As the CEO of eToro I’ve been thinking a lot about the opportunities and challenges of the shift from e-commerce to social commerce. It is a necessary shift, the shift from enabling commerce over the internet to making smarter decisions. Moving from how to buy X, to why should or shouldn’t I buy X.
While having lunch with two friends from the Internet industry, Ido (aka Gingi) who works at Outbrain, and a friend who works at Google, we discussed the problem of the search industry today and how Google could use its existing ecosystem to take over social commerce. The problem with the current search model is very simple: it promotes low-cost (higher margin) supplier solutions rather than the better valued (viral) solutions.
Imagine two Limousine services operating in NYC. The first uses cheap limos driven by underpaid drivers, resulting in high profit margins. The service pays $2 CPC, Click to Lead of 10% means CPL is $20 and conversion rate from lead to ride of 66% means $30 CPA. Calculating a passenger fare of $70 and total driver/limo/gas cost of $30 yields a margin of $10 per ride.
The second limo service has spent an additional 33% on better vehicles and better drivers. Consequently, buying CPC on Google is simply not profitable for that particular service. It needs to pay the same $30 CPA, but its cost is $40 which results with zero margin. The service is therefore unable to scale its business using Google.
Is Google really interested in promoting the cheapest and least valuable products? The latter service can still have a great business, possibly a better one than the first. They have no Google Adwords campaign, and must therefore rely on other channels and word of mouth for referrals. The social commerce shift is about bringing the offline word of mouth online, and being able to analyze, monitor and optimize accordingly. We are still far away, but here are three steps that would take Google the right direction:
- Give significantly higher quality score for companies’ Google+ pages in search results and AdWords, in order to discount AdWords PPC cost toward a social funnel.
- Optimize conversion funnel toward socially-connect lead generation through Google+ pages (website optimizer version for G+ pages)
- Enable simple viral coefficient tracking in Google analytics, i.e for a keyword in a campaign count the amount of 1st tier, 2nd tier, etc. of social connections impacted.
In the solution I suggest, the driver would direct the clicks to a G+ page, seeing reviews of his friends, the history of the service and its quality. He would register using Google+, enabling him to return later and the service will remember his ride history. This page will optimize the context and social history of the page, the better product will get a discount on the Adwords (either explicitly or because of the higher quality score), the better product will now have better CPA and better conversion, since its reviews will be better, and since any visitor will see his friends’ reviews or usage of the service. This page can be optimized towards the acquisition, with smart tools and experience from Google. I am certain that any Google+ landing page with social context and a fast G+ connect to user email (and phone number) can be more efficient than the dozens of tools today for landing page optimization.
Google already optimizes organic search results for Yelp and Google+, why not optimize paid results as well ? Google should take advantage of the monstrous search business to push Google+ toward becoming the first scalable use of performance social marketing.
Facebook is too personal, which is why advertising doesn’t scale there yet. Facebook needs to shift how people think of commerce in order to scale their current model. G+ just needs to become the ‘Facebook for business’, the place to see what your friends are buying, and for how much. It should be more than just personal, but rather commerce oriented.
I believe eToro products would convert better with social context, as the leading social investment network we are a social service by definition and every social service is based primarily on its users’ satisfaction. We would experiment with social search and spend all of our Google Adwords on Google+. All we want is a good discount .