Amazon(with acknowledgement to Jason Goldberg, CEO of stuff they don’t. 99% of the products we sell are not on Amazon.2.Better product discovery and browsing. Amazon is a catalogue. We are a place to discover and learn. Amazon is the best place in the world to buy the stuff you know that you need. We are the place to discover amazing artisanal foods and tell their stories.3.Mobile. We’re building towards a world where mobile dominates. No onehas yet solved for that in a meaningful way.4.Social. Food is inherently social. We are just getting starting withshopping and sharing with friends.5.Create a deeply engaged network of users. Users should want to come to your site not just to transact, but to discover, learn and share. Sharing includes user generated content that goes beyond basic traditional user generated content such as ratings and reviews.6.Making markets. We are in the early stages of making a market for real artisanal foods. We’ve already created a platform that previously didn’t exist for artisanal food vendors.7.Gamification. Making it fun and engaging to keep your customers coming back again and again.8. Building a brand. Brands are emotional experiences not transactions. There are still many great opportunities to build long lasting e-commerce brands.9. Making it fun and emotional. That’s how offline shopping works. Who says online shopping has to be so drab and transactional? We’re making entire new experiences.10.Appeal to a higher cause. In our case a healthy food supply is important to not only your personal health, but the health of our society. We have created a philanthropic aspect of our company through our “Karma Kauses” and 1-1-1 giving back.

    1. Donna Brewington White

      This sounds really interesting. But one thing I will say is that sometimes I want my online shopping to be drab and transactional. I want to choose when to engage and when to just get stuff done. But as someone with a deep appreciation for “social” I especially appreciate your objectives.

      1. PhilipSugar

        I think his point number 1 shows he has ceded the transactional market to Amazon. (which is ok). I agree when I want to buy an SSD or something like that just give me Amazon.

        1. Donna Brewington White

          I’m no expert but seems like he’s thought of everything. Impressive.

    2. fredwilson

      it sounds like your users can buy directly on your site. if that is the case, then i think you are doing it right

      1. Jim Ritchie

        We hope so and we are just getting started, much more to come.

    3. Patrick Dugan

      Sounds like we’re competing! 😉

  25. jason wright

    is ‘layer’ the right word, and layering the right structure?

  26. Brandon Burns

    “When a system converts north of 5% of users visits to a transaction, it is working extremely well for the end user. When a system converts 0.1% of user visits to a transaction, it doesn’t work as well for the end user.”Where are you getting the 5% to 0.1% spectrum? Are these VC accepted metrics? Is this for overall traffic, or from marketing and CRM initiatives only? E-commerce selling physical goods only, or e-goods like e-cards?In agency world, we usually adjust conversion benchmarks depending on a whole host of variables, with the client’s historical performance being #1. I’m curious to see where / how you’re getting your numbers. Is there a study or link to reference?



    2. fredwilson

      i just pulled them out of my head for the purposes of explaining my logic.

  27. Jochen

    whenever I read “conversion” in the context of “social”, I get skeptical. eCommerce is less and less about conversion and more and more about customer loyalty and retention. That’s where a “social layer”, as you call it, can really help

    1. fredwilson


      1. Social Annex - Al

        However, most traditional online retailers don’t yet think this way. We speak to many of them every week for our product see our site for context and still the conversation is around “immediate ROI” from social vs. long term customer loyalty from social. I am saying this on the basis of over 500 conversations with online retailers over the past 6 months. See our site and our products –… for context. The reality is that we expect that over the next year or two online retailers will start to understand the long term benefits of social (build loyalty, social data, product discovery) and we have built that into our product but the immediate concern of social ROI still has to be addressed with almost every traditional eCommerce site today based on our experience with every one of them.

  28. andyidsinga

    birchbox seems like a really interesting take on commerce and “anticpation of the experience” ..with a social connection

    1. Alexander Ainslie (@AAinslie)

      birchbox = sampling 2.0

      1. andyidsinga

        right on

    2. fredwilson

      i mentioned birchbox on stage in the context of this discussion. i agree.

      1. andyidsinga

        oh – I think I missed that. The birchbox co-founder was speaking at the GigaOm roadmap mini-conf last monday. was interesting. They mentioned doing something for men and that made me really curious.

