Trends in Social Commerce

If you are not intending to listen to a panel on social
commerce you're in the wrong place. We have actually a
really great group of speakers here who represent a lot of
different aspects of social commerce and so what I wanted to
was start off by - let's start off with Brian, at the end
there, who is one of the founders of AirBNB and is
definitely in the anti-portfolio for floodgate.
We actually heard the pitch for AirBNB right before they
went live in the democratic convention. Whenever I'm asked
which company I regret not investing in, the number one
answer for me is AirBNB. Bring on the pain.
Is it just introduction?
Yes, introduction. Tell us a little bit about your company
and a little about your background.
Excellent. Yes, I'm Brian Chesky. I'm one of the founders
and CEO of www.AirBNB.com. We are a community market place
where you can list and book all sorts of unique spaces
around the world; like to say anything from a private
apartment to a private island. It's all sorts of spaces from
a night to a year. We are in 10000 cities.
Travelers came last year from every country on a plane up in
North Korea and the Congo, so we're literally in 192
countries around the world and we really started in New York
City. We started getting a lot of traction about two years
ago and it has really taken off since then. We are in about
10000 cities and this is a business that was somewhat
serendipitously started.
I had moved up from Los Angeles to San Francisco about three
years ago and I was with my college roommate at the time and
we weren't able to make rent and a design conference was
coming to San Francisco. All the hotels for design
conference was sold out and I had originally quit my job,
and I think I had $1000 in the bank account.
This is October 2007, so probably a really good planning,
obviously. I get to San Francisco and I realize rent was
$1150, so I already had enough problem right there. We didn'
t know what to do. This conference was coming to San
Francisco, all the hotels were sold out. We had this idea,
why don't we create a bed & breakfast for the conference?
That was the vision. There was no business plan; the vision
was let's make rent for the month of October. That was the
business plan basically. I told Joe, "We don't have any
furniture so we can't create a bed & breakfast." He said, "
Brian, we have a few airbeds in the closet." We blew up some
airbeds, we called it the Air Bed & Breakfast. It was a
temporary bed & breakfast, we ended up making I think $1000
by hosting a bunch of people that week and that was supposed
to be it.
Over the next few months, people started saying they'd love
to use us and that would be awesome if they could go
somewhere and use it. I'm not going to go into full story
except to say that we started our business to solve our own
problem and our own problem was to make rent and we'd like
to say what started as an airbed in the living room is now
spread to 10000 cities around the world.
That's Gregg.
Hi, Gregg Fence. I'm the Chief Marketing Officer of One
Kings Lane. I joined late last year after 10 years at E-Bay
and a wide variety of ten years in marketing, general
management and products, so quite a few things happened over
the course of the 2000s and prior to that.
I worked at Coca-Cola and kind of classic marketing, classic
brand management. We are a company founded just about two
years ago by Susan Feldman and Alison Pinkus, really focused
on the home and living space and we are just laser-focused
on driving deep and delivering on the consumer needs and
also the industry needs in a very fragmented industry that's
been very challenged with the downturn of the economy.
We're grounded in sales events but you've probably seen
overtime that we're growing into new forms e-commerce;
better ways to serve products to our consumers and really
delivering a great curated branded experience in many, many
interesting ways and really trying to weave commerce and
content together, tell an interesting story and then attach
products around those stories which really, I don't think,
has been done. It was sort of the promise of the internet in
early 2000s. We're going to try to crack with a deep focus
on home and living.
My name is Brett Garrett, Bain Capital Ventures; which is a
venture and growth equity, investment on bank capital. We're
deeply involved in lots of social and e-commerce and social
e-commerce companies from LinkedIn to Rent-A-Runway which is
a kind of a high end dress rental, the Netflix of dresses
we'd like to call that. The Find, which is a vertical search for shopping. Buy With Me, which is a group
buying website and we're looking to invest in a lot more.
I'll be representing the VC part of the room.
My name is Brett Keintz, I'm an '08 grad of GSB and I work
with Groupon. My official title is Director of Social. I'm
in the product management group and my background is
primarily in social, so in building apps on the Facebook
platform, on the Twitter platform and at Groupon, I do a lot
of new product development.
And this is our last. I'm Ann Miura-Ko, I'll be moderating
this session. I am an investor at Floodgate and I've
invested in a couple of social commerce companies. In our
portfolio, we have a company called Chegg, which is textbook
rentals and I'm also on the board of ModCloth, which is a
good example of social commerce in the fashion space.
