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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.

#Web/Tech

Dispersion and Entropy In Social Media

On Monday, I trained it up to New Haven to meet a Yale professor named Dina Mayzlin and talk to her class. I thoroughly enjoyed talking to Dina's class as it allowed me to work on some new material in a comfortable setting. But the talk Dina and I had over breakfast before class was even more thought provoking.

Dina got her PhD at MIT's Sloan School a decade ago, before she started teach at Yale. Her thesis looked at TV shows being talked about in the social media of that time, newsgroups, IRC, Usenet, etc, etc.

What she and her colleagues found out was that volume (number of mentions) was not a good predictor of popularity. Volume was more of a trailing indicator than a leading indicator.

But Disperson, or what Dina calls Entropy, turned out to be a very reliable leading indicator of popularlity of a TV show. The wider and broader the discussion of the TV show went within online social media, the more likely the show was to become popular.

By coincidence, the material I am working on in my public talks right now is about the fragmentation of social media. And so as I talked about fragmentation with Dina's Yale class, I started to weave her work, which was still rattling around in my brain, into my fragmentation thesis.

I am totally convinced that the world of social media is not consolidating around one "winner takes all" social platform. Instead, the world of social media is fragmenting into dozens of social platforms that are best of breed for a certain kind of social engagement. If you are building a social media strategy today, you absolutely need to address Facebook, YouTube, Twitter, and Tumblr. And you should also consider Foursquare, Instagram, Pinterest and Path. If you are in the music business, you need to consider SoundCloud. If you are in the book business, you need to consider Wattpad. If you are in the TV business, you need to conside GetGlue. And so on and so forth. Many of the companies I just mentioned, but not all of them sadly, are USV portfolio companies.

That's the thesis I spent thirty minutes on in front of the Yale class. But near the end of the talk to Dina's class, it occured to me that disperson/entropy can be gained by engaging on multiple social platforms. The number of likes on Facebook or tweets on Twitter is volume and is likely to be a trailing indicator of popularity. But if you track the essential social gestures across the fragmenting landscape of social platforms, likes, tweets, tumbls, checkins, pins, etc, then you get a measure of dispersion that may well be a leading indicator of popularity or the slope of the popularity curve.

That's the theory anyway. I'll leave the research to Dina and others. I hope someone will run the numbers to see if it works.

#Web/Tech