  29. GramGoods

    Hey Fred – Great post. We have data that suggest your philosophy could be wrong :) is a platform for shopping on top of Instagram. (the model you don’t like)We had a merchant go live last night and post their first product to Instagram.Here was the results:- 2,636 Instagram followers- 116 Instagram likes on post of product to Instagram**43 Unique visitors clicked to product page**2 Purchases = 5% conversion from unique visitors to purchasers



      1. GramGoods

        For sure. We are brand new…hope to have lot’s of great data down the road.

    2. Richard

      Counfounding effects are always ignored in this type of analysis. The issue is would they have purchased without the route?

      1. GramGoods

        Maybe they would go to a retail store or shop from the computer at a later time…..Our thought is people just want to easily purchase the products they like on Instagram right from their phone.

    3. Chris Teso

      With all due respect, it appears GramGoods is attention rerouting, not in-stream high value transactions. It’s a shopping experience that takes a user outside of Instagram to a traditional landing and checkout experience. You’re doing social advertising, not commerce.

      1. GramGoods

        Hi Chris….What you “name it” is just semantics. At the end of the day we are driving a user who sees an Instagram photo of a product they like to a purchase right from their phone.It’s simple, streamlined and effective. The customers don’t have to pre sign up for our service to purchase.Merchants just want to drive sales…so we could call it “revenue”

        1. Chris Teso

          I’m not interpreting (semantics) what you’re doing. Nor am I questioning it’s effectiveness. It may be working quite well. It’s a fact that you’re using Instagram as an advertising mechanism that leads to a storefront. I stated that this is social advertising vs. social commerce. I don’t think you’d be proving Fred wrong as you’re experience is neither a social platform with commerce built in, nor is it a commerce platform with a social layer. It’s traditional advertising.

          1. GramGoods

            Interesting. So would you consider the attached image “Social Commerce” — The consumer is buying from within the Pinterest app.

      2. fredwilson

        yup, see my reply to gramgoods above. what matters is what happens to all the folks who see the opportunity in the social platform. i think the chirpify model is the right model. i just worry that the big social platforms will knock it off and knock third party transaction services off their platforms. past history suggests that to me and nothing else.

    4. fredwilson

      the conversion rate is the one from number of people who saw the item on instagram to the number who purchased. do you know what that was? the point i am making is that the conversion from seeing it in instagram to buying it somewhere else is going to be too low to be interesting

  30. Roberto Angarano

    After reading the post two things came to mind: Starbucks and bars. In essence they sell you the product coffee or drink, but as a collateral you get the social experience.Roughly 60 percent of people that go to Starbucks go to socialize. Its such a simple concept applied to the internet

    1. Balu Chandrasekaran

      Yep, very true.

    2. Donna Brewington White

      Today after leaving a Starbucks I realized that I had not just bought a latte, but that I had also had an “experience” — not social in terms of going there with friends. A certain environment had been created based on the music, the decor, the service, the product offerings and the clientele. The quality of what I experienced and the brand integrity were reminiscent of Disneyland. I also noticed that this Starbucks will soon offer an evening menu including wine and beer (not sure if this is only at select Starbucks). I think they might pull this off.One aspect of social is the experience created. This experience can be a platform for commerce. The award winning game Cranium was launched on top of the Starbucks experience in the late 90s and initially retailed exclusively through Starbucks.This is all anecdotal but I think it supports what you shared.

    3. fredwilson

      exactly. i wrote about this phenomenon a while ago, in the context of Etsy…

  31. Jay Melone

    Social commerce was (probably) even implemented well back when Fred Flintstone asked Barney where he got his shiny new stone wheel. Weird how centuries-old knowledge is turning on new lightbulbs on the web.

  32. Moe Ibrahim

    Sorry if this post is a duplicate – my last post disappeared. At, we’ve built social natively into our hotel booking platform via an Identities system that enables hotels, people and travel agents to interact with each other, interchangeably, in both a social and transactional manner. By doing so, hotels can customize SocialRates to markets, channels within markets, segments within channels, further filtered by gender, age, etc and even specific to an individual based on spending patterns. We are also introducing a rewards system where users (both people and business entities) benefit financially from the bookings of others they have invited or even their non-transaction social activities. All will be shareable. New revenue streams for business entities (and regular travelers) are possible. Travel Agents become relevant again. ROI of marketing efforts can be measured. By building social features natively into our commerce platform, dynamic rates, which will be a function of a traveler’s total spend and hence directly impact hotel profitability, will replace the group buying concepts that today often hurt business profitability. You have to link the two to do some really special things. But it’s hard work, especially in travel, and we are building the plumbing, from the perspective of a business entity, to improve business profitability, remove the middle men, and introduce pricing to consumers more favorable than anything possible today.

