Can eBay tap into social commerce?

Ebay was social commerce before anyone coined the term, but its daily deal experiment feels like a PayPal extension rather than a bricks-and-clicks social commerce platform.

Expect minimal a payoff from Facebook Gifts

Facebook received gushing reviews as it began to roll out Gifts, a mobile and web program for giving gift cards and physical goods. But gifts won’t transform Facebook, disrupt ecommerce, or solve the company’s mobile monetization issues.

Shoes and subscriptions

ShoeDazzle’s switch away from subscriptions cost its CEO his job. But do traditional subscription value propositions work for a big shoe-buying audience?

Pinterest rival Fancy gets into group gifting

New York-based social commerce platform Fancy is rolling out a new option that lets users organize group gifts. The startup also announced a new partnership with American Express that it says could mark the beginning of an extended relationship.

Treater nets $2.5M for just-because social gifts

Treater, a social gifting startup launching Wednesday, wants to use Facebook help people send impromptu, casual gifts to friends. The Washington, DC-based startup is also announcing that it has raised $2.5 million dollars.

Today in Social

The Wall Street Journal underscores social commerce giant Groupon’s woes in a story that points out that Andreessen Horowitz thought the company’s IPO was premature, and has sold off its holdings. Fidelity might be starting to cash out, too. But Kleiner Perkins, Morgan Stanley and T. Rowe Price are still in or adding shares. Fortune takes the Journal to task for over-interpreting these “patterns,” or seeing them as a big negative on the whole sector. My own Weekly Update says Groupon’s headed for trouble if it thinks it can be an e-commerce technology supplier for local businesses. It would be better off selling them simpler marketing services.

Groupocalypse: Groupon loses its way

In my last few Weekly Updates, I’ve written about Zynga and Facebook, two companies whose business models I’ll continue to defend. But right now they make up a pair of the Horsemen of the IPO Apocalypse. I might as well add a third. Groupon’s second quarter results were about in the middle of its guidance, it showed a profit, and it cut way back on marketing expenses as a percentage of sales. The result? Its stock is at an all-time low. Can Groupon turn it around?

The opportunity

Unlike Facebook — a digital media leader and core technology platform provider — and Zynga — on a cold streak but with a plan — I’m pretty sure that Groupon is headed in completely the wrong direction. I have written that Groupon’s scale would be a huge competitive advantage as social commerce shook out. I thought its massive sales force, customer base, and merchant relationships would produce a terrific combo.

In theory, Groupon should be able to analyze its customer data to help it target and improve deal conversions and feed insights back to its merchants. Groupon should be building out other marketing offerings for those merchants, so that it could move beyond new customer acquisition into loyalty programs, and sell them services like paid listings and SEO. Groupon could be a local merchant’s one-stop marketing supplier in a way that even Google would have trouble matching.

Misdirected?

Instead, Groupon’s revenue in actual retail is growing faster than its high-margin deals business. It envisions itself as an e-commerce technology platform provider. CEO Andrew Mason says he wants Groupon to become the “operating system for local commerce.” And the company is bragging about being a leader in mobile commerce.

Does Groupon really want to build warehouses and compete with Amazon in multi-category online retail? Perhaps it wants to get into payments – no, that’s not a crowded field at all. Or how about in-store point-of-sale hardware for small business? Madness.

Yes, mobile commerce is promising. Groupon says that in July nearly one third of its North American transactions were completed on mobile devices, a figure that’s up 35 percent from the year earlier. Groupon’s mobile app has just as much adoption as those of Amazon and eBay, but does that mean Groupon could become a mobile transactions platform for local merchants and retailers?

Perhaps. But I expect big, national retailers that sell through local stores and affiliates are better equipped to handle sophisticated technologies like geofencing and real-time inventory liquidation than the local small businesses that are Groupon’s strength. Remember, airlines are the leaders in yield management. Your typical local restaurant or gas station is probably not thinking about balancing discounts versus empty slots that might go unsold via complex algorithms and business rules. Lots of Groupon merchants couldn’t even handle volume discounts profitably.

There’s no shame in being a force in local marketing. BIA/Kelsey projects that digital advertising will only comprise 11 percent of a $150 billion U.S. market by 2016. There’s plenty of opportunity – and plenty of competition already – for Groupon to offer services to support local merchants’ marketing needs. Make no mistake, there are some positive signs for Groupon’s core U.S. business:

  • Groupon’s targeting is starting to improve efficiency in cities where it has been using it longest
  • Nearly 20 percent of its merchants are increasing their use of Groupon’s other services.
  • Its Groupon Rewards loyalty program is gaining traction.

What momentum Groupon has is in marketing services. Once it embraces this, and shifts its development and sales assets accordingly, it will start to claw its way back towards prosperity.

Question of the week

How could Groupon turn itself around?