Will “Social” Startups Suffer the Same Fate as Early E-Commerce Pure Plays?

I was having an open discussion with an analyst today as part of a briefing about the latest version of Sugar 6, coming out in a couple weeks. This release has a lot of social media management capabilities – which I’ll wait to get into here on the blog closer to the announcement ;)

Anyway, the analyst and I were talking and an interesting point was made. The analyst noted that with all these social silos being built up, and the potential for users and companies to see little value out of this disengaged approach – a lot of negative backlash could occur.

I agree – and I quickly made the analogy that the whole social spectrum of startups might suffer the same fate as the e-commerce pure plays of 1999.

Huh?

Let me explain. While we did see some really well done pure play e-commerce companies come out of the dot-com boom n’ bust, like Amazon, there were a lot of stinkers: Pets.com, Webvan, DiapersDelivered, etc. (ok I made that last name up but I think there was a diaper e-commerce play that went nowhere – but you get the point.)

These pure plays lacked a lot of things: solid revenue models, business savvy and, well, customers. They were gambles made on hype and speculation. And so many of them faded before the ink was dry on their VC checks.

But a lot of brick and mortar firms made strong headway into the e-commerce world early on: Barnes and Noble, Walgreens, Gap.com are all examples of strong brands expanding into the early world of web commerce. I think social will play out in a similar vein.

We will have some big social standouts – maybe we already do in Twitter and Facebook. But I think when it comes to companies that thrive around social media – existing technology plays with sound business models, flexible products and strong core customer user communities are set up to win.

In the “social CRM” world – traditional CRM players already “get” CRM, and are simply adding new channels to support the way customers want to interact. They are not re-inventing the wheel, just adding new features to an already well-functioning vehicle.

Ultimately, when it comes to a concept like CRM, there is way too many traditional (or should I say eternal) features to consider for any pure social media play to unseat the leaders here. We may see a lot of CRM providers acquire these small guys, or see some fizzle out, but CRM as we know it is not going away, just evolving.

2 thoughts on “Will “Social” Startups Suffer the Same Fate as Early E-Commerce Pure Plays?

  1. Great post Martin! We, like the number of social companies, are overpopulated and oversaturated. I have talked about the infoglut ‘explosion’ for a few years now– exacerbated by the social phenomenon. But with every cure seems to come side-effects. This one is just too darned much exposure, too many social (everything) companies, and too much information. The negative backlash will be exacerbated as more companies adopt social media as an additional channel of information on their employees, and as companies we pay to protect us (E.g. insurance companies) use the information against us.

  2. Great points Randy…the ease of access to social tools and data has spawned a ton of “first movers” in this space, and like you note, there is just not enough room for all of them.

    The data explosion opens up a whole new level of issues, some you hint at – not even gonna go there in this comments section ;)

    Thanks again and keep reading!

    Martin

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