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Social Commerce - Just a Fad or Here to Stay?

Of late, I see increasing articles and blogs on social commerce, fuelled by recent news items such as the Facebook IPO filing, the increasing user base of Google+, the growing popularity of Twitter, etc. This growing interest has re-kindled debate over the relevance of social commerce to online business.

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Of late, I see increasing articles and blogs on social commerce, fuelled by recent news items such as the Facebook IPO filing, the increasing user base of Google+, the growing popularity of Twitter, etc. This growing interest has re-kindled debate over the relevance of social commerce to online business.

One camp seems to be excited about the prospects of social commerce and how it can shape the future ecommerce space. For example, Booz & Company estimates social commerce market size to be of USD 30 Billion by 2015 (Source: www.booz.com).

However, there is another camp that sees social commerce as a fad, and questions its ability to drive sales and revenues. Adherents of this view include Sucharita Mulpuru of Forrester Research, who characterizes its commercial viability as being "....like trying to sell stuff to people while they're hanging out with their friends at the bar".

So, which side is to be believed? To me, the answer is quite simple - the true potential exists somewhere in-between. Before I justify that statement, however, there are a few important points to keep in mind:

* First, social commerce is a platform-independent global phenomenon.  Although it's true that Facebook, and more recently Twitter, Google+, etc., were instrumental in driving  the astounding growth of social networking (which is the foundation of social commerce) , fact remains they represent the means, not the end. The larger issue of the future of social commerce per se is quite separate from the success or failure of any specific platform.

* Second, social networking on global scale is indeed new, but there is ample precedent for concept itself in business. Decades old practices such as product user groups, consumer focus groups, bulletin boards, chat groups are all forms of social networks in some sense.  Companies have successfully used these forums for product research and design, test marketing, redressing consumer complaints, etc., for years. What has really changed now is advent of new global platforms which have fundamentally expanded the speed and scale with such activities can be carried out.

In the light of above, it's necessary to re-examine the revenue potential of social commerce from two different perspectives:

1. Direct revenue generated by businesses through exclusive pages and "shops" set-up on social platforms such as the Facebook. In this model, social commerce is considered as a distinct channel to business. People who question the revenue potential of social commerce often refer to this model and their assessment is based on both online businesses and platform providers today struggling to find how to convert social network dynamics into dollars or pounds.

2. Influenced Revenue refers to revenue generated by online businesses by seamlessly integrating the near-unlimited powers of social networks into their other channels of business like Mobile, Stores, Online, etc.

I believe future of social commerce lies more with influenced revenue than the direct model. It opens up plethora of opportunities for platform providers, intermediaries (companies that build innovative apps to help online businesses integrate with social platforms), as well online businesses. Such a mutually dependant eco-system would enable online businesses to harness near-unlimited power of social networks in a variety of ways.

To conclude, social commerce is here to stay and the key to success depends on how well online businesses are able to integrate their social strategies into their other channels of business to drive sales and how platform providers and intermediaries enable this seamless integration.

 

Comments

Nice one, Satish. I am not a major supporter of social media's influence on business performance or advertisement. I use social media only for keeping in touch with friends. I want to wait and watch how the Facebook venture works out.

Thanks KN for your comments. I appreciate your stance you are not a major supporter of social media's influence. However, knowingly or unknowingly individuals like you and me are building blocks of this network and its influence. Given the point you use social media platform to stay connected with friends mean you do share (possibly lots of) information about yourselves - your likes, interests, purchases, etc. amongst your friends. It is this wealth of information about "you", "your network of friends" and “their networks of friends” that companies are trying to leverage for targeted advertisements and offers. It is a complex and evolving network and as stated in my blog, companies need to think beyond just selling directly in a social platform to leveraging this social network to enhance their reach, influence, conversion and revenues.

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