I wanted to kick off this conversation. There is a lot of
different opinions as to what social commerce means.
Everyone talks about social commerce but they seem to be
talking about it in a lot of different ways. I wanted to go
down this group and just tell us from your perspective what
are some of the defining characteristics of social commerce.
Social commerce is definitely a big buzzword these days. I
think the way I think about it and the way I think we think about at Groupon is a lot of the way that
Facebook defines sort of this concept of a graph, a lot of
people will say, " You throw Facebook connect on a website and
you've got social commerce," that's not really fundamentally
how it works. It's not just about virality and sharing
through the newsfeed to your friends whenever you buy
something, that's not truly social. I think you have to figure
what your business is and what the nodes of
[inaudible] business are.
For us, it's local businesses and consumers and how we
connect those two through commerce, through a transaction.
That's how I really think about social commerce and
permissions play a big part of that. The permission of how
you can engage with the consumer, how you can get them to be
open to receiving messages or want to receive these sort of
messages, that's really where Facebook has done the best out
of anyone in enabling this two-way communication chAnnl
between friends.
The same thing applies for local businesses. It applies to
home manufacturers, it applies to people who have an
apartment or an air bed and breakfast that they want to
connect with other consumers. That's kind of how I think
about it.
I think I would agree with that. I think in general social
e-commerce is a pretty unyouthful label because it is so
broad and so undefined, but I think within it there are
really interesting businesses and there are really
uninteresting businesses in terms what social commerce is
and so, I think there is one social commerce where you just
take your business and you have Facebook connect and now
social commerce and there is another way you're really doing
something new; you're either taking your social activities
offline, you're facilitating going to the Web somehow or
you're creating totally new behaviors like AirBNB, they are
only possible because of the Web and you're able to kind of
create a commerce platform that way with social connections.
I think in that spectrum, I think the more interesting ones
are the ones where you're not just sticking some kind of
Facebook connect or some social label on something that you'
re already doing but you're really imagining something very
new and something that's available to do only now because
there is a social graph that you can leverage, so I make
that distinction.
Same opinion. I think the basics is wiring your setup to
share is really just the basics but how we're thinking about
things is how do consumers really start influencing our
shelves in the realtime, how does our inventory shift as our
consumer needs shift around that? How do we really co-opt
our consumers into becoming our sales force, our
merchandising team or customer support team? How do you
incent them, how do you arm them, how do you encourage them
authentically to go to work on your behalf because they love
your brand?
I don't think companies have really done that well
authentically. That's the magic word it's scale
authentically, cost-effective and where there has been a big
fixation for all the reasons in the Facebook and Twitter,
because of the network effects they've created. We're
equally as interested in the tales of social media. Where do
enthusiasts live? The Web, the forums, the blogs, the places
where they talk about what they love and I think we're going
to see more folks starting to push out there with new
technologies to really try to scale out into the tales of
social media because of the enormous power out there.
I think it's the early days quite honestly, a lot of fun
stuff is going to happen over the next several years.
I think we think of social commerce as very distinct at
[inaudible] to be and it means breathing online - offline.
We feel like a lot of things before AirBNB meant bringing
offline online and we think AirBNB is very much bringing
online offline. We are now connection millions of people
around the world. It's actually really cool because we can
create a world map and show which countries we've connected
to other countries.
In America, we're connected with residents in 90 different
countries last year. I believe Australians are connected
with people in 60 different countries and we can country by
country and look. If you bring those all together, almost
every single country has been connected with another country
on the planet minus the two countries I mentioned and it's
very intimate. Social commerce in our sense is very
intimate.
There is three really intimate things that you can do online
or offline. The first thing is that you're paying somebody
else money. A financial transaction is a very intimate
transaction, because you're paying money. Another thing you'
re doing is you're meeting people in real life that you don'
t know. It's the idea of meeting somebody in the real world
that you met on the internet; ten years ago there was a
stigma to that, I think it's pretty accepted today.
We're combining that with money, we're writing a third thing
and the third thing is now you're in the home with the
person. If you combine those three things, that is
incredibly unique kind of intimate transaction.
I think that's a great point. I think one of the customers
for one of our portfolio companies Zimride said, "My life
becomes more interesting when I open my door." I thought
that really captured this notion of what a lot of people are
calling collaborative commerce or the sharing economy.