    1. ShanaC

      it is a post where a lot of people are posting links and causing a backend “accidentally get caught in spam” problem. Sorry.I also don’t think of your model as highly social. If anything it is highly targeted, almost to the point of creepy. Do I get to pay less if I use a different computer, for example? What signals are being used against me for finding the best price?

      1. Moe Ibrahim

        A platform that enables all buyers and sellers to interact with one another in both a social and transactional manner, and more importantly serves as the settlement platform, is by definition social commerce. Next, enabling sellers to customize rates and/or packages to maximize profit, and make them available only for those consumers that find it relevant, or better yet, request it, is not creepy, but functional and even desperately needed in this age of spam deal sites. Third, sellers rewarding travelers for bookings and referrals, and the platform rewarding sellers for porting their customer base are examples of social rewards, which are inherent to a successful social commerce experience. Independent social commerce sites need to be relevant to the very first user and then need to turn viral – a properly structured rate/referral and rewards system has the potential to make this happen. Finally, online travel agent’s use of Guerilla pay-per-click, share shifting strategies and fictitious pricing techniques are creepy. A model where consumers are assured they are always getting the best available rate, or a rate customized for them due to superior spending habits is not creepy – it’s called recognition. Moreover, by linking the fulfillment system to a social network, consumers can’t game rates by switching computers or accessing different URLs. Travel is unique because it is inherently social and many of the nuances specific to this industry make it ideal for a true social commerce platform. Hotels have practiced these techniques off-line for decades, ie, customizing rates to certain sub-segments of different markets. However, the proliferation of online travel agencies has made the online rate ubiquitous, often destroying a hotel’s pricing structure across markets and channels, dramatically affecting margins. Platforms like ours enable hotels to do business the way they always have, while reducing dependence on middle men. Ultimately, the consumer wins as we have the potential to reduce a hotel’s distribution costs by 15-20%. I don’t know about you, but I’d rather see these in the form of reduced rates and rewards versus the inflated profits of online travel agencies. While my reply is specific to travel, successful social commerce platforms will reduce distribution costs for suppliers and reward buyers in the form of discounts, rewards or maybe in experience, friendships and/or access to authentic information.

      2. Moe Ibrahim

        A platform that allows buyers and sellers to interact both socially and transactionally is by definition social commerce – so I disagree with your statement. It is social by design throughout. Moreover, we’re introducing incentives to reward bookings, referrals and even reward sellers for porting over their user base. Your level of socializing depends on your preference settings – there’s nothing creepy. You can also monetize your social network in novel ways. Customizing rates/packages based on transactional history/demographics/targeted lists improves margins for sellers and enhances the experience and improves trust for buyers. Integrating the fulfillment system with the social network means buyers can’t game rates simply by switching computers or changing to country specific URLs.

  33. Balu Chandrasekaran

    This is fascinating stuff. Would folks agree that social being built in natively into a commerce platform is even more suited to online-offline platforms (e.g. Groupon) where the end user experience (i.e. eating out) may be inherently social? As opposed to pure e-commerce (e.g. Etsy) where I may interact with others before and after my purchase, but the act of buying and experiencing the product/service is not social.

    1. fredwilson

      not sure about that

  34. Abdallah Al-Hakim

    Yes make it native and seamless. I don’t think people’s frame of mind on the different sites is fully comprehended but the key is to make the experience feel native and with low inhibition.

  35. nilb

    How would you consider airbnb? (They are not commerce site per se, but their social layer is deep and inherent in the product). Their social (and maybe a huge part of their product and technology) is about validation of the user and social is a great way doing so…

    1. fredwilson

      they are a marketplace which is even better than an e-commerce site in my opinion. and they are doing an awesome job of social commerce. they key is they provide the transaction opportunity to the end user

  36. mironlulic

    Natively building a social layer into the commerce platform is exactly the strategy we are pursuing with If Twitter is where people go to have a conversation with the people the influence them, Swagsy is where they will go to shop with them. At least that’s what we hope. Of course, scaling a social layer is hard – especially while balancing the operations demands of an e-commerce store. So we are leveraging the undeniable power of celebrity as our main user acquisition channel and a means for increasing conversion rates.

