sCommerce and the Hype Cycle

Sucharita Mulpuru is among my favorite people at Forrester. She’s pragmatic, technical, and, in my view, a brilliant forecaster – three key skills and traits to be an effective strategist.

Last month she wrote “Why Facebook Is Still A Tough Sell For Retailers“. She was called out as a hater. I don’t think that was fair.

The crystallizing quote comes from an interview two weeks later – and you may have seen this article  in Bloomberg on February 22.

TL;DR:

“There was a lot of anticipation that Facebook would turn into a new destination, a store, a place where people would shop,” Mulpuru said in a telephone interview. “But it was like trying to sell stuff to people while they’re hanging out with their friends at the bar.”

States.

Are people always in a hot buying state? Are people always researching? Are people always buying?

The answer is no. That’s ridiculous.

What percentage of all Google searches end in a commercial transaction? What percentage of all visits to your website end in a commercial transaction? What’s your conversion rate?

Context counts. And there’s a big difference between causing a hot state to occur (creating desire, a need, or, at the very least, an attitude or perception change) and being present while somebody is in a hot state. The latter is far easier. You just have to have more money than anybody else. The former is far harder.

Context counts.

Those who argue that hot states cannot be created or induced by marketing tend not to own Apple products. They’re entrenched in their worldview and are excused.

My theory is that hot states are contagious. I can understand why those with no knowledge of bar or club culture would reject that theory.

Hype and After

Many innovators went into Facebook early. There’s been a lot of abandonment. To some extent, the rush into it was driven by hype, the rush out is caused by disillusionment. That doesn’t mean that sCommerce is dead.

Far from it.

Yesterday, it was revealed that 15 million Facebook users bought virtual goods last year, representing approximately 2% of the base, and, a much higher percentage of serial gamers. Hypergrowth is traditionally estimated to begin at the 2% to 5% threshold, with considerable debate as to which is the right value. After the hype and trough comes the masses. Usually. (But not always).

Commerce Adoption

A majority of US households didn’t get broadband until mid-2004. eCommerce adoption was an echo of that broadband curve.

A majority of US households didn’t get onto Facebook until much, much later. sCommerce adoption will be an echo of that adoption curve. In a much more concrete way, sCommerce in 2011 is much like eCommerce in 1999.

The reason to believe that sCommerce will be more disruptive is threefold:

• For one, the recession has caused more people to think like companies. More people are selling their own products themselves, causing drastic SKU inflation, and creating value networks.

• For two, the social graph reduces friction in value networks.

• For three, banks are finally making it easier for people to exchange money amongst themselves, without a merchant account.

That all causes more productive people working productively. Boosts in productivity is what causes wealth creation.

Adoption takes time.

Hypers gonna Hype, Haters gonna Hate

The volume of hypers in the United States is why the United States is the United States and the lack of hypers in Greece is why Greece is Greece.

There’s always a fight between the hypers and the haters. They grate on each other. And the cycle is generally the same. The hypers advance. The haters battle back.

And we’re all the richer for it.

Sucharita isn’t a hyper nor is she a hater. She’s a realist and her contributions are welcome. She’s asking really good questions and stating evidence to support her points.

Think critically and be skeptical. Just don’t be so cynical about absolutely everything.

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I’m Christopher Berry.
I tweet about analytics @cjpberry
I write at christopherberry.ca