October 28, 2004, 12:00 AM

Social networking for e-commerce gets beyond the talking stage

When Buy.com bought Metails last month, it was the first major development in what some marketers have been predicting will be the next big thing in online marketing: Harnessing social networking. “It’ll be a huge force to reckon with,” says Scott Blum, CEO of Buy.com.

When Buy.com bought Metails last month, it was the first major development in what some marketers have been predicting will be the next big thing in online marketing: Harnessing social networking. Buy.com is among those who think the phenomenon has a future. "Don`t underestimate the power of social networking," warns Scott Blum, CEO of Buy.com. "It`ll be a huge force to reckon with."

Buy.com will relaunch Metails later this month with a new design and brand, as it sharpens its focus on serving what Blum calls the YUB--BUY spelled backwards--or young urban buyer. As social networking develops with e-commerce, it will bring about nothing short of a revolution in the retail industry, Blum predicts. Online social networking, as represented by such sites as Metails and Friendster, consists of people making connections with other people through web sites. An individual establishes a profile online then invites friends to view and link their own profiles to the original profile. The network grows through such ongoing links. Marketers like Buy.com looking to harness the power of social networking figure that people are more likely to buy based on the recommendation of a friend of friend than of a stranger. "This will be big," Blum says. "Corporations now control the web, but this will take power from corporations and give it to individuals."

Metails has several patents pending on the technology it uses to combine social networking with e-commerce; for example, the ability for a Metails user to visit a personal web page of a friend or anyone with similar interests, view products that person has purchased, and click an image of one of those products to link to a retailer`s buy page. Metails is designed so that buyers, as part of a community of buyers in the social network, will receive discounts from retailers ranging from 2-10%. The person whose page showed a listing or image of the purchased product would also receive a reward, such as a coupon valued at 2-5% of the friend`s purchase.

Buy.com is experiencing its own strong sales growth, reporting a 52% rise in net sales for the third quarter. But Blum, who is also managing partner of investment firm ThinkTank Holdings, whose investments include Buy.com, is especially enthusiastic about the future of Metails and what it means for Buy.com.

As social networking combined with e-commerce spreads, Blum says, he expects Buy.com and its Metails unit to lead the market in two ways: It will directly serve YUBs and it will be the primary provider of a technology platform to others that want to operate a social networking/e-commerce site. "We`ll stand out with our patents on e-commerce and social networking, and we`re big enough to protect them in court," he says.

The re-branded Metails will launch this month with a number of participating retailers, including Buy.com as one of its major anchors, Blum says. He hasn`t named the other retailers, but the company says they`ll range from large to niche merchants. "They`ll be merchants that go after young demographics," Blum says.

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