    1. fredwilson

      i like your approach

  37. Tom Klein

    What’s missing in the social commerce conversation is the notion of social merchandising.I see social merchandising as the integration of a social layer into an ecommerce platform to display products in such as way (on site, in social media, in-store, email) as to capture the attention of shoppers and entice them to buy. It’s also a way to create a more social connection between shoppers and brands, as well as between shoppers and sales people.This is a very different notion from consumer social platforms with visual bookmarks, scrapbooks, or conversations. In Mary Meeker parlance, we’ll go with some version of re-imagining the mannequin, the shop window, and one to one interactions with sales people.The challenge for most retailers is that this social layer doesn’t come “out of the box” with ecommerce platforms. Ecommerce platforms can’t evolve very quickly because they’re essentially enterprise systems. IBM releases a major upgrade to Websphere Commerce every three years . . .Major social platforms (Facebook, Twitter, Pinterest, etc.) are ad networks. While they’re great and engaging for consumers, it’s not a smart idea for a brand or a retailer to push all customer interactions into a third party – especially one that will turn around and charge the brand in the future for access to its own customers.Maybe the social merchandising idea is just the push side of the social layer you mention. Depending on the category, merchandising can be much more important. Think about apparel, furniture, home interiors – versus office products. Sometimes self-service is great, sometimes it’s not.Conversion has to be there – I agree. But, we can’t forget the importance of traffic and loyalty. Brands and retailers need the merchandising tools to create new content, use that content to drive conversion on-site, also publish that content off-site to build traffic from the social platforms, and also use the same to support loyalty. Whew – that’s a lot.The social interactions, between shoppers and friends, shoppers and sales people, happen at every step along the way.

    1. fredwilson

      great comment

  38. RichardF

    I liken this to your comment in the same interview about cross media transacting. When I am ready to transact, once I have decided I am ready to buy I will go to amazon and buy it.What I want is the ability to add something to a wish/buy list from any platform to my preferred transaction agent. Unless Twitter or Facebook think they can compete with Amazon, which they cannot imo because its not in their dna

    1. fredwilson

      i think they can tightly integrate with amazon and i think they should

    2. Donna Brewington White

      Great idea!

    1. fredwilson

      i totally agree with him. i believe twitter, facebook, instagram (facebook), pinterest, etc will all do this. but i think they will do it with their own proprietary services not via third parties

  39. takingpitches

    Fred, what retailers are you referring to when you have seen social effectively built into the e-commerce platform?It’s interesting that the most successful e-commerce platform – Amazon – is one with hardly any social features. Its two subsidiaries that have the most connection with its customers – Diapers and Zappos – are built on service, and in the case of Diapers, a real understanding and built-in empathy for their customers.To the extent, social is the recommendation of who we know or we respect in some way — in particular, getting into Facebook or Twitter Feeds, I haven’t seen that work at all, at least in my circles.Kevin Ryan said late last year: [Facebook is] an extraordinary place where people go and connect with their friends to date, they are not using it really to make concrete purchasing decisions and they are certainly not purchasing things on Facebook…Consumers today are not looking at Facebook psychologically as a place where you go to buy things.”I tend to agree with Kevin.

    1. takingpitches

      The one place where I think getting into Facebook and Twitter Feeds matters is with experiences (restaurants, other experiences like sidetours) or unique design-centric products like

      1. fredwilson

        Fab is another commerce platform i mentioned on stage

    2. takingpitches

      In contrast to getting into Feeds, I think curation, a la Pinterest works, although it may have to operate on a meta level (above a retailers). It has worked on my wife, in choosing how she wants our nursery to look for our upcoming babies, for me when trying to figure out what i may want to cook for guests, and for my friends in figuring out wedding themes.Conversion may not be the right metric there, since a social service like Pinterest is going to have a much wider reach than the social service tied to a particular e-retailer. So you can at least in theory have a much lower conversion, but overall be more effective because you are reaching more people.

    3. fredwilson

      on stage at ad:tech i talked about Etsy and how it has become a lot more social in the past few years. i think they can do a lot more to make Etsy even more social, but when you use their activity feed, you get a sense of what i am talking about

