Social networks face obstacles in road to e-commerce domination

Social networking companies have made no secret of their desire to convince people to purchase things discovered in ads, photos, and other content shared to their services. But the big social players are finding that more difficult than expected, even with the added sales activity from the holiday shopping season.
Over the last year, Facebook, Twitter, and Pinterest have spent much time developing ways to make shopping easier by eliminating the need to navigate outside the social network with various “buy” buttons. The idea is that if you build purchasing features directly into the social service, people will be more likely to make a transaction than if they were redirected to an online retail site or brand’s website. The problem is that consumers aren’t changing their shopping habits as much as hoped, according to a report from Recode.
The report focuses on the various “buy” buttons that have appeared on these social networks in the last year. It notes that Facebook’s is still seen as a test; that Twitter’s isn’t encountered very often even by its most fanatical users; and that Pinterest’s have led to fewer than 10 purchases a day from a retail partner.
A Facebook spokesperson reiterated the company’s stance — that it’s testing its commerce tools, and that it’s focused on discovering new products as well as allowing people to purchase them with a “buy” button — in an interview. Twitter didn’t respond to a request for comment. Pinterest emailed a prepared response:

Since launching Buyable Pins 6 months ago we are encouraged by the early results for merchants. Although it’s still early days with the program we are hearing from merchants that many of their customers coming through Buyable Pins are new and we are driving higher mobile conversions. We look forward to continuing to deliver value to our partners through the holiday season and a fun, easy shopping experience for our Pinners.

It’s worth noting that criticism of these “buy” buttons doesn’t come amid a holiday shopping slump. Reports indicate that Thanksgiving and Black Friday shopping habits were “perfectly average,” and that an estimated 34 percent of purchases from the last week were made by shoppers on their smartphones.
So it’s not that people are closing their wallets this year, nor that they were too busy eating potentially-worrisome turkey products to use their phones. They’re spending a fair amount and they’re doing so via their smartphones — they just don’t seem to be using social networking companies’ purchasing tools to do so.
This might not be too problematic for Facebook and Twitter. Both companies have introduced features unrelated to commerce — like a not-so-virtual assistant and summaries of breaking news — over the last few months. But Pinterest’s inability to convert digital window shoppers into buyers could be a problem.
Commerce has been Pinterest’s focus for a while. First came the buyable pins; then came a dedicated shopping section in its mobile apps; and then came a new visual search tool designed to allow people to identify products shown in pins. It’s obvious that the company wants people to buy things found on its service.
That makes Recode’s report more damning. A Pinterest spokesperson offered several examples of businesses finding new customers through its service — the same as they do on Facebook and Twitter — but only one of a brand improving sales by a notable margin. And even that was expressed as a percentage of growth instead of an absolute value, which makes it hard to tell how big a bump that really was.
“The effectiveness of buy buttons hans’t been fully realized at this early stage. Mobile users have many options for making purchases and it will take time for this payment route have an impact on overall mobile e-commerce sales,” Gartner analyst Brian Blau told Gigaom. “I think we will see [these companies] make adjustments and continue to configure these purchase points over the coming year to optimize their role in the mobile customer purchase funnel.”
It’s still early in this game. All of these companies have emphasized that their commerce efforts are being tested, and at least for Facebook and Twitter, it’s clear that the companies aren’t focusing all of their efforts on getting people to buy things through their platforms. Those companies will be fine either way.
Pinterest’s success or failure in this regard will be more interesting. The service is often used as a way for people to learn about new products. (Or, as it seems to be used in my house, as a never-ending source of hit-or-miss recipes.) Now it just has to bridge the gap between discovering a product and purchasing it.

Pinterest introduces a new visual search tool

Pinterest has introduced a new visual search feature that allows its users to identify specific objects shown in the images people collect and share on its site.
The tool works by allowing people to select a portion of an image — presumably centered on whatever they wish to learn more about — and searching for similar images. It’s basically Google’s Image Search built right into Pinterest’s service.
Pinterest engineering manager Kevin Jing says in the blog post announcing the visual search feature that it can be used to identify everything from a lamp hanging in a kitchen to the pair of shoes worn by the subject of a photo-shoot.
In a post on the company’s engineering blog, Pinterest’s Andrew Zhai explains that the company partnered with members of the Berkeley Vision and Learning Center to develop the technologies that allow this visual search tool to function.
This new feature comes hot on the heels of a dedicated shop from which Pinterest users can purchase items from brands like Nordstrom and the Heist. It isn’t hard to see how the search and commerce-related features might collide.
To use the example from Pinterest’s blog posts: Imagine someone likes a lamp they see in a pin. After using the new search tool to find more information about the lamp, they decide they want to buy it. So they click a “buyable pin” to do so.
That process is much easier than it used to be. That same shopper would’ve had to use Google’s image search after cropping out the irrelevant parts of the “pin,” found an item, and then looked for a store that sold the damned light fixture.
Pinterest, as I noted in my post about its new shopping section, doesn’t currently make money from brands that sell items through its service. That will change — and when it does, search features like this one will help it sell more products.
Until then this is just an interesting feature that will make it easier for Pinterest users to learn more about an image without ever having to leave Pinterest’s site or mobile apps. Let the Pinterest-addicted lamp-seekers of the world rejoice!

