Monthly Archives: April 2010

Re-commerce: The reinvention of e-commerce

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With the announcement of our investment in Groupon, it makes sense to provide some context for why we were compelled to make the investment at this time. Josh Kopelman has recently written about, the innovation that is taking place in the e-commerce market. At Battery, we’ve been following this same overall trend of innovation and referring to it as “re-commerce”, the reinvention of e-commerce. We believe that Groupon is a major player in this reinventing of the huge and growing e-commerce industry.

For the past 15 years, the Internet has been centered on community, content, collaboration and commerce. Community has been revolutionized by social networking. Content has been changed forever by user-generated content. Collaboration has been re-imagined by myriad online services. Until recently, the modern online shopping experience was nearly identical to shopping online many years ago. We believe that there are fundamental changes taking place in the e-commerce world, similar to what happened in offline retail over many years, with the advent of discount retailers, big box specialty retailers and warehouse clubs.

There are many innovations that we have seen over the course of the past few years, but there are five that have been particularly exciting for us at Battery (*Represent Battery investments) .

  • Private flash sales (Gilt, RueLala)
  • Collective buying / demand aggregation (Groupon*, LivingSocial)
  • Customization (J. Hilburn*, CafePress)
  • Crowdsourcing (Threadless, Modcloth)
  • Democratization (Fingerhut*, Etsy)

The new models of e-commerce that are emerging are not fads. They are tapping into all of the same trends that are impacting the broader web, including social, personalization and gaming. Most importantly, they are yielding e-commerce businesses that deliver better experiences for consumers and are more profitable than their predecessors. Many investors look at the valuations of public e-commerce companies and dismiss the entire sector. You can expect Battery to invest heavily in the sector as we view re-commerce as an opportunity to create enormous wealth by reinventing an industry that has been stagnant for too long.

Why OpenGraph helps Facebook become a $100 billion company

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I had the good fortune of being able to attend Facebook’s F8 conference today. While I’ve been quite the Facebook (as a business) fanboy for some time, after today I’m absolutely convinced that with OpenGraph, Facebook has finally exposed the true power of its platform in a way that will help it create incredible value in the coming years. Today’s discussion at F8 didn’t directly touch upon the value of OpenGraph to Facebook, but I believe that the value of the data that Facebook will collect and organize via OpenGraph will allow it to build search and advertising businesses potentially more powerful and sizable than those of Google.

I’ve written before about the importance of data in advertising and the trend towards buying audience rather than impressions. Facebook’s OpenGraph will create the richest user profiles yet, enabling advertisers to target specific audiences based on their friends, Likes, and activity, anywhere that audience can be found on the web. This kind of data and targeting differs from Google’s search-based intent data in that it helps advertisers reach their target consumers earlier in the purchase funnel, enabling what Facebook has called demand generation. This data, combined with the potential of earned media via Facebook and its social plugins, could be the key to shifting billions of dollars in brand advertising spend to the web.

Potentially more important is what I consider to be an entirely new category of search, which I refer to as “subjective search”, that may finally be realized because of OpenGraph data. While Google will likely continue to dominate search for queries where there are objective results, my view is that Facebook will become the default search provider for queries that are subjective in nature. After all, with a graph of my preferences, those of my friends and those of the broader web population, won’t Facebook be in the best position to tell me what Italian restaurant to eat at in Palo Alto, what action movie to see on Friday night or where to go on vacation with my family?

I’m not sure that anyone could have honestly envisioned that we would see another Google-type business in our lifetimes. But by wielding the power of OpenGraph, Facebook could build yet another incredible business based on search and ads. My frequent comment that Facebook will be worth $100 billion sometime this decade has regularly been met with laughter and ridicule. I wonder if that statement will still get the same response after today.