What I'd love to do is dive a little more deeply into that
concept Brian around. What is it about today that makes this
kind of sharing and collaborative culture possible?
We've been struggling with that in a sense. When people hear
about our concept, it depends. I think in 2007 people heard
about our concept they thought, "Are you crazy?" That was I
think what my mom said and lots of my friends said. Of
course they don't say it at the time, they say it a year
later like, "Let me tell you what I really thought." At the
time they were really supportive, "Oh, it's excellent." A
year ago, "I thought you were crazy."
There were things that I think had to happen on the internet
before you could do all those kind of things. You could
argue you had to do all those three things in our websites
but do all those three things distinctly.
Paying other people; that happens on E-Bay. Before E-Bay,
there was a huge stigma to doing that and people were not
comfortable. People wouldn't buy anything online, let alone
pay another person online, so that had to happen.
Meeting people from the internet. 15 years ago, even ten
years ago, there was a huge stigma. Today, not a big deal.
And sharing space with people from online; that happens
every day on Craigslist. Maybe you get your roommate. A lot
of people in school or after you graduated, you'll find
roommates on Craigslist. The average person probably has, so
AirBNB, I think in many ways just picked all three of those
and they converged them, so they are already doing it but we
had to allow all these other websites to happen first. And
then, you bring them all those unique things together.
What about trust though? What kind of issues do you find
with that?
I think that's one of the other reasons. I think trust is
the currency of our marketplace and the way our site works
is you can book space or stay with people all over the world
and trust is the mechanism that allows that. We allow you to
check Facebook, you can see who their friends are. The real
key though is the reviews, the transactional based reviews.
After you stay with somebody, you leave a transactionally
based review.
That's a quantitative score, various things about them and
they leave a reciprocal review. We have 24/7 customer
support and as you build this user base of profiles with
reviews, you're basically building a trusted community
marketplace, it's a currency that over time - now, it's
really hard to get going because no one really wants to be
the first person without a review to book another person
without a review and so, there is a long story of why we
took AirBNB took a really long time to get going.
Now we have hundreds of thousands of reviews. One of the new
features we're going to coming out with is to allow you, if
you don't yet have reviews, you can self-select and say, "I
want to stay with Stanford alumni around the world." Maybe
you're in Tokyo; we can find you a Stanford alumni that we
connect you to as well, so trust can come through being
earned or it can come through affinity groups as well.
So communities is a really important part of that.
I feel like that's also, in some ways with One Kings Lane,
what's really interesting is that you guys have really
focused on one particular vertical and having a lot of
credibility within that vertical and I just want to dive a
little bit more deeply into that concept. Have you guys
thought about moving into other verticals and why did you
pick this one in particular?
Actually, we haven't. Laser focus by the founders was
saying, "We want to drive deep and really, truly deliver on
the needs of consumers in the home and living category,"
versus I came from E-Bay where we sold everything to
everybody and it's daunting, it's hard to deliver a really
rich experience in a given category if you've got to serve
50, 60, 70 categories. So we're very laser focused on this
category.
In large part, because it's incredibly fragmented on the
retail side. These folks really felt the pain when the
economy turned down particularly the high end of the
industry. There are brands collapsed, the magazines
collapsed. They were looking for a solution to sell their
goods to consumers without degrading the brand experience
and really needed a place One Kings Lane, just like Gill
Groupe has done in the apparel industry. They need a place
to move their merchandise while they keep their brand high
and really well thought of.
On the consumer side, it's challenging for consumers as
well. You ask most consumers what their design tastes are
and they say, "Eclectic," because they don't know. That's
basically, "I don't know what they are." And so what they
are looking for is people to help them, guide them, curate,
give them a sense of how they can build things out one at a
time, make it less intimidating, really starting to
democratize the industry which by the way, fashion was
democratized ten years ago, the internet really ripped it
out in the mainstream, it didn't happen in home. That's we'
re really looking to do is make it a whole lot less
intimidating on the consumer side, the buyer side and really
be a solution to the retail side which is challenged right
now.
I'd like to dive in a little bit more into the concept of
curation that you bring up, because it feels like
particularly for groups like Gilt Groupe or One Kings Lane
and I've seen this with the ModCloth; one of the things that
develops a brand is actually point of view as to what your
brand should be about and it's something that differentiates
these types of e-commerce companies from what I call
Commerce 1.0 where you're creating essentially a database of
all the products that could be sold as in Amazon.