Pinterest introduces a dedicated shop to open users’ wallets

Pinterest has introduced a dedicated shopping area to its mobile apps to promote the so-called “buyable pins” added to its service earlier this year.
Pinterest says it will be rolling out the dedicated shopping section to both iOS and Android smartphone users over the next couple of weeks. It will feature products from retailers that are experimenting with Pinterest commerce.
“Now you can shop the best of Pinterest at our brand new Shop,” Pinterest says in a blog post. “Stop by every day for new collections—from entertaining essentials to cozy winter accessories—hand-picked by us at Pinterest.”
The company name-drops Bloomingdale’s, The Citizenry, Nordstrom, and The Heist as some of the brands that can be found in its new shop. (The exact number of companies testing Pinterest’s buyable pins hasn’t been revealed.)
This update is part of the buyable pins’ rollout to Android smartphones. The commerce feature, which is supposed to convince Pinterest users to buy the goods they find on the service, was previously exclusive to iOS and the Web.
Pinterest said in June that “30 million Pins all over Pinterest” would be converted into buyable pins. The company isn’t yet taking a cut of the revenues drawn from its users, or charging a processing fee to merchants.
It’s only a matter of time before that changes, though. Social networks don’t introduce features that involve money out of the kindness of their hearts — they do it because they’ll eventually want a slice of that pie. Introducing a dedicated shop is probably a sign the company will soon take that slice.

Facebook woos retailers and shoppers alike with new features

Facebook is testing new features that will make it easier for its users to make purchases without ever having to leave the confines of its mobile applications.
The move should be very appealing to business owners, especially those already doing some marketing/advertising on Facebook, as it should make transactions easier and quicker for customers.
Some of the features include a shopping section on businesses’ Facebook pages; “Carousel” advertisements that allow retailers to display multiple products in a Facebook user’s News Feed; and the addition of a dedicated shopping channel to the sidebar navigation in Facebook’s mobile apps. These might be small changes on their own, but together, they’re bound to have an impact on Facebook users.
That impact will probably manifest itself in two ways: convincing more people to buy things found on Facebook, and consumers staying in the social network’s apps instead of heading off to other websites (or, Zuck forbid, Pinterest) to shop. Canvas, a new-ish ad unit that shows products inside Facebook’s apps instead of on an outside website, is the update most likely to bring about those changes.
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Canvas has been around since June, but Facebook said in today’s announcement that it’s testing a new version of the ad unit that will make it so “people will see a fast-loading, full-screen experience where they can browse through a variety of products, before going to the retailer’s website to purchase.” It’s basically the shopping equivalent to Facebook’s not-inaccurately-named Instant Articles.
Now, the “before going to the retailer’s website to purchase” bit contradicts my argument. But I suspect it won’t be long before Facebook expands its buy button — the feature which allows Facebook users to purchase goods through its app, and is mentioned right after Canvas in Facebook’s blog post — to include items shown in Canvas. It might just take a while for retailers to warm to that idea.
But Facebook is making a pretty compelling argument. Reuters reports that many online sales happen somewhere other than mobile devices, and for good reason: Shopping on a smartphone is a pain in the ass. It’s hard to type in credit card information on a small display, mobile websites still aren’t easy to navigate, and waiting for image-heavy pages to load is hardly worth the time and effort.
These are the same problems affecting publishers’ mobile efforts. People just don’t have the patience to wait for something to show up on their phones. So if Facebook can speed up the process, like it has with Instant Articles and will with Canvas, there’s a good chance retailers will eventually get on board with letting Facebook users buy things through the social network instead of an outside site.

Cloud options mean decisions, decisions for IT buyers

Much has been written about cloud consolidation, with M&A roiling the cloudscape over the past few months: Cisco bought Metacloud, EMC bought CloudscalingHP snapped up Eucalyptus. Despite all that, cloud deployment options abound, and choice will be a big theme at the upcoming Structure 2015 event, this June in San Francisco.

First, there is more choice than ever in public cloud. Sure, Amazon Web Services leads the market-share race by a wide margin. But viable options are available — from Microsoft Azure to Google Cloud Platform to vCloud Air to Digital Ocean to CenturyLink. What many of us tend to forget is that, despite all the cloud talk, we’re still very early in the game when it comes to business deployment. There’s a ton of opportunity out there. Is it enough to float all boats? That’s the zillion-dollar question.

