In its second-largest acquisition, Amazon buys the company for $970 million.
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While this free or sponsored route seems easy enough, retailers must walk a very fine line between marketing on any kind of social network and fitting in with members, many of whom already have voiced concerns about commercialization of social networks, warns Wertz at Abebooks. “An online community has its own life. People are there to connect with others who share similar interests, not necessarily to learn about a product. Consequently, retailers have to be very careful not to be too aggressive. They should carefully connect with a community through things like contests, content and forums.”
The company believes committing resources to social networking will prove to be a good investment, even though it’s not yet sure how to prove it. “We have to figure out how to gauge the results,” Wertz says. “One way or another, we ultimately feel what social networking has to offer is worth the investment.”
The second of the three ways for retailers to get into social networking is by buying all or part of an existing social network, like Abebooks did with LibraryThing. While this entrée into social networking is more expensive than creating a space on a mass appeal network, it typically requires little work and no retailer staff on the part of the merchant and comes complete with a pre-existing community.
The deal makes a lot of sense because LibraryThing is about one’s whole library, not simply favorite and new books, and Abebooks is about all the great old books people treasure, says Tim Spalding, founder and president of LibraryThing. Spalding owns 60% of the network he founded a year ago.
From Abebooks’ point of view, the primary reason for the partnership is the data LibraryThing soon will start generating for the retailer, Wertz says. “The most searched keywords, types of forums, the opinions posted by members, and the links to our site and other sites make for rich, useful information,” he explains. “That information will help us better merchandise our products.”
Do it yourself
The third way retailers can socialize is by building a network of their own that typically is wholly separate from but linked to its e-commerce site.
In July Slingo Inc., which hosts online and sells games, launched a social network. The niche network offers its very regular and loyal customer base the things mass appeal social networks offer: creating profiles with pictures and other content, communicating messages to fellow online gamers, searching for new friends with common interests, inviting other members to join their circle of friends, creating forums, and sending e-cards. It also lets members participate in daily and weekly contests that award winners with online Slingo “cash” and prizes. In-house technology staff built the network based entirely on free open-source software, so the total cost is limited to the hours put in by staff to create and monitor the network.
“The social network lets us know more about our customers and adds a personal touch to our gaming environment,” says Eric Lamendola, director of operations and business development at Slingo, which now has an additional source of revenue: selling advertisements on the network.
Another benefit: The e-retailer can use the network to ask members questions about existing products and ones they would like to see, which produces myriad data that can help guide company efforts, says Pete Czech, director of online operations. “For example, we can discover what women, men and kids prefer, and shape special promotions and offer games that appeal to the various demographics.”
Another e-retailer that has a social network in house is Buy.com. Its Yub.com network-a predecessor that launched in February 2003 became Yub.com in February 2005-enables shoppers to see what others are buying and recommending. The company’s goal is to bring more shoppers into the online shopping mall and get them to browse for longer periods of time based on the input of fellow shoppers.
It’s an ideal venue to personalize a company’s brand; well-executed plans leverage a social network as a loyalty program, reaffirming the value of an e-retailer to customers by engaging them with other shoppers and brand advocates, contends Eoin Matthews, vice president of business development and co-founder of Yub.com.
“But because social networks are inherently viral, for better or for worse any significant mistake by an e-retailer is amplified, discussed more and passed on. The bad spreads with the good and e-retailers must be willing to cede some control to network members,” Matthews advises.
Potentially having one’s brand associated with unfiltered content that may not correlate with a retailer’s demographic is indeed a risk, adds Neel Grover, CEO and president of Buy.com. “It takes a certain leap of faith. But the opportunity is there for an e-retailer to really build depth in its relationships with customers. If an e-retailer is comfortable with associating its brand with a particular network, then there shouldn’t be any downside. Yub.com revolves itself around e-commerce, and it has been embraced.”
Flash in the pan?
Downside or not, will social networking in general be embraced for the long-term by shoppers as well as overall Internet users? Crystal balls are running from that question.
“Initially it might not grow much beyond 20% of Internet users getting into a social network for a certain amount of time,” says Horrigan of the Pew Internet and American Life Project. “As is typically the case with new Internet tools, that 20% may boil down to only 3% or 4% who remain heavy users. Today in list-servs and chat rooms, 2% to 3% of all users are responsible for 90% of traffic. It’s difficult to say if social networking will follow the same trend.”
And it’s very difficult not just for researchers but also for e-retailers-including those who already have jumped into social networking. Elliott at Alibris was confronted by the questions concerning the latest web phenomenon’s benefits, risks and staying power before Alibris started its MySpace experiment. His response to these questions pretty much sums up the industry’s present take: “Ask me again later,” he says.