It feels like there is a strong tie between this curation
concept and social commerce. What do you think is that tie?
I think curation is the secret sauce and we actually as a
company, one of the first things I did when I got there, the
founders said, "Really bring our brand to life, articulate
it, put it on paper, dimensionalize. As we hire new people,
we get bigger, we don't want to lose sight of who we are and
what we're all about." That's kind of rare for companies.
The challenge is, coming from E-Bay was not curated, trying
to curate. That's tough. It's easier to start with a very
tight experience and walk and walk and walk and give more
power to the consumer, make it more social, allow consumers
to sell to other consumers and that's what everyone aspires
to do. It's just really hard to do tight curation and scale.
That's the magic, when you make both of those work.
AirBNB is doing a phenomenal job in making them both work,
that is really the solution. And I'm biased in I think
driving deep in categories, being very focused on a narrow
set of consumers and segments is a winning solution going
forward.
So to challenge that notion going on to Groupon, you guys
have really expanded really, really fast and it doesn't
necessarily feel like there is really a lot of curation. How
do you think through that kind of social commerce? Do you
want to move in a more curated direction or do you want to
just provide offers to the masses?
The interesting thing is it may not be as well known but we
actually do a lot of curation, so we have an editorial staff
of probably 100 or more people that are doing write ups on a
daily basis and that's just a lot content. I think there is
a stat out there about how much content is created by
editorial team and it's something like thousands of
newspapers worth on a daily basis for every deal that we run
in every city we are in.
Curation is something that we value fairly highly. The trust
factor you were talking about; we are curators of local
experiences, so we have to pick out the best ones. We use
other review sites as well and look at what the reputations
of those businesses are elsewhere as well as in discussing
with them to determine just how good those businesses are,
but at the end of the day when someone buys a groupon, they
expect it to be a great experience and if the local merchant
can't deliver on that because of whatever reason; whether
it's our fault or not we suffer for that.
We try to be very careful in terms of making sure the
merchants are ready for the onslaught of customers they
have, making sure that they do actually provide good
experiences, but then there is the challenge of growth. How
do you continue to grow when you're curating so heavily? And
I think that's just something that our business and One
Kings Lane and we all have to deal with as we're trying to
create a great customer experience while still growing
massively over geographies and internationally in both
categories.
Everyone thought that the solution to curation was math;
algorithms that tell you to do everything and that's where
everyone went wrong. There was no personalization and
curation is really balancing the editorial and the
algorithms. You've got to get both right, that's where the
secret is going to come which is really hard to make a math
working skill and that's why in Groupon we say is there
balancing the both sides of the equation and really doing
some amazing things.
I have to agree with that. I think one of the things that I
always see in entrepreneurs is that that they - because I
teach mostly in the engineering school a lot of these
students come in thinking that the computers can solve the
problems and one of the most compelling parts of ModCloth in
particular was, there was a woman there who really
understood the community and the customers she was selling
to, so I think that's definitely an important component.
Now, we've looked through three different types of the
social commerce business. I'd love to ask Brett, in terms of
when you think about investing in these types of companies
then we've looked at curation, this concept of collaborative
commerce and what makes that successful even with these
sales sites the concept of community and how communities
will also help these couponing sites. How do you think about
evaluating these types of companies? What's the most
important component for you?
There is not one component that stands out head and
shoulders above everything else but I think there are some
themes that we're generally very excited about. I think the
three panelists here that are operators really represent I
think some of those themes.
I'd say one of the biggest things we're excited about in
terms of social e-commerce really is kind of what Brian said
earlier, which is taking the paradigm from bringing people
on the internet to taking people off the internet. And so,
AirBNB in a lot of ways I think was unlikely inaugural
company to do this, because of all the miracles I think
Brian had to overcome, but we're seeing lots more
marketplaces that the internet enables social commerce on
but is not really on the internet in the traditional way.
Some examples of that are a company called thredUP based in
San Francisco, which enables parents to send each other
boxes of clothes when their kids outgrow them, so it's
taking a very social practice that happened long before
there was an internet. People would say, "My 2-year old, 5-
year old, 7-year old just outgrew these clothes, I'm not
waiting for an in-law or someone else to give them to you,"
but now the internet empowers this practice and you can
share with only people who are in certain groups or
everybody and there is these platforms now where the
internet is touching that a little bit, in a sense that it's
not happening on the internet, it's happening in people's
houses where they pack all the boxes and print out the
labels, but internet is ubiquitously letting this happen.