We will discuss those options, and how even the biggest enterprises — General ElectricWalmart — are deploying more of their IT on cloud. The question is no longer if, but when.

At this year’s event, we’ll welcome back [company]Amazon[/company] CTO Werner Vogels, Khosla Ventures founder Vinod Khosla, [company]Microsoft[/company] EVP Scott Guthrie, Google SVP Urs Hölzle, Battery Ventures technology fellow Adrian Cockcroft and DataGravity CEO Paula Long.

We’ll hear from first-timers, too: Canonical founder Mark Shuttleworth, Digital Ocean CEO Ben Uretsky, CoreOS CEO Alex Polvi. And, on the end user side, we’re really excited to bring on stage National Football League CIO Michelle McKenna-Doyle, FBI CISO Arlette Hart and Pinterest head of engineering Michael Lopp. More names to come.

For a refresher of last year’s event, here’s a sampling of some favorite sessions:

Google’s Urs Holzle:

[youtube https://www.youtube.com/watch?v=I9R4P0TLViA]

Facebook’s Jay Parikh:

[youtube https://www.youtube.com/watch?v=F9FYTbxWK1o]

Intel SVP Diane Bryant:

[youtube https://www.youtube.com/watch?v=HTXuwqLUw7M]

Amazon’s Werner Vogels:

[youtube https://www.youtube.com/watch?v=oZPlr2-KMnw]

Microsoft’s Scott Guthrie:

[youtube https://www.youtube.com/watch?v=TImzXnUaO0A]

Pinterest is experimenting with MemSQL for real-time data analytics

Pinterest shed more light on how the social scrapbook and visual discovery service analyzes data in real time, it said in a blog post on Wednesday, also revealing details about how it’s exploring a combination of MemSQL and Spark Streaming to improve the process.

Currently, Pinterest uses a custom-built log-collecting agent dubbed Singer that the company attaches to all of its application servers. Singer then collects all those application log files and with the help of the real-time messaging framework Apache Kafka it can transfer that data to Storm or Spark and other “custom built log readers” that “process these events in real-time.”

Pinterest also uses its own log-persistence service called Secor to read that log data moving through Kafka and then write it to Amazon S3, after which Pinterest’s “self-serve big data platform loads the data from S3 into many different Hadoop clusters for batch processing,” the blog post stated.

Although this current system seems to be working decently for Pinterest, the company is also exploring how it can use MemSQL to help when people need to query the data in real time. So far, the Pinterest team has developed a prototype of a real-time data pipeline that uses Spark Streaming to pass data into MemSQL.

Here’s what this prototype looks like:

Pinterest real-time analytics

Pinterest real-time analytics

In this prototype, Pinterest can use Spark Streaming to pass the data related to each pin (along with geolocation information and what type of category does the pin belong to) to MemSQL, in which the data is then available to be queried.

For analysts that understand SQL, the prototype could be useful as a way to analyze data in real time using a mainstream language.

Pinterest bought Kosei because recommendations are really hard

Pinterest announced Wednesday that it has acquired Kosei, a Palo Alto, California-based startup that focuses on machine learning for product recommendations. It’s a smart buy for Pinterest because the company’s path to profitability depends on its ability to connect users, products, and the companies or people selling them.

Here’s how Pinterest explains the acquisition in a blog post:

Over the past year, Kosei has been building a unique technology stack that drives commerce by making highly personalized and powerful product recommendations, as well as creating a system that contains more than 400 million relationships between products. As we build a discovery engine for all objects, Kosei is a perfect fit for our team.

. . .

As people use Pinterest to save and discover the things they want to do in the future, we have a unique and growing data set of more than 30 billion Pins that will only get more powerful over time. With the addition of the Kosei team, we can supercharge our existing graph to help brands reach people at the right moments, and improve content for Pinners.

For Pinterest, as the post goes on to note, the Kosei team will add to several other machine-learning-based teams at Pinterest, which are responsible for everything from spam detection to deep-learning-based object recognition (via its Visual Graph acquisition in early 2014). Kosei joins an existing “Discovery” team that’s already working on recommendations and user-behavior models.

Pinterest's guided search feature

Pinterest’s guided search feature

But the bigger picture here (and something several speakers will no doubt cover at our Structure Data conference in March) is that, despite years of effort by companies such as [company]Amazon[/company] and [company]Netflix[/company], recommendations — a driving factor behind the entire big data and data science movement — are far from a solved problem. Data science teams at those companies, as well as at places such as [company]Facebook[/company], [company]Google[/company], [company]LinkedIn[/company] and [company]Twitter[/company], are always testing out new variables and tweaking their models in an effort to put the right content — ads, users or otherwise — in front of the right people.

And they have some of the smartest people and most-advanced systems around. For laypersons and smaller companies, recommendations can be a much more daunting task, although there are now startups, open source projects and other efforts trying to address the situation.

