The below article was published in Qatar Today - Oct 2011 issue. The article highlights the way Social Media has redefined itself and a financial perspective to it.
Social Commerce drives Online Business
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver- Ayn Rand
Human beings always like to be in control of things. However, in today’s world humans are being controlled by money. Internet and Social Media are no exceptions to the greenback.
Last week, I was looking for a SLR camera to gift someone that would be easy to operate. While I would never have taken the time to email or call all my friends to ask which SLRs they liked, I felt updating my status on Facebook and asking for help would be a good choice. Guess what within an hour, a stream of comments and suggestions started to list on my Facebook wall. This helped me to take a decision to buy the SLR.
Social commerce is an emerging buzzword that has caught the attention of many including people who called Social Media a fad. It is an area which may redefine the way people engage with social media, and how will they share information. It may also change the way we share information and content with peers.
As we share information and converse with people on Social Media site, the level of trust has increased, so has our comfort level to perform financial transactions. At present, like any other new trends, social commerce is surrounded by uncertainty on issues like
• how will people use the platform to make payments,
• which type of devices will be used to share content,
• how will the brands capitalize on this opportunity
Currently, major developments are taking place on the Facebook platform, as brands want to engage 750 million active users, and develop a platform to purchase products and facilitate payments. This development has been given a new name called F-Commerce
Buddy Media, a Facebook marketing company gives us examples of how successful F-Commerce is: -
• Groupon made 11 million dollars in one day on a GAP promotion
• Pampers – a baby care website, sold 1000 diapers in 1 hour on its Facebook store.
• Ticket Fly – 3.25 average sales generated through Facebook shares.
“Share” (on Facebook) drives Sales; more the people share and recommend better chances of increase in sales.
According to Buddy Media: -
• The predicted revenue for the social commerce market in 2015 will be over $30 billion.
• 90% of all purchase decisions are subject to influence
• 67% spend more online after recommendations
Coca Cola has also got a transaction page set up on Facebook, which enables a fan to purchase branded merchandise directly on the page and make payments.
Take a look at where have Venture Capitalists invested their money in 2011 to ensure maximum returns.
- Groupon (group-buy) $950m
- StoreEnvy (social marketplace) $1.5m
- PlumDistrict (group-buy) $8.5m
- ShopSocial (social shopping/rewards) $1.2m
- Snapdeal (group-buy) $12m
- VillageVines (flash-sales club) $3m
- Baynote (ratings, reviews and recommendations) $13m
- Pose (social shopping/rewards) $1.6m
- Vitrue (Facebook commerce) $17m
All the above sites are closely related to the Share and Buy phenomenon. Your peers recommend a product or a service which may encourage you to buy the same.
Google has also taken a plunge in Social Commerce and is working to commercialize its homepage. This would help balance the competition, as both the giants’ battle for the market share.
The other side to the F-Commerce is the privacy issue, which Facebook has been battling for a while. Some people may not want their social interactions and graphs to be monetized at all. Rather they could do their 'social commerce' on Amazon, or the actual online retail store.
Some brands may actually try to influence their products and services by writing fake reviews. However in the past many brands have been busted for artificially raising their rankings online.
According to techcrunch.com, PowerReviews, a company that provides customer review technology for retailers and e-commerce sites has raised $10 million in new funding this year. This investment brings PowerReview’s total venture funding to $37 million. It shows how powerful online reviews are and how many companies may try to control and get their hands on it.
The social media hype is good for giants like Coca-Cola and Pampers, as they can afford million dollars in advertising. However, the mom and pop stores need to spend significant time to crack a solution which gives them returns. Social Commerce drivers need to give affordable option to small and medium enterprises to break into this stream.
It’s great to see that we are starting to analyze online conversation using numbers which will highlight the results and effectiveness of social media.