Consumer Psychology for a Digital Age

Speed Summary | Wired Feb 2011 Cover Story on Social Commerce

So next month’s (Feb 2011) Wired magazine (UK edition) has just dropped, with a cover story on social commerce, by editor David Rowan and editorial assistant Tom Cheshire.

The cover text- “What are you selling? Big Brands want to cash in on your Facebook friends: Ecommerce is over – Long live social commerce” gives you a flavor of what to expect.

The article is a well-written executive briefing of the social commerce space, peppered with smart quotes and buzz-worthy data-points (summarised below); the sort of content agencies will want to hand out to clients, entrepreneurs to VCs and marketers to budget holders.

We recommend getting your hands on a copy; currently it’s languishing in dead tree media only – no iPad or web yet.  But here’s our annotated speed summary:

Speed Summary:

Commerce Gets Social: How Your Networks Are Driving What You Buy

  • Social Commerce, building “a social layer on top of online commerce”, “turning products into conversations”, is attracting big funding, big buzz and generating big revenue.
    • Flash Sale sites such as Vente-Privée use a social layer to promote the sharing of time-limited online deals (and drive member-get-member referrals)
    • Group-Buy sites such as Groupon and Keynoir use a social layer to to promote the sharing of time-limited local deals
    • Social Shopping sites such as PolyvoreKaboodle and Lockerz use a social layer to promote the sharing of products discovered online – thus encouraging ‘social discovery’
    • Social Shopping apps such as Stickybits and ShopKick use a social layer to promote the sharing of store visits, using scanning technology to encourage store discovery and selection
    • Purchase-Sharing sites such as Blippy and Swipely use a social layer to promote the sharing of products purchased – thus encouraging social product discovery and selection
    • Personal Shopper sites such as GoTryItOn use a social layer to promote smart shopping decisions by allowing shoppers to get a second opinion on what to buy
  • E-commerce is Over. Long Live Social Commerce”: Retail has entered a new phase, where product discovery and purchase decisions are informed by the collective and distributed social intelligence of peoples’ social graphs.
  • Facebook is leading the social commerce charge with a) social plugins that add a social layer to retail sites (so people can share likes and purchases with friends, and get personalised recommendations) and b) Facebook Deals that add a social layer to bricks and mortar stores (allowing people to share store visits – and get deals)
  • Social Commerce enhances the retail experience for shoppers – helping them realize the ‘value-expression’ function of shopping (what psychologists call ‘impression-management’ – aka bragging rights, ego-tripping) whilst also helping shoppers make smarter shopping decisions using their social intelligence (personalized recommendations for product discovery, product choice)
  • Social Commerce enhances the retail business for retailers by turning electronic word of mouth into sales – a share on Facebook generates $2.52 for ticketing site Eventbrite, and $20,000 in additional drinks revenue were generated for London restaurant Preto following a Groupon group-buy promotion
  • Big brands want to cash in on your Facebook Friends”: Volkswagen has added a social layer to its online car configurator allowing people to share personal car configurations and get feedback from their social graph.  Of the 450K people using the configurator in November 2010, nearly 1/4 modified their design based on feedback
  • Word of mouth and imitation have always influenced purchase decisions, but social commerce adds scale and transforms this social influence into sales – leaving a trackable (measurable) digital trace: Social commerce makes word of mouth measurable
  • Social commerce makes use of human psychology – the psychology of sunk costs; consumers change from sceptics to advocates once they own a product (part impression-management – we want to be seen as smart shoppers (which is why the average review is 4+ stars out of 5, and part “Post-decision dissonance management“))
  • 90% of purchases are subject to some sort of social influence – that’s the size of the social commerce market