      1. nicholerobertson

        I’ve been an etsy seller since 2008 and am approaching 10,000 sales. The etsy social components have, without a doubt, increased sales and brand awareness. So much so, that I drive my blog readers to the etsy shop rather than my own e-commerce site. I recently spoke about this at the Martha Stewart American Made Etsy panel, and hope I was able to convince other sellers to take advantage of circles, favorites and treasuries as a means to increase views. There are a surprising number of sellers who don’t see the point.On one hand, I see the potential downside to running a large business on etsy: sharecropping, lack of control over design, exit points from your shop, and general sense from the press that etsy is for small/new businesses only, (or those unwilling to “take the next step”).Because of those factors, as my sales increased and the press picked up, I figured I would “outgrow” etsy and move on to my own domain. But the built-in traffic is key (I learned this the hard way). People come to etsy to shop (frame of reference) and they love to browse. I would have to spend thousands of dollars on marketing and advertising to be able to reach as many people.There are lots of incentives for larger, popular shops to stay on etsy. Having said that, I do fear my business isn’t taken as seriously by less informed members of the press and my retail partners. For this reason, I still maintain my own domain.But I am a big believer in social commerce, and I am extremely interested in seeing what etsy does next.

        1. fredwilson

          can you do both? operate an etsy shop and have your own shop too?i have been encouraging etsy to make that easier for sellers to do

          1. nicholerobertson

            I do have my own domain, but I drive most traffic to my etsy site because it converts much better.

          2. fredwilson

            right, i understand that. which is sort of the point of this post. but what if your etsy store could run on etsy and your own domain? would that be useful?

          3. nicholerobertson

            I think if etsy provided back end solutions that made it easy for users to integrate their etsy shop it would be extremely successful.Especially if you could still somehow benefit from the social components (clicks, favorites, activity feed). Those seemingly figure into etsy’s search algorithm, which is becoming increasingly important.

          4. fredwilson

            Thanks. I love talking to Etsy sellers to learn what is most helpful to them

          5. jhaime

            You should check out ‘tictail’ and has something like shopify ever been a part of how you approached your marketing thinking online? Simply curious.

  40. David S

    When will disqus work well on mobile. Fonts are too small and input is too slow on iPhones. Speaking of friction…

    1. fredwilson

      great question. i think this is the biggest UI thing they need to tackle.

      1. David S

        It wouldn’t be a big deal except your site is practically the disqus discussion so it’s pretty unusable on the phone.

      2. Donna Brewington White

        They’ve done so many great things but this need is huge. I am accessing AVC via mobile more than ever before and commenting is a pain. I’ve been thinking about commenting in a memo app and then cutting and pasting into the Disqus comment box. This is so out of my league but it’s almost as though they need an entirely different commenting interface for mobile. I can’t imagine how complex this problem must be — or they would have fixed it by now.

  41. Pete Griffiths

    The point about friction is critical. I believe this to be related to the problem of choice. It is well documented that if you offer a potential buyer too many options you can paralyse him/her and no sale is made. One of the unintended benefits of early mobile ecommerce was that it restricted choice!

  42. Carl Rahn Griffith

    Love raw – gut/emotion – analytics. All too easy to lose, nowadays.

  43. thomasknoll

    I have great friends (umbabox) and advisors ( in this space, and have built community tools on top of e-commerce (zappos) so this is an issue close to my heart. For me it all comes down to this dichotomy:“How can I exploit a social network?” vs. “How can I help my customers provide strong personal referrals to trusted friends and family members?”

  44. Alex Murphy

    I like this topic Fred and thought your statement was interesting at AdTech.The challenge here is trying to frame the discussion in two forms: Social Commerce vs Commerce Social.The reality is that there are many forms of commerce and many forms of social.”Social” (as we think of it today on the web & mobile) is really more about the form of the newsfeed / real time delivery of content. Email, chat rooms, and personal pages existed well in advance of Twitter Facebook et al. Its the real time nature of information flow and the ease of sharing interesting pages that has changed the nature of interacting with content. This married with peer to peer communication across the platform and you have the current social phenom.Commerce is very much a social (lowercase s) activity. The process of buying starts with the realization of a need, then research, then evaluate, then buy. Each of those 4 steps often includes interaction with other people as consumers socialize the level of need, ideas on the research, feedback on the evaluation, and confirmation of their decision in what they bought.So, what is social commerce? I think it is applying the real time delivery of content, allowing for the peer to peer communication, that helps people through each of the phases of buying from need to discovery to purchase. I don’t think that it is something that is layered on top of a social media company or on an ecommerce company but rather is a new platform.

    1. fredwilson

      i disagree

  45. David Chevalier

    Perhaps conversion rates are lower because social commerce is earlier in the sales cycle and buyers are less qualified than in e-commerce. Focus too much on conversion rates an you can end up in a retail store doing inside sales because face-to-face selling offers such a nice conversion rate. Isn’t it important to participate in a discussion with your target audience as early in the buying process as possible is spite of the changing frictions?

