In its second-largest acquisition, Amazon buys the company for $970 million.
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The widget operators form partnerships with e-retailers either directly or through affiliate marketing companies such as Commission Junction, DoubleClick Performics and LinkShare. Once partnered, an e-retailer typically provides the widget operator access to its data feed, which contains product information and images. The widget operator funnels that information through its web site so users can select which products they would like to appear in their widget product galleries. Widget users get commissions on sales generated through the widget on their web sites, social network pages or blogs.
“Shopping widgets like Lemonade are allowing Internet users to become what amounts to peer-to-peer affiliates for e-retailers where the users can make money,” says Laura Evans, executive director of the retail practice at Resource Interactive, an interactive marketing firm that follows emerging technologies such as widgets, social media and m-commerce. “Individuals setting up shopping widgets are keying in on a product mix personal to themselves and what their interests are and what they stand behind.”
Lemonade, which launched in September, hit a milestone this spring: 30,000 sellers with Lemonade Stands. Bloggers and social networkers have been driving the growth of Lemonade. The more stands that appear, the more new stands subsequently open as a result of the viral nature of widgets and social media. The stands appear everywhere from Facebook to MySpace to individual blogs.
To set up a stand, a user creates an account at Lemonade.com. The user names the store, selects the look and picks products to sell. The user can select items from more than 200 retailer partners of Lemonade, including Apple, eLuxury, Fragrancenet.com, The Gap, Lands’ End, Macy’s, Nordstrom, Old Navy and Wal-Mart.
Retailers pay commissions of 5% to 15%-sellers get 80% of the commission, Lemonade gets 20%. All commissions are handled through PayPal accounts. Retailers send commissions to Lemonade, which then deposits users’ shares in their PayPal accounts.
Lemonade.com, through various networked connections with social networks or through sharing widget code, then transfers the widget to where the user wants it displayed. Widget functionality is enabled through a link from the widget to servers at Lemonade.com, which has access to the numerous e-retailer’s data feeds for product information.
Visitors to a site with a Lemonade Stand widget shop products on display, drilling down by categories to see more products and their prices and descriptions. When they’re ready to buy, they select the product, which sends them to the e-retailer’s site to complete the purchase.
“You don’t need to hold any inventory, ship items, deal with returns or manage payment for the products you recommend,” says Tim Smith, chief strategy officer at Lemonade. “All transactions take place at the retailer’s e-commerce site. You are simply referring people to products you like and the retailer takes care of the rest.”
Protecting the brand
Because shopping widgets are so portable and can proliferate across the web so easily, though, they potentially could pop up on web sites, blogs and social network pages that e-retailers may not like. The question becomes: How can an e-retailer protect its brand and image?
While the nature of widgets is very viral, shopping widget operators take multiple steps to ensure their widgets do not appear on web sites their retail partners would find objectionable.
What’s more, Lemonade includes a Report Abuse section on its site where Internet users can file information on stands they believe to be on objectionable sites. Because all Lemonade stands operate through Lemonade.com servers, Lemonade can pull a stand at any time.
“With a half year under our belts, our retail partners have become comfortable with how the experience works,” says Smith of Lemonade. “But this also is in part due to how retailers now realize that people are speaking about their brands in all these new ways they can’t control, like in blogs and social networks. They are having to give more control to shoppers and leverage new developments to build their brands and get the word out.”
Widget operators also use blacklists and whitelists to control where widgets can be downloaded and viewed. “A brand can complete its own blacklist, or use Google’s free blacklist, and when coupled with the widget downloading system, the lists will not allow objectionable sites to download a widget in the first place,” says Plous of Direct Message Lab.
Zazzle.com can monitor use of its widgets through a system in MySpace that shows who is downloading the widget to which social network pages. However, it says it generally must let its band customers be who they are-to a point.
“Philosophically, we cannot have a thought police group in our company,” Heckman says. “But if there is an organization that we get negative feedback on and that is clearly objectionable, we will not fulfill their orders. It’s as simple as that.”
E-commerce from scratch
Unlike the shopping widgets that enable consumers to become mini-affiliates, recommending products from retailers and earning commissions based on those referrals, one shopping widget, Ustrive2 Inc.’s Cartfly, enables merchants or Internet users who wish to be merchants to set up bare-bones e-retailing functionality on a web site, blog or social network page.
Music apparel retailer Black Eyed Saint sells at concerts and events and used to operate a bricks-and-mortar store. It decided it wanted to get into e-commerce but was wary of what it took to do so.
“One of the most intimidating things in selling is e-commerce, especially for someone who doesn’t know much about the game,” says Ryan Norton, owner of Black Eyed Saint. “All the systems required and the initial investment to get an e-commerce site up and running-it really took the wind out of my sails.”
But Norton came across a way to create an e-commerce store in a matter of hours. What’s more, it would cost him nothing to set up shop online.