Social Commerce Factoids

  • $13m – backing for purchase-sharing site Blippy including Twitter’s Evan Williams and Sequoia Capital
  • $2.52 and 11 visits – what a Facebook share generates for ticketing site Eventbrite
  • $250m – funding for sFund for social applications/services from KPCB, Amazon, Facebook and Zynga
  • 1m+ sites that have integrated Facebook’s social layer on their websites
  • 17m – members of social commerce site Lockerz
  • 98m – “haul video” views for 17-year-old juicystar07 YouTube
  • 60m+ “haul video” views for 23-year-old DulceCandy87 from LA
  • 35 – countries that Groupon operates in – with 2 years of launch
  • £20,000 – extra revenue from drinks earned by London restaurateur Dean Knight of Preto, following a Groupon deal (£20 of food for £8 – 3,006 vouchers sold)
  • 90% – proportion of purchases subject to social influence (Econsultancy)
  • 23% – market share of US display ad impressions on Facebook (vs. 2.7% for Google)
  • 1.75m – UK Facebook users referred to top 200 ecommerce sites in October 2010

Social Commerce Smart Quotes

On the potential for social commerce:

  • Mark Zuckerberg (Facebook founder) “If I had to guess, social commerce is the next area to really blow up”
  • Andrew Mason (Groupon founder) “The size of the [social commerce] market is the size of every empty restaurant table”
  • Bing Gordon (KPCB investment (sFund)) “The potential for social commerce today is “infinite”… Every ecommerce site will have to adapt”
  • Christian Hernandez (Facebook) “There was an Econsultancy survey that said that 90 per cent of purchases have some sort of social influence – your friend recommended it, or you saw it on somebody. Until now there’s been no way of getting that ‘girls in the mall’ effect on a large scale. That’s the opportunity: it’s huge and untapped. And we have the benefit of both scale and identity”
  • Danny Rimer (Index Ventures) “It’s this notion that a transaction is more communication than the be-all and end-all. We believe that when you go to checkout, the end of that activity is sharing what you’ve purchased with friends. Everything is going to have to integrate a social layer in commerce. No question.”

On the rationale for social commerce

  • Andrew Mason (Groupon founder)  “Middle-class people sit around trying to think of how to spend money.  One of the most powerful ways to figure that out is looking at what you friends are buying, people you trust”
  • Christian Hernandez (Facebook) “Social recommendations can help you discover things that some algorithm won’t”
  • Danny Rimer (Index Ventures)  “When we buy something, we become its greatest champion. That is what social [commerce] can do. It really is transaction as communication. The internet lends itself to promoting and building validation, confirming that what you’ve bought is great. It’s one of the irrational, unexplainable but inherent bits of human behaviour.”
  • Shervin Pishevar (Social Gaming Network founder, investor) “It’s about ego, sharing your status and accomplishments, a quest for positive validation”

On social commerce business opportunities

  • Reid Hoffman (LinkedIn founder)  People will converse about your brand independently of you. You can’t stop the negative comments. But what you can do is maximise the likelihood of a distributed set of very good conversations. That has to be your strategy.
  • Christian Hernandez (Facebook) “I’m most excited about Deals – so when you check into a physical Gap, it gives away 10,000 pairs of jeans. Imagine you run a Gap promotion on Facebook, and track who walked into the store and cashed it in for a pair of jeans. It’s the advertiser’s holy grail: how does my brand money lead to foot traffic? It means you can figure out the return on your advertising. And users get to discover deals – your friend checks in and cashes in a deal, it gets shared. So if I learn that Tommy Hilfiger is doing an interesting deal nearby, I might just go and check it out myself. It amplifies the coupon model to 500 million people.  There’s discovery, sharing, bragging about what you’ve bought, and redemption at the storefront”.
  • Reid Hoffman (LinkedIn founder) With millions of people in the role of publisher, the challenge for marketers is how you tastemake…Rather than buy [ads in] one TV show, it’s better to be in the fabric of the conversations. It makes more sense to participate in, say, girls displaying their purchase”
  • Reid Hoffman (LinkedIn founder)  “You don’t say, ‘Wow, I bought this really cool toaster,” he says. “But it’s really relevant with music, movies, books – they are part of our identity, and they’re repetitive purchases. We buy maybe three books a month, at least one album a month, see three movies. That’s key. Look for purchases that can be part of people’s everyday lives”
  • Michael Lazero (Buddy Media founder) “Facebook is now ‘This place where 50 per cent or more of our customers live online, where a quarter of all US ad impressions are – if we don’t go there I’ll be fired.’ So all of a sudden, brands are publishers who sell directly through social channels – bookstores, travel companies. And we’re just at the beginning.”
  • Shervin Pishevar (Social Gaming Network founder) “I call it people rank, as opposed to [Google’s] PageRank. Just as PageRank gives more weight to a page with more authority, we can now identify the most influential people in a space. Traditional marketing? It’s dead. It’s real-time social marketing and commerce that really matter now. There will be multibillion companies in the social commerce space. We’re where we were with social gaming two or three years ago.”
  • Sinan Aral (Stern School of Business, chief scientist, SocialAmp) “The companies that will succeed with social shopping are the ones that have science under the hood.”
  • Danny Rimer (Index Ventures) “We picked up a trend on YouTube called v-hauling. We saw these 18- to 25-year-old girls going online with their most recent shopping bag from Topshop and Target, explaining to the camera why these were awesome goods. And some of them had followers in the hundreds of thousands.”
  • Danny Rimer (Index Ventures) “[Privacy], It’s a generational thing: the new generation want to scream from the mountain-tops what they’ve bought and share the value with the largest audience they can get.”

