Today we are announcing our investment in 8thbridge (www.8thbridge.com), a company that provides social commerce solutions to mid- and upper-enterprise customers. Following our successful investment in Extole (www.extole.com), a company that provides social marketing solutions to the same market segment, we had been looking for an investment in social commerce to round out or portfolio. The meteoric success of social commerce companies like Groupon, LivingSocial, Gilt, Rue La La, and Haute Look convinced that there will be a need for integrated solutions that enable companies to participate in social commerce. Brands are aggressively building their Facebook presence to take advantage of where consumers spend their time. For this reason we believe that they will invest in solutions which enable social interaction on Facebook and use it as an important sales channel. Over the past two years 8thbridge’s team led by Wade Gerten has developed an innovative social commerce application and has signed up a significant number of large customers including companies such as Delta Airlines, Haute Look, Brooks Brothers, and Mark Avon’s fastest-growing division.
Consumers connect to a brand on Facebook for three reasons: 1) to stay current on available new products, 2) to receive coupons and discount offers, and 3) to let their friends know about the products they support. Corporations like Coca Cola, Starbucks, P&G, and Disney have come to realize that consumers are engaging around their brands on Facebook and during the past year they have started investing heavily on marketing programs that to facilitate and enhance this type of engagement. Social commerce may be a key to demonstrating ROI to brands on Facebook. Companies use 8thbridge’s solution to enable in-stream shopping in Facebook’s brand’s pages, essentially the equivalent of natural search for a brand. A recent report published by Booz& Co puts social commerce of hard goods (apparel, tickets, etc.) at $5B during 2011 and projects it to grow to $30B by 2015 split almost evenly between US and the rest of the world, for a growth rate of 56%.
During a relatively short time we’ve seen social commerce solutions evolve in three phases. The solutions of the first phase offered stores built on the tabs of a brand’s fan page. The solutions of the second phase offered shopping in the news feed. Brands can market to consumers who opt-in and they in turn market to their friends. The most recent solutions are able to utilize the power of the Open Graph enabling consumers to engage their friends, participate in a truly social shopping experience and in the process get better deals. Several of 8thbridge’s customers, with Delta Airlines being the leading one, have already implemented such third-phase social commerce programs using the company’s solution.
We view social commerce as an extension and complement to ecommerce; certainly not a replacement. Whereas consumers go to ecommerce sites seeking needed items, they engage in social commerce more for impromptu purchases. Ecommerce is fueled by paid search, SEO programs. Social commerce on the other hand is fueled by fans and their friends, paid Facebook ads, and social marketing programs driven by ecommerce sites. Finally, whereas ecommerce sites use affiliates to drive traffic and sales, social commerce uses affiliates to drive sales within social networks.
Social commerce is still in its infancy. We expect that during 2011 brands will continue experimenting with both social marketing solutions as they look to expand their presence on Facebook as well as with social commerce solutions such as those provided by 8thbridge as they try to determine how to best sell to consumers without distracting from the overall Facebook social experience. We also anticipate that around the 2011 Christmas holiday season companies will start looking for hard ROI metrics for these solutions. In addition, merchants are also waiting for Facebook’s approach to commerce and how parallel it will be to its approach towards social games. We look forward to working together with 8thbridge’s team to build a great company around this exciting opportunity.