PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
Social networking offers retailers a grand new venue for marketing their products and increasing brand awareness, many industry observers contend. However, just as many say social networking is a risky proposition.
Social networking offers retailers a grand new venue for marketing their products and increasing brand awareness, many industry observers contend. To date, the overwhelming response from e-retailing executives is two basic questions. First, could social networking be another web fad, which launches with fanfare, gains a bandwagon of millions, then soon loses steam, winding up with a small but dedicated user base? And second, is the concept of blending social networking and the branding and marketing efforts of e-retailers even a good idea to begin with?
A handful of retailers are experimenting with social networking in an attempt to answer these very questions and capitalize on the venue by getting in on the ground floor. These merchants, willing to take on what many industry observers call a risky proposition, are either setting up a “space” on one of the social networking giants like MySpace or Facebook, acquiring or buying a piece of an existing niche network, or building a niche network of their own.
Taking the acquisition route, Abebooks Inc. in May bought a 40% interest in 66,000-member social networking site LibraryThing, which launched in September 2005. Abebooks lists more than 80 million new, used, rare and out-of-print books from more than 13,500 booksellers. LibraryThing enables members to, among other things, catalog their personal library of books, the current total being 4.7 million titles. Members also can create themed groups where users with similar interests can meet and greet; members created 415 such groups toward the end of last month during the first week the functionality was offered. The niche network charges members $10 for an annual membership or $25 for a lifetime membership.
Through searching and socializing on LibraryThing, members can find individuals with very similar tastes or collections-Medieval history, for example. These online relationships can generate interest among like-minded members to purchase online their own copy of a book they read about in another member’s space. Low-key communications to customers and members drives traffic from one site to the other.
LibraryThing continues its practice of including product links not just to Abebooks but other e-retailers. These factors help ensure LibraryThing members continue to view it as a true social network, not a kind of concealed marketing tool for a single merchant, network executives say. In the overall social networking arena, industry observers point out, many network members have a disdain for commercialization-hence Abebooks’ cautious approach. In the end, LibraryThing gets more traffic and Abebooks gets more shoppers, as well as key information on product and shopping preferences via aggregate user data from LibraryThing.
Abebooks, however, wasn’t really in the market for a social networking site. It was the potential synergy between the two companies, both of which focus more on used and rare as opposed to newly released books, that made Abe more social. “We did not first sit down and make a strategic decision to invest in social networking. Like many others we simply were watching this whole new space,” explains Boris Wertz, COO at Abebooks. “But then LibraryThing came to our attention. We asked the network’s president to make a presentation to our senior management team, and that led to our investment.”
If an e-retailer has a niche and offers great products, a social network can help it gain customers and sales, Wertz contends, and the organic growth rate for social networking sites in general is amazing.