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Perspectives February 11, 2011

TechCrunch / How E-Commerce Got its Groove Back

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E-commerce was an innovation wasteland for most of the past decade. While social media companies such as YouTube, LinkedIn, Facebook and Twitter were growing exponentially, breakthrough new commerce start-ups have been few and far between. As our friends at First Round Capital noted in this blog post, 7 out of the top 15 sites on the Web were started in the past decade but only 1 of the top 15 e-commerce sites was started during this same period. Who was that new, major e-commerce entrant? Umm, NewEgg.

There haven’t been many exciting financial outcomes, either. I’m not talking about pioneers such as Amazon or eBay but the start-ups that came later. Sure, there are a few, such as Zappos, Diapers.com and Stubhub, but not many.

Classic e-commerce businesses were mostly saddled with high customer acquisition costs (loads of Google Adwords spend), low customer retention (one-off transactions), and operating models that consumed cash (due to warehouses full of inventory).

But the e-commerce market is big and ripe for innovation. E-commerce is now more than four times the size of the annual online advertising market. Yet it’s only four percent penetrated. Read more on TechCrunch.

“Social commerce entrepreneurs have architected fundamentally better models. They’ve replaced consumer experiences that were uninspiring and overwhelming with experiences that are curated, exciting and addictive.”