Things like thredUP, things like Getaround or RelayRides,
which are kind of like the AirBNB for cars so there is this
collaborative consumption again through the mobile device,
allowing the internet to go through this whole platform and
enable us to help enough people go in a web page in surfing
around and have a social experience. I think those type of
marketplaces that are inherently social, that are happening
offline are really interesting from an investment perspective, because A) They are marketplaces
that are really stable and hard to dislodge overtime
but B) Taking behavior that is just really has been happening
for a long time and making it more powerful and more
extensible in lots of ways.
I think that's one things that's been really exciting. There
is other themes too but I think that's kind of the next
generation of social e-commerce.
I saw Brian, you were smiling when he was saying AirBNB of
something and that means you really know you've made it when
people are saying that.
When we launched we said we were the E-Bay of space. It's
funny how we came up with that name. We did "why common air"
it doesn't like to call itself incubation, I guess you could
say it's just kind of seed program where they give you
$20000 and it has a bit of collegial field; there is
typically 20 or 30 companies that will enter twice a year to
this 12-week program. Every week there is a notable speaker
and this all leads to this final day called "Demo Day".
Leading up to Demo Day, we were trying to explain what we
were and I remember Paul Graham, people at the time couldn't
get their heads around if there was a real business here and
there is notably like couch surfing. A lot of people
originally thought we were couch surfing. Today we have a
lot of homes, we have like really big spaces, we have
castles, we even have cars and boats and all sorts of
spaces, but back then it was mostly bedrooms and airbeds in
living rooms. Paul Graham says, "You should say you're the
E-Bay of space," because E-Bay was a marketplace. They were
really big, they were a billion dollar company and never
rent space.
We were so matter of fact and like, "Yeah, we're the E-Bay
of space," and at the time, I don't know if we really could
say we were because we were pretty much the E-Bay of
bedrooms but now we really have moved into any type of
unique space and the thing we'd like to say is E-Bay can
become a billion dollar company but monetizing stuff in your
home, how big could a company be if they monetized the home,
which is basically 25% of the annual assets and the
backyard, the front yard, all that kind of space and one
other thing maybe I'll say and this is to follow up Brett's
point was, I think in many ways social commerce is the way
things always were and the way that they will be and I think
it was kind of post World War too, there was this period of
maybe 60 years, at least in our space, where it wasn't like
that and the story goes like this:
We came up with a concept; I told my mom about it. My mom is
59 years old, baby boomer, and she thought we were crazy and
most of her friends probably thought we were crazy. And I
told my late grandfather about it. My grandfather grew up in
Great Depression and he said, "Of course," and I go, "What
do you mean, of course?" He had done this when he was
growing up. Of course there was no internet, but there
weren't modern hotels like we know today. People would stay
in bed and breakfasts and inns or in private residences. The
word "Southern hospitality" really means like taking people
into your homes and they have that symbol, a pineapple,
which is a symbol of hospitality. They used to have
pineapples at the ends of your bed.
In other words, this is how people have been traveling since
the biblical times. A hotel 100 years ago looked like a bed
and breakfast today; a bed and breakfast 100 years ago
looked like AirBNB today and so, it was really in 1960 like
the Marriott or Hilton had started really taking off, so it'
s this idea that we're the new way is kind of true, but at
the same time it's what people were doing for a really long
period of time.
I think for a period of time there was this idea that
strangers were being connected from so many different places
and there was this absence of trust and reputation in any
kind of currency. I think finally all those things came back
together and now you're seeing all these things happen.
And it feels like it's a rich space for a lot of different
types of startups actually to start popping up which is why
we're seeing sort of the AirBNB of lots of different types
of companies.
I just want to add one thing to that because it's an
interesting point related to the fact that this is how
things used to be. I think a lot of these social businesses
can be proven out by entrepreneurs at an early stage without
any technology at all, so one really interesting example of
that is the Rent-a-Runway story where Jenn and Jenny had
this idea to be the Netflix of kind of aspirational dresses.
Instead of buying a $1500 dress, you can rent that dress for
$100 through Rent-a-Way and they'll send it to your house.
