February 12, 2013, 4:17 PM
Blogger

The value of social traffic

Mike Jones

CEO, Science Inc.

With 80% of U.S. adults shopping online these days, e-commerce has undoubtedly transformed shopping habits, fueled disruptive companies and changed the world.

With the rise of social media, social commerce—e-commerce that involves social media—has exploded, with Facebook and Pinterest leading the way. But is social traffic valuable and hence worth the investment by e-commerce companies? We say a qualified yes. In sampling revenue data from some of the e-commerce sites that Science has incubated, we discovered that the value of each social traffic transaction is higher than that of e-mail and search traffic.

E-mail and search outperformed social in conversion and yield (revenue/visit), with our results similar to a report from web marketing firm Monetate, which came in at .59% for social compared to 4.25% and 2.49% for e-mail and search in the second quarter of 2012. However, the value of social was greater. Social has about a $10 edge on e-mail and more than $25 in search (40% and 250% respectively!).

We also discovered that some social media sites are better than others at converting social traffic into monetary transactions. Comparing Facebook to Pinterest, the two largest social media sites to date, the driver of higher transaction value is Pinterest.

Pinterest has captured a lot of media attention recently as a driver of traffic to e-commerce sites. BizRate's study revealed that 70% of Pinterest users use the site to "get inspiration on what to buy." Monetate found that referral traffic from Pinterest was up 2535% year over year and now makes 26% of all social traffic, compared to to 1% at the end of 2011.

The hype is deserved, to a certain degree. Pinterest's conversion rate, as per our data, is the lowest across all traffic sources. Despite having the lowest conversion, it has the highest revenue/transaction, $54.09, almost 5x that of search and more than double that of e-mail and even Facebook.

Optimizing Pinterest referrals can bring in valuable customers. So while the excitement over Pinterest has yet to turn into high yields, there is real potential for Pinterest to be a valuable marketing tool for e-commerce businesses.

Search and e-mail traffic remain dominant but social traffic must be a key part of any future e-commerce strategy. People use social media to browse, to get inspiration, and, increasingly to buy. And when they buy, they buy big.

Research for this blog was by Alex Osborne, an associate at Science Inc.

Science Inc., based in Santa Monica, CA, creates, invests in and develops technology startups and transforms later-state Internet companies. Its e-commerce companies include Dollar Shave Club, Wittlebee, Uncovet, FourthandGrand, TripleThread and Ellie.

Michael Jones is a long-time Internet entrepreneur and former CEO of MySpace.

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