    1. fredwilson

      yes, you can do that by creating seamless integrations with the large social platforms as i mentioned in my post

  46. iamronen

    Fred it seems to me that you are reading into this something which may not necessarily be true but rather serves your motivations and/or world view.Friction is not in itself a good or bad thing. It is a quality that can be functional or dysfunctional depending on context. Disruptive technologies, which you often mention with enthusiasm, are a friction-based mechanism. If you are being disrupted then that friction is a negative thing, if you are benefiting from it then it is a positive thing.”Conversion rates are critical. They tell you what systems perform best for the end user. When a system converts north of 5% of users visits to a transaction, it is working extremely well for the end user. When a system converts 0.1% of user visits to a transaction, it doesn’t work as well for the end user.”That statement is not necessarily true. If you are a seller then surely reduced friction and better conversion rates are good for you. Some consumers may also benefit from reduced friction. However some consumers may actually be protected by friction – maybe they don’t really need what they are considering buying? Maybe they are being pressed into it by a finely tuned and aggressive sales effort? If you really want/need something you are going to get over the friction and find a way to get it.Society is protected from a social vice like drugs by the frictions an individual has to go through to get it. In my world view rampant consumerism is a social vice and making it easier is not necessarily a good thing.

    1. fredwilson

      i understand your point, but what i am talking about is the user experience. when i see something i want to buy and it takes ten steps to buy it and massive frustration, that is never a good thing

      1. Dave W Baldwin

        “when i see something i want to buy and it takes ten steps to buy it and massive frustration, that is never a good thing”… should be the opening line.

  47. Donna Brewington White

    Some commenters have referenced the value of social for discovery. Speaking of which, I have discovered numerous products right here at AVC.

    1. fredwilson

      social can be great for discovery, but what you want to be in that transaction is the retailer not the social platform. a retailer who plugs deeply into social platforms is what you want to be. that’s the only point i was making in my post

      1. leigh

        I think everyone needs to start to see social as an evolution in the way people communicate. Think about their business across everything and figure out where social has a role. Commerce is one piece. Even putting reviews tied to people’s social profiles could be considered social commerce. All depends how broadly you want to look at it (and for me it’s never broadly enough)

  48. Tom Labus

    It’s always best to be as close to the customer as possible. As the consumer you don’t need multiple sales staff (from the manufacturer, from the store) attempting to help you pay for your purchase.

  49. Abedul-azez Kasaji

    Hi Fred,I have started developing a social commerce platform for the MENA region a few months ago called Mallna, and I really want to thank you for sharing this piece , it’s really something I should keep in mind ,The best business model you can have is transitional ; where you get paid instantly , but with my humble opinion this doesn’t defer much from the traditional offline business models , we are in a time where we need to discover new ways to make money while it’s becoming much harder for everyoneto do so.The other thing I experienced when I was thinking of while building Mallna (or any social commerce platform) I thought of the white labeling option but I realized that the main value proposition for Mallna that it’s open and helps people to discover, compare and ask friends directly … I wouldn’t imagine any ecommerce platform to build a product that would lead users to land on a competitor’s online store.It is debatable , and I’m being very objective here but I think the world now is working in a different way where everything is becoming social and connected to people rather than algorithms , find a spot where you can combine both and you’ll have a sustainable business.

    1. fredwilson

      what i would suggest is you become a retailer or a marketplace right at the start and don’t just offer a social experience

  50. Carl Rahn Griffith

    Amazon seems to be missing a trick here?

  51. Jwalant Patel

    For CTR, We, at, are displaying products from different ecommerce sites based on users’ activities on social networking sites. Benefit is, User can see products what they might like and also for their friends based on their interests which will give high CTR.User can also discuss about different products related to different categories. We are building few unique technologies to make a dent in social discovery platforms.

  52. Dave W Baldwin

    Good post. I saw an article a couple weeks back regarding Amazon and the troubles small businesses are having where Amazon is using their store but directing traffic to Amazon store/outlet. These businesses have cancelled out of Amazon but it still keeps going….Just curious if anyone knows of this.

  53. Mark Kudlac

    At we see display ads as the stream. They contain enough information to be content and can be the sole building block for mobile applications.

  54. Dennis Carpenter

    I gotta believe that Social Media will perfect this issue, not wanting users to leave their site.