They had this idea coming out of Harvard Business School and
when they met with us, we basically said, "Prove it," and
they said "We'll have to hire all these engineers, we have
to build this front end, we have to build this back end,"
and we said, "No, no. Don't do that. You pick the venue,"
but they decided to do it at sorority parties at Yale,
Harvard, Princeton and they showed up at the sorority
parties. In advance, they had sent out invitations to rent
dresses.
They showed up with a small inventory of dresses just to
test to see if people would pay money to rent the dresses,
what would happen to a dress at a sorority party, how it
came back, could it be re-used, lots of things they learned
without any technology at all.
I think a lot of these social proof points can really prove
it out, because I think the technology is what lets it scale
massively but the technology is usually never the business
in itself, so I think that was really an interesting anecdote and I think it applies to a lot of
social commerce businesses.
Yeah, we actually have a very similar story with Chegg.
Chegg came from a pivot out of Craigslist for colleges
basically and Facebook came out with Craigslist and so we
were like, we can't really be Craigslist for colleges
anymore. They had this idea everyone is exchanging textbooks
on this site and so, let's try to pivot there.
Instead of creating a whole new site with the Chegg brand on
it, they created a site called Textbookflix. And then, what
we did was we got an Amazon prime count and kids would come
in; I think we had 1000 students up first quarter, come in,
try to rent a textbook. We'd buy it off of Amazon and ship
it for free out to these students and they would call and
say, "I just a box from Amazon," we're like, "Yeah, just
send it back to us when you're done."
It was extraordinarily successful from that perspective. We
got to test out exactly as was mentioned here by Brett;
whether or not students would return the textbooks, what
state did they return it in and being able to test all that
hypothesis out before really even launching the business was
extraordinarily valuable, so I think that's very much true
for a lot of these types of businesses as it was proven out
by AirBNB.
Another question that I'm going back to One Kings Lane, it's
a little bit of a different type of business with AirBNB but
I wanted to go back to this notion that you were just
talking about how you would use your community actually to
help inform some of the back end of your business, and I
think that's a really interesting concept because it feels
like social commerce then what you're saying is not just
people coming and buying stuff, it's actually some of the
information that they are providing you to help you optimize
your business.
I'd love to hear a little bit more about that.
Sure. What One Kings Lane is trying to do over the next year
or so is more of our merchandising and we do it all
ourselves. It's beautiful, it's very expensive to do, it
looks great, but we want our consumers to do the
merchandising, so more user generated content because I can
tell a story and I can paint a picture of the room; if I can
get a consumer to do the same thing, it's much more
powerful, it's much more authentic, it's much more real. And
so, overtime the site will come more from our consumers than
merchandise and the aspiration.
All the ideas will come from them because consumers actually
have more trust in other consumers who share like-minded
interests than they do in folks like us. They love our
stuff, they trust people who are like them and so, more and
more the look and the feel, the merchandise that appears in
the site, the recommendations you name it, will come from
our consumer base and we think that's very powerful.
And again it goes back to the notion that no one has really
cracked the notion of amazing content and an amazing content
woven it together to provide context that really inspires,
surprises and delights consumers and I think that's the next
wave you're going to see and again, it's not math. It's math
and editorial woven together and we think the editorial from
our consumers is much more powerful.
Great. And then Brett, going back to then the concept of
Groupon, it feels like there is just with the wild success
of Groupon there has been billion other Groupon clones that
have been born. How, as a company, do you stay ahead of
that? Do you think that there is room for everyone or as
there is more competition, does that create problems for a
business like Groupon? How do you guys think about that?
There has definitely been a lot of companies that have
pivoted into this space whether they were in it to begin
with and there are companies such Yelp or even Google kind
of coming in and try to be in this space. I think, to us,
that's a sort of flattery I guess in some sense, because the
company has done so well. I think the thing we hear from the
merchant standpoint that's very interesting is that as a
merchant now locally, you get calls from countless daily
deals sites all the time and so while some of the fatigue on
the user standpoint for how many emails can you actually
subscribe to, daily deal emails, there is sort of a question
there. It doesn't take that long to read an email.
On the merchant side, to engage with a salesperson from ten
different daily deals sites, that can be really tiring. I
think there is an interesting dynamic going on where there
are maybe 100 copycat companies in the Bay Area, they are
all calling on the same merchants we want to work with and
that we have worked with. To a certain extent, these
merchants they want to work with us because they need new
customers, but they need to be dedicating 99% of their time
to running their business and making sure that that's
profitable and making sure that that's running well.