image: @dan_webster (yfrog)

Comments (40):

  1. LIAD

    January 6, 2011 at 06:15

    Things really are going gangbusters.

    I hope as more people jump on the bandwagon, your site will get the kudos it deserves for what you do for social commerce

    • Paul Marsden

      January 7, 2011 at 13:39

      Thanks Liad for the kind comment – indeed social commerce appears to going into warp speed! Best wishes for 2011.

  2. Camilla

    January 6, 2011 at 06:45

    Your site is so inspirational and all I can think about is how to implement this in my current position! Thank you!

    • Paul Marsden

      January 7, 2011 at 13:38

      Thanks for Camilla for the kind comment – wishing you all the best, and a very social commerce 2011.

    • Cathy

      April 26, 2016 at 04:38

      Si tu anulas tu voto, ¿como se lo vas a dar a otro partido? es un mito, pues hasta donde yo se, NO existe una mecánica &#0ga8;ló2ic2” para esto, no hay evidencia y nadie sabe como, ¿o tu si?, para mi es tan malo uno como el otro, así que no voy a ir a votar solo porque considero que uno es “pior” que otro

  3. Dan Mitchell

    January 6, 2011 at 15:22

    Plus ça change, plus c’est la même chose.

  4. Quincy

    January 6, 2011 at 16:46

    Looking forward to the Feb. Issue. Thanks for the heads-up as well as the speed summary. Just recently discovered your blog and loving it! Please keep up the good work.

    • Paul Marsden

      January 7, 2011 at 13:36

      Thanks Quincy for kind comments. Happy New Year to you.

  5. David Fishman

    January 7, 2011 at 13:17

    Paul –

    This blog is perhaps the single best resource for social commerce intelligence. Thanks for keeping the content fresh and forward looking.


    • Paul Marsden

      January 7, 2011 at 13:35

      Thanks David for your kind comment – happy you find SCT useful. Wishing you a prosperous 2011.

  6. Katja Presnal

    January 22, 2011 at 14:00

    Thank you so much for this very insightful post. I do social media marketing strategy for living and own a blog network and a lifestyle brand and found this summary very useful and got new ideas I’ll be implementing in the future.

  7. Benoit Schoeffel

    January 24, 2011 at 10:38

    Great Post. You made my day. From now on, I will be stopping by your blog more often. Great find !! Thanks a lot for this very insightful post. Cheers from Paris.

    • Paul Marsden

      January 25, 2011 at 19:33

      Merci Benoit, ravi que vous l’avez trouvé intéressant.

  8. Ashley Heather

    February 1, 2011 at 22:57


    Great post indeed. We are organizing a Social Commerce event at Social Media Week in NYC on Feb 10th. The details are here It is free, but there are limited places. I would love to see if any of your readers want to come and join the debate.



    • Roxy

      April 26, 2016 at 04:52

      If I di1n#&82d7;t know better, I would begin to think someone is trying to destroy the USA. At the same time the government and the free market say a quality education system is necessary for our country to survive and thrive, the same forces are using everything in their power to destroy the future (and present) of that quality education. We are becoming Brazil (insert name of any poor nation here) at the same time Brazil is becoming what we once were.

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