Friday, 27 May 2011

The Impact of Social Commerce on Ecommerce

Venture specialist Dave Beisel first coined the term “social commerce” to refer to the integration of e‐commerce with social networking. According to PR executive and blogger Steve Rubel, “Social commerce can take several forms, but in sum it means creating places where people can collaborate online, get advice from trusted individuals, find goods and Ideation services  and then purchase them. It shrinks the research and purchasing cycle by creating a single destination powered by the power of many.”

Wikipedia describes social commerce (also known as social shopping) as a subset of  e‐commerce solution in which the active participation of customers and their personal relationships are at the forefront. The main element of this new trend is customers’ involvement in the marketing of products being sold, e.g. their recommendations and comments through blogs and shopping lists. This phenomenon enables customers to interact with one another in order to make better buying decisions by capturing and structuring “word‐of‐mouth” around product recommendations and reviews.


Social Networking sites are a key target for online advertising, as SNS users say peers and colleagues hold more influence over their purchases than any other source of information. Furthermore, Compete, Inc. reports that SNS users spend nearly 25% of their disposable income on online purchases. The recent boom in online advertising has also provided social networking sites a way to convert website traffic into dollars without charging members a subscription fee. The advent of Google's AdWords advertising program has been an especial boon, as it allows sites to place keyword based ads alongside content like users profiles. “Networking sites provide some of the most powerful word‐of‐mouth‐marketing opportunities there have ever been,” says Nancy Costopulos, Chief Marketing Officer at the American Marketing Association. “It's past the fad zone and into the reality zone.”

Another survey by AMA found that 47% of consumers said they would use social networks to discuss and find holiday gift ideas; 29% would buy products through those sites; 51% would look for discounts on social networks; 51% would download coupons; and 18% would read or write product reviews.

According to online marketing firm The ClickZ Network, “‘Brand Advocates’ spread opinions via word of mouth, as well as over social networks, instant messaging, chat, photo sites and blogging. Such advocates have at least a two‐to‐one rate of converting an actual friend or family member to buy the same exact product or brand they support, according to the report.” E‐Consultancy’s Social Commerce Report 2007 found that 67% of online retailers say that a social networking strategy is a medium‐to‐high priority for investment.

A recent study commissioned by social networking giant MySpace reported that business‐to‐consumer messaging could create considerable value when combined with consumer‐to‐consumer messaging. Following up on this study, MySpace recently introduced a hyper targeting program that allows advertisers to pick "enthusiast" audiences from ten categories of interests: music, movies, personal finance, gaming, consumer electronics, sports, travel, auto, fashion and fitness. Similarly, Facebook allows “endorsements” on its site and encourages members to subscribe to brands. Forrester Research observes, “As these ‘Fan‐Sumers’ share their affinities, brands can advertise using trusted social relationships.”

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