  55. Dave W Baldwin

    Good post. I think an earlier post sent regarding small businesses having trouble with Amazon and if anyone has heard of this didn’t make it… so question stands.Remember there is more than one level of marketing. The bridging of Social/Commerce may include seamless layers and it is a matter of understanding where one layer is best suited to “image” vs. direct transfer of goods/$$$. Then you aren’t trying to grab the consumer/referrer by the throat to make a pitch, but allow the natural progression take place.

  56. Patrick Dugan

    We’ve been building a simulation game about ecological farming to promote sales for real farmers, we just pivoted yesterday towards an eCommerce-first approach having realized that our social game would require tremendous resources just to filter through 10-20% of the potential market. Now building on the interactive aspects that only support conversion and will reincorporate game elements that make the cut later, as a force multiplier for existing customers/visitors to retain and invite.So yeah, kind of had to learn this lesson the hard way.

  57. Dan Sweet

    If the primary goal is transactions, remember that you get a VERY small number of clicks. Make every one count until you’ve closed the sale.

  58. Peter G

    For the right products social discovery can have very high sales conversion ratios, particularly with niche products that can go viral within communities. Generally though, we also find that conversion within “social” platforms is lower, but I don’t think this is due to a suboptimal experience. Our assessment is that if someone is looking at a social feed or browsing blogs they are not necessarily in the mind to make a purchase. The conversion is naturally lower than for visitors to a review site or somewhere that feels more like a marketplace. The challenge within social platforms is to not only offer an opportunity to transact but also offer an opportunity for a user to show interest, so the product can be offered later when the user is in the mindset to pull out a credit card. As such we measure engagement conversion as well as sales conversion.

  59. Dror Engel

    “When users start in a social system that is divorced from the e-commerce platform, I believe the conversion rates are significantly lower, often by an order of magnitude or more.” – did someone say Pinterest?

    1. Via Duende

      Dror do you know what Pinterest conversions look like? I wanted to buy as a result of discovery on Pinterest on several occasions and found it difficult.

      1. leigh

        Pinterest is a great search and desire engine.

  60. PhilipSugar

    This is a great post which is only outpaced by the really good comments, which you predicted.One thing I’ve always thought about is when retailers want to “game” social and get Facebook likes etc.Is what you are saying is “don’t be Facebook’s bitch?” I think that was a quote from you, build it yourself into your native platform?

  61. jhaime

    The problem is burnout… take Facebook’s open graph as an example which I did a post on (http://myaulter.wordpress.c…. So many guys like RunKeeper and Fab witnessing growth spurts via social sharing but it becomes a feeding frenzy. I’m already seriously contemplating deactivating my Facebook when all I see littered everywhere is ads, sponsored likes and a constant stream of what people are buying, listening too, reading etc… I don’t think it has too much to do with sharing into facebook or twitter but building out a community (which I think is what Fred is meaning here) as a layer to evoke discussion and exploration. Etsy doesn’t even really have that, neither does Fab, they’re reliant on objects and actions for social leverage and that’s a painful road for growth on behalf of sellers and the ecosystem. There needs to be a shift toward self-sustanied communities, similar to guys like Quora and Branch whereby the community dictates the value of the ecosystem and that’s where browsers remain for all their social needs. Then there are guys like Lyst and Polyvore, heavily reliant on affiliate linking to break even and trade customer acquisition, there’s nothing inherent about it, broken model.

    1. leigh

      We recently did a big brand program and had Facebook Actions turned on. OMG. What a mistake. Way too much streamed content that actually inhibited the overall program. Short term gain (impressions) for overall program fail (the network not wanting to clog up their friends feeds with too much content). It also doesn’t let you turn parts of it on and parts off = bad UX.Would never use it again.

  62. Mark

    I absolutely agree. These are not synergistic experiences. Users are there for a reason.That said, I think Facebook could really benefit from importing their graph to a completely seperate commerce app. The user behavior doesn’t have to overlap for the services to take advantage of the synergistic properties.Merge the data without merging the user-experience.

  63. Srini Raja

    Commerce/Business has always been social. We just didn’t call it ‘social’. In most things we buy, including our groceries, we’ve been influenced by somebody at some point.

  64. Youssef Rahoui

    Yes, agreed. Perhaps it could also be the other way around: a community of people passionate about sthg with ecommerce capabilities they can take advantage (buy or sell the stuff you’re passionate about).

  65. Mark Essel

    Arnold has shared/inspired years of discussion on this topic. How about a series on social commerce with Mr. Waldstein as a guest contributor?

