Social Shopping Is Big Business, but What’s So ‘Social’ About It?

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Want to start a tech company? Make sure the word “social” is involved somehow. Social shopping site LivingSocial—second only to social shopping site Groupon—has just raised another $400 million, and is said to be worth over $3 billion now, according to the New York Times.

That’s still quite a bit short of Groupon, which “is said to be pursuing a public offering at a valuation near $25 billion,” according to the Times, but for two companies that have each only been around for a few years, things are looking pretty good so far. But have these companies been able to raise so much money because of innovative social features? Or are they simply peddling good deals that people naturally share with one another?

This whole “social” thing has been growing steadily hotter for a while now, spurned on by the success of sites like Facebook and Twitter, which I’d argue are truly social products. They facilitate communication between people and serve as meeting places—though not physical locations—for people to gather and exchange ideas. People use them to socialize.

Then there’s “social shopping” from the likes of Groupon and LivingSocial.

What’s social about Groupon? You could argue that since the site’s daily deals need to be purchased by a minimum number of users in order to be valid, there’s some impetus to get your friends to buy into the same deal you’re buying into. But my guess is that more often than not, people wait for strangers to scoop up the rest of the deals. That doesn’t seem too social.

And some of the better deals are often e-mailed to friends and shared on Facebook or Twitter, but that behavior isn’t specific to social shopping sites. You can comment on deals too, which, again, isn’t a feature that can’t be found on plenty of other sites—social or otherwise.

Then there’s LivingSocial, which functions very similarly to Groupon, but is actually slightly more social in that if you get three of your friends to buy the same deal you’ve just purchased, you get that deal for free.

But unlike truly social products like Facebook and Twitter, Groupon and LivingSocial could both theoretically survive just fine without any of the “social” aspects. They’re localized daily deals sites with the ability to share deals and, in LivingSocial’s case, feature what amounts to an affiliate program. Take the “social” out of sites like Facebook and Twitter, though, and everything falls apart.

None of this is meant to take away from what Groupon and LivingSocial have accomplished, but very little of either site’s success seems to have much to do with social aspects other than people e-mailing deals to each other and perhaps bum-rushing the same understaffed coffee house all at once.

Take all of the Facebook, Twitter, and send-to-a-friend buttons off of each site, and people would still be able to buy $40 gift cards to local stores for $20; and those gift cards would still be snatched up by the fistful.

LivingSocial board member Tige Savage told the Times, “Our playbook is focused on using the social elements of the Web and delivering broader packages of value to consumers.”

I’d argue that simply delivering broad packages of value to consumers begets social sharing whether such functionality is built into a daily deals site or not. An interesting test would be to see if removing the “social” tag from sites like Groupon and LivingSocial would fetch them as many investment dollars. Just how much is being considered “social” worth?

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