A daily deal site for them is a way to acquire new customers
that are loyal, that come back in the door time and time
again, but they can't spend too much time working with us,
we need to make it really easy for them. And so, I think the
more options there are for them, the more actually it helps
us to a certain extent and more it helps some of the leaders
in the space that have larger subscriber lists, that are at
a greater scale than some of the people who have looked at
the model and said, "That's so easy. I just need to start
selling local businesses," and then quickly learned while
there is a network in fact here, it's just localized. It's
not the same network effect that's at play at E-Bay, it's
all within San Francisco, it's all within Palo Alto, it's
all within Chicago.
So I think there is some dynamics out there that some people
talk about but don't really think through all the way that I
think will contribute to having scale as an advantage for us
across multiple marketplaces.
But if each merchant is getting 10-15 calls from every other
coupon site, does that make it a race to the bottom in terms
of margins for companies like yours or is it one or two
survivors will really emerge in terms of we have a big
subscriber and so therefore that's what we offer?
I think the subscriber base is the key thing there. For
them, again, I think that's it's more about I want to be
able to get the right number of customers in and in the
right cadence and it's less about the margin itself. These
merchants are ones that again, they can operate, they know
they operate good businesses, they know once they get
someone in the door that they can convince them to come back
in.
A lot of times, a very local merchant, so it's not as much
like a Taco Bell where the person that's serving them doesn'
t get to know that customer. They take pride in every
customer that comes in their door. They want to get to know
them, that's where that social aspect - it's funny you were
mentioning how it used to be like - I think in a lot of ways
what we do socially is we give these local merchants the
ability to reconnect with their local consumers in a way
that hasn't been seen in the United States in a long time.
I lived in Spain for a year in 2004 and I became a local at
a bar and I'd never done that in America, I'd never gotten
to know someone that actually served me food and gave me
drinks and we were friends and that's for us the ultimate
success for Groupon, can we create that sort of dynamic
through the internet, through mobile in local basis?
Just to tie that all back, I think that this social
discussion one massive barrier I think that Groupon can have
at scale is that they can push social promotions that are
curated because of your social graph and basically drive
better the right consumers to right merchants and the right
deals to right consumers in a way that once you have that
scale upstarts can't do that well and I think that's
definitely one really exciting thing about once you hit
scale doing Groupon that other people can't touch you, so I
don't know if you guys have been proven out yet but I'm sure
you're working on it.
Data at scale in any business is a definite advantage and
having the resources is to take that data and figure out
what it means and then apply it to your product then that's
something that we think about a lot, we put a lot of effort
on.
Great. I wanted to gather some final thoughts from each of
you on where do you think this all goes over the next, let's
say, two to three years. It feels like social commerce on
some levels has reached a maturity in terms of what it
actually is but it feels like there is also a lot more that
it can actually do and there is a big promise aspect to
social commerce.
Before we turn it over to the audience for questions I'd
love to get your perspectives on where this is all going in
the next two, three years. Start with Brian.
I know a lot of entrepreneurs that they have slide decks and
in our slide deck we had a make up a giant guess on the
marketplace and we had to make a guess on where this went
and I'm pretty sure that a lot of people now have our logos
in their slide decks and they say, "I get the Google alerts
for AirBNB and every so often you'll see AirBNB for cars,
AirBNB for events, AirBNB for food, AirBNB for tutoring," so
we've proven this model now which is really interesting.
I think that now that we've proven this at a certain scale,
it's really opened up people's, the door of their
imagination to all the other ways you can connect and I
really think it's all these different industries. I think
for AirBNB, the one thing I can say with certainty is that
it's going to grow quite significantly geographically. Our
site was global from day one and the reason we were global
and it's a very different than Groupon; we're local but we
bring the locals together from around the world. It's not an
in-store community.
Basically, we started in London, Paris, New York. People
travel this cities from tens of thousands cities around the
world and so this is natural that a network effect that
happened where they came from these thousands of cities
around the world, they booked, they stayed in New York. When
they go back to wherever they came from and we remarketed to
them essentially, that's all it was.
They would say, "You had a great experience. You should rent
your place, you should tell other people about it. Unless
your homeless, by definition you have space. You can rent on
AirBNB." That was essentially what we had said to them and
it really started to grow and so, I think this is something
that's spreading internationally and even with our platform,
it's spreading into different categories.