    1. fredwilson

      great idea

    2. William Mougayar



    Fred:Back at the end of 2010 my partner and I started analyzing User Experience in the existing Social Network platforms and weighing it against the User Experience in the e-commerce sphere. At that time WE still were not fully sure what Social Commerce was.WE realized that FB [which was and is the biggest] was great for personal socializing but horrible for selling products. I’ll explain how: WE didn’t find a single FB company page that directly sold products on FB. WE found some FB pages with shopping cart items listed but when you clicked on them, you’d be taken out of FB to the actual web site that the e-commerce software resided on. While FB was providing a great Social User Experience, F-commerce was providing too many roadblocks which were not conducive to making sales [anti-conversion]. This is exactly what you say not to do in your article.When WE looked at Etsy [around the beginning of 2011] WE noticed they had a great niche platform for craft-makers but also had limitations. A. They were attracting mostly women and few men which limited their reach and revenue. B. They had almost no social elements in the beginning. C. They charged a lot of money to small producers for membership, listings, transaction fees, etc., etc. – Again, this was a great platform but expensive for those who produce their products from home/garage.Pinterest was and still is a great and viral digital scrap book platform with amazing potential in Social Commerce but still has limitations.WE found that with Ebay and Amazon the fees were high and they had no social media components.WE researched the e-commerce software providers and found they all charged membership or subscription fees or licensing fees, and almost always listing fees and transaction fees.WE concluded that if WE combined Social Networking [specifically for businesses] with e-commerce and educated companies about how they could Co-operate and Compete simultaneously [COOPETITION] then it WE would essentially be creating a B2B2C Social Commerce Network. This was when the idea for AgooBiz // The Social Commerce Network was born. Since November 2011, WE’ve been providing social media tools and an e-commerce solution marketed to small manufacturers, distributors, wholesalers, & retailers.Fred, you wrote that during a sales process, roadblocks to the sale must be removed in order to smooth the process and prevent the consumer from changing her/his mind. WE created a social network for businesses to collaborate and transact in the same place. In order to make it affordable and create a competitive advantage for us, the new-comer, we decided not to charge any subscription fees for membership, nor for listing products. WE placed no limitations on the number of products listed and no limitations on length of time for each listing. We only charge a nominal percent of sale for completed transactions. It’s common sense: why should WE take money from a small business before they’ve made any money through our platform?In conclusion, Social Commerce can only work when there’s a seamless merger of social networking and e-commerce. This is a truly great article Fred! It struck a chord with me and my team and made me feel like you were sitting in on our brainstorm sessions 1.5 years ago. :-)Best Regards,Steve KavetskyCo-Founder/Pres.AgooBiz // The Social Commerce Network”WE work greater than me”

  67. Francois Gaouette

    Hi Fred,I have a completely different view of what is social commerce and I am building a business around that vision. It is called Ziliko and our tag line is real social commerce. Instead of generating commerce from social media, we enabled social organizations with a specialize e-commerce platform. What is a social organization? For us, it is an organization that interact with people such as a soccer club, a chamber of commerce, a non profit organization, a professional association, etc. All of those social organizations have one thing in common, their participants or members care a lot about them. In addition, they tend to be local, not visible on the wed and are all in needs of additional revenues. We are proposing to them an e-commerce platform very similar to amazon but tell their unique product which are activities, memberships, events, classes, booking, etc…and leverage the relations with their participants and members by selling them other goods or services. As an example, a soccer club with 500 players has at least a very strong relationship with 2 to 3 thousands people when you consider friends and family. It is pretty obvious that if the club can become an e-commerce merchant and start selling Tv, iphone, shoes, etc…to those people it will be very successful. People will prefer to encourage the club versus the bestbuy around the corner.


      Sounds like a very cool idea for social organizations! Wish you guys continued success! WE’ll be sure to visit.

  68. Marc Phillips

    Hi Fred,I agree too. Social Friction leads to lower transactions/conversions. Social commerce where users have to transact inside Facebook is not going to work. I point to F-Commerce technologies who don’t understand this friction ratio you talk of.I work at and we see this across our 100 merchants who have deployed our product catalog app onto their facebook pages. Our sole focus is to minimize the friction in discovering of product images on Facebook, whilst enabling sharing yet embedding these merchants affiliate links into the images so they can monetize their social traffic back on their websites – where users are comfortable transacting. Social media is not a platform for transactions yet and I doubt ever will be. It’s window shopping at the most. I believe you have to get people to touch the window. which is just to click on images on Facebook. Don’t expect them to do anymore.