Blog of Intellectual Capital

Article from GigaOm.

“A year and a half ago, I spent a few hours at the offices of Hunch, a New York-based startup, learning about their decision engine. By asking you seemingly random questions, the engine helped you make decisions. Hunch’s engine was a nice way to aggregate what you liked, then help you find information based on that assumption. For me, the real potential of this decision engine was commerce, and that’s why I thought perhaps Amazon should buy Hunch. It could use the decision engine to help customers sift through the ever-expanding array of offerings and make purchasing decisions. That little kernel of an idea still looms large in my thinking, especially as I wonder what the future of media and e-commerce looks like.

Social Spending

Last week, I was chatting with Lightspeed VC’s Jeremy Liew, who has invested in companies such as Bonobos, ShoeDazzle and LivingSocial. He pointed out that the first phase of e-commerce was about shopping for staples. It was utilitarian, and he pointed to the success of companies such as Diapers.com, Amazon and Zappos. The next phase of e-commerce is about recreational shopping, and as a result, it needs to be a more fun and social experience.

No wonder there seems to be a growing obsession with companies such as Groupon and LivingSocial, part of an amorphous category called “social commerce,” which means different things to different people. Elizabeth Yin, co-founder of the wedding apparel shopping service Shiny Orb, wrote in a guest column: “the social shopping space is comprised of e-commerce sites that facilitate interaction among customers as part of a shopping experience.”

If that is indeed the case, I have to say today’s social commerce companies need to build deeper social experiences. But how? And where does social commerce go from here?

Enter the “Interest Graph”

In July 2010, Chris Dixon — co-founder of Hunch — noted we would soon enter a phase where “one graph to rule them all” will give way to more-focused, social graphs built around concepts such as taste, location and trust. In other words, these concepts could become the underpinning of what is now generically known as the interest graph.

At its very core, the interest graph is a way to organize a social network based on people’s interests. For instance, if you’re a fan of Charlie Sheen and Lindsay Lohan, it’s clear self-destructive Hollywood stars and their lives are what you’re interested in. The interest graphs are built through various mechanisms: by following people whom you deem as experts, through your likes and shares, etc. In the middle part of the last decade, we tried to do this through tags.

These interest graphs are more like mini-Twitters. Just as you can follow someone — Will Ferrell, for example — without being his friend, you can have an asymmetrical relationship with someone who has similar musical interests or taste in watches. As a blogger for Asset Map, a San Francisco-based startup, noted:

Music, movies, books, articles — these are all things where people have tastes that aren’t always influenced by friends — or at least not a big group of your friends. It’s no surprise to me that the most successful music services so far are things like Last.fm and Pandora that are far more organized around your musical interest graph than your musical social graph (AssetMap Blog)

Interest Graph + Commerce = Transactions

Interest graph, for me, is the underpinning of a new kind of e-commerce experience. Think of it as a new kind of social commerce experience that goes beyond the notion of group shopping (Gilt Groupe, Groupon), shopping communities and recommendation engines. When Apple launched Ping, its music-oriented social network last year, to me it represented a template for social commerce.

Since Ping’s launch, I’ve downloaded songs based on the likes and recommendations of people who are not necessarily my friends, but who I follow because they have good taste in music. Sure, I have friends who are good at picking tracks, but Ping’s social layer has helped me discover new artists.

A few years back, I met Jeff Bezos and asked him why he was buying up content sites. I suspected the Amazon founder wanted to eliminate the “advertising” between commerce and content. If you remember, in 2007, Amazon bought DPreview, a digital camera community, and later acquired IMDB, a movie database.

As always, Bezos was a little ahead of the curve. In the post-Facebook, post-Groupon world, one can see a new kind of symbiotic relationship emerge between the interest graph and the “sellers.”

The concept is no different from enthusiast magazines of the past, such as Stereo Review, except there are “network effects” at play. Network effect, according to the Wikipedia definition is, “the effect that one user of a good or service has on the value of that product to other people.”

While enthusiast magazines were limited by the geographic boundaries and dollars publishers could spend on attracting new customers, in the Internet age, the network allows us to spread the word at a rapid clip, especially amongst people with similar interests. More importantly, since sellers can target the exact interest graph they want, they can skip advertising entirely. Instead, they can come up with an actual offer that leads to a transaction.

For entrepreneurs, I believe there are opportunities to create unique experiences around the concept of “interest graphs” that can be built off the backs of uber-networks such as Facebook and Twitter. These networks can help find the right kind of audience to build a viable channel for new commerce experience.”

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