As long as the web continues to be a hub for our shopping, education, socializing and media consumption, companies will strive to personalize it the names of user experience and revenue. Which means they’ll also keep pumping money into the graphs, models and algorithms that make personalization possible.

Pinterest explains how it’s making its search work better

It’s not just Netflix that’s taking search seriously through the use of recommendations. Pinterest is amping up its search capabilities to provide better results based on the words a user is searching for in relation to what other people may be searching for, the company detailed in a blog post on Monday.

Dong Wang, the Pinterest software engineer who wrote the post, explained that even though a user may search for the word “turkey,” it’s unclear what exactly that person may be looking for. Does he want to find turkey recipes, is he planning a trip to Turkey or is he just interested in poultry — it’s hard to say without some context.

If that person decides to search for “turkey recipes” as part of his next query, Pinterest takes that into account and can assume that the next person who may be searching for “turkey” might also be craving some turkey recipes as well; maybe it’s holiday season and everyone’s hungry. Pinterest learned that “the information extracted from previous query log has shown to be effective in understanding the user’s search intent” and this can be applied to other Pinterest users as well.

Pinterest uses a data-collection workflow called QueryJoin that helps with applying one user’s search queries and the data gleaned from those searches to other users in order to generate more relevant search results for everyone involved. QueryJoin contains data like search queries, demographic statistics, adjacent queries and pins.

Pinterest QueryJoin

Here’s some technical details on QueryJoin, per the blog post:
[blockquote person=”Pinterest” attribution=”Pinterest”]For each Pin, we have aggregated data from the PinJoin (the data collection of a cluster of Pins with the same image signature and the information about those Pins) as well as some engagement stats like the number of clicks, repins and likes.][/blockquote]

The data collected by QueryJoin is used in several Pinterest search functions such as autocomplete, guided search and search relevance.

Two charts that show why Uber’s valuation isn’t ridiculous

Uber’s latest funding brings the company into the stratosphere of private company valuations.

At $40 billion, Uber is believed to be four times more valuable than Airbnb, Snapchat, Palantir or Dropbox. Its valuation is eight times larger than Pinterest’s, fifty-seven times larger than Lyft’s, 100 times larger than Instacart’s.

The news sent the tech world into a tizzy. People called Uber’s new valuation eye-popping, ridiculous, absurd. Just like Uber’s last round of funding, it was heralded as proof of a bubble, an upcoming crash, the tech apocalypse, etc.

[dataset id=”898119″]

But when you plot Uber’s valuation compared to big public tech companies, it looks less dramatic. [company]Amazon[/company], [company]Facebook[/company], [company]Microsoft[/company], [company]Amazon[/company], [company]Oracle[/company] and others are — as you’d expect from mature companies — much larger by market cap than Uber’s current valuation. Twitter is much smaller. Investors are essentially saying that they think Uber will be nearly as valuable as [company]Yahoo[/company] or [company]eBay[/company] and more valuable than Twitter when it goes public. It’s not a totally outlandish conclusion for them to bet on, given current tech hype and market trends.

Uber’s staggering valuation says more about the changing nature of tech fundraising than it does about Uber investors’ ridiculousness. Companies are staying private longer, choosing to develop their product outside of the prying public market’s eyes. Uber is leading that trend, a pioneer for a new kind of growth model.

Without much precedent, it’s hard to know what Uber’s eventual IPO will look like. It has more money and time to hone its business, so it’s not entirely fair to compare is to the IPOs of yesteryear and call its valuation outsized. We’re playing by a new set of rules.

[dataset id=”898108″]

There’s another way to look at Uber’s valuation. CEO Travis Kalanick isn’t content for his company to remain a car-hailing app. He plans to move into urban logistics and shipping, doing everything from delivering food to transporting supplies. When Uber drops off kittens on National Cat Day, it’s not just a publicity stunt — it’s logistics testing.

On that note, perhaps Uber should be compared to public transportation, logistics and automotive corporations. Companies like [company]Ford[/company] and [company]Tesla[/company] are distant cousins to Uber, but given that Kalanick wants Uber to replace car ownership, they may be competitors down the line. The same goes for [company]FedEx[/company] and [company]UPS[/company].

Uber’s valuation puts it at less than half the market cap of UPS, but close to the market cap of FedEx ($51 billion). From an automotive standpoint, the numbers are even more optimistic, with Ford and [company]General Motors[/company]’ market caps not that much bigger than Uber’s valuation. Tesla and Hertz’s market caps, $29 billion and $11 billion respectively, are smaller than Uber’s $40 billion valuation.

Uber’s investors are essentially saying that they think when the company goes public, it will be worth at least half as much as GM and Ford and more than Tesla and Hertz.

[dataset id=”898118″]