We see ourselves not limited to bedrooms or even necessarily
houses. We have many people renting all different types of
spaces. A few weird use cases that have been facilitated
today are, when people first move to a city now, AirBNB is
an incredibly common use case. Let's say you had to go to DC
next week; you just found out you got a job and you're not
finding an apartment on Craigslist from another city through
a different Craigslist when you came in toward the
apartments and you have to rush, that doesn't really work.
People use AirBNB now for neighborhood sampling. I want to
try out a neighborhood once a week and see what it's like.
That's really, really common. And there is a lot unexpected
things. People are even renting out other people's homes for
dinner parties, which I thought was unbelievable. It's like
why get a really nice house? Get a small house and when you
want to impress somebody, rent a big house for the night.
To some extent, I guess where I'm going is we think that
platform allows people to project what they want onto it, so
the future for AirBNB and for these marketplaces is if we
create really dynamic platforms, people are going to find
uses for it. They are going to realize I have this. We never
thought that people would put up their entire homes. We
never thought people would up tree houses.
One day a professor at Harvard decided he would rent out his
house, he had a tree house in his backyard that he probably
built for this kids. His kids went to college. One day, he
decides to rent out his tree house. His tree house is now
getting more booking than the house, and the tree house has
paid for the mortgage on the house, so it's pretty crazy.
When people rent out other people's houses, do they lie
about it being their house or do they - what is that
dialogue?
The dinner party one?
Yeah, the dinner party.
I have absolutely no idea about that one, but I wouldn't be
surprised. It's actually a really good idea. It's a great
way to impress a date.
Gregg -
The notion of maturity in social commerce, I think it's so
early. I think e-commerce overall is really early stages.
Right now, the share of e-commerce overall retail is same as
the catalogue business which is somewhat embarrassing. I
could say that because I've been in this business for 10 -
12 years and I'm as much as a culprit as anybody else and I
think this is just going to unlock things that the internet
was supposed to do ten years ago.
If we think back, I was supposed to be able to get
incredibly personalized experience for me, for anyone in
this room as it relates to e-commerce. That hasn't happened
and I think social empowering more people to do that for
other people is going to really, really awaken and help grow
e-commerce in new and different special way. It's a lot
about giving up control and allowing consumers and your
social graph to build your story for you, so I think it's
early days and we're just getting started, but not just
social commerce, the e-commerce is just getting going in the
next couple of years. I think there is just going to be
things happening that have not happened since the early
2000s, so it's just an exciting time to be in the space.
I couldn't agree more with those thoughts. I think we're
definitely just at the very beginning of a really exciting
phase, almost like asking the question, "What is the future
of personal computing?" in 1980. It's just stuff you can't
even dream about today and I think we spend a lot of time
talking about AirBNB, One Kings Lane, Groupon, which are all
immensely successful businesses but from a venture
perspective we've been seeing different use cases that are
equally social and commercial and they kind of marry those
two in totally different applications.
Things like; I don't know how many people are familiar with
just startups like fashiozine or go try it one where you can
basically take a picture of yourself wearing something and
because there is enough users on the site you get instant
feedback on, yeah definitely buy that because you're in the
dressing room at Macy's and that kind of social feedback on
that one use case is just really interesting. And so, I
think there is everything from personalized closet and kind
of mobile devices enabling real time sharing both with your
friends and to other people as you buy, just we haven't seen
anyone really scratch the surface on that, so I think it's
very, very exciting in the next three plus years.
It's definitely new. I think there is two dynamics we're
going to see expanding overtime. One is the enriching of
that social dynamic; in AirBNB's case, what are those
interesting interactions that are happening when the person
is at that house and how do they make that experience better
for both parties?
For Groupon, same thing. How do we make that experience
better for each user and for each merchant? And then the
second is really just mobile and I think you've touched on
it. All the things that are coming out with GPS, with
cameras, front and back; what are the things that you can
build into your product or new sort of interactions that are
made easier just by the fact that you have this with you all
the time?
This is becoming the most important device, the most
important technology that there is. If people get nervous,
they get anxiety. If it's actually taken away from them and
so, how can you use this device to actually make things more
social? Those are really the two dynamics I see.
Great. Well, thank you so much.
[Informal Talk]