How Amazon Missed The Boat On Social Media, But Could Still Catch It With One Key Strategic Acquisition

| About:, Inc. (AMZN)

It goes without saying that the best social commerce programs are built on the backs of successful social media programs. Nowhere on any list of social commerce leaders, though, would one be likely to find the absolute dominant leader in e-commerce: Amazon (NASDAQ:AMZN).

The dots between social media, social commerce and e-commerce have never really been connected by the world's undisputed e-commerce leader. For Amazon, never the twain shall meet, it seems.

Jeffrey Bezos is a business genius, in my view. I've been a fan of Amazon ever since it first launched in 1995, and I've been an Amazon Prime member since it launched in 2005 (if memory serves I signed up on the day of launch). I'm also currently long Amazon.

Indeed, Bezos hasn't missed much in the 21 years since he launched Amazon. He has fired on nearly all cylinders over past two decades. However, there is one boat he completely missed: social media. It's a tragic oversight, too, because Amazon could have been a dominant force not only in social commerce but beyond that, in social media itself.

The green shoots of a successful social media platform were there almost from the beginning: product reviews. These reviews, and the accompanying reviewer profiles, could have smoothly evolved to form the world's first e-commerce-oriented social network, 15 years before Pinterest even landed on the scene. It would have been so easy, for example, to integrate a "follow" function, just to see what any given reviewer was doing and commenting on, and to then enable broader comments and sharing. A simple "Like"-type function (originated much later by Facebook, of course) could readily have been integrated, as well.

Sadly, nothing along these lines ever happened. Amazon, despite being well ahead of the curve in nearly every respect, let its reviews system lie fallow, and failed to evolve it in any "socially" meaningful way. For all intents and purposes, Amazon's reviewer ecosystem never evolved beyond the 1990s. It missed social media and social commerce along with it. To this day, on the site's landing page there's no obvious way to search for specific reviewers or to see what one's friends and family are buying or browsing or doing on Amazon.

It's not just about bells and whistles on an e-commerce platform, either. With even just some basic elements of a social network baked in, could have been a much stickier site over the years, translating into significant additional revenue. Just as stores encourage shoppers to linger, stickiness on an e-commerce site can goose revenue dramatically, through both increased impulse sales as well as advertising (the latter is nothing to sneeze at; the company's ad revenue reportedly may top $800 million this year).

Over the last few years Amazon has at last been playing catch-up, albeit in a pretty spotty way. For example, it now allows users to share their reading impressions on Twitter and Facebook, but this is a fairly modest added feature and focused exclusively on books.

In more recent days Amazon made another move toward social by simply acquiring a large, pure-play social media platform focused exclusively on books, GoodReads.

Again, though, in both of these are purely on books, but Amazon moved beyond books shortly after its launch in 1995. One wonders why its tepid steps in a "social" direction are only in this one specific area.

In 2011 the company announced with some fanfare that they had recruited one John Yurcisin from global marketing communications giant WPP to help develop social strategies. Ah, finally, one might have thought: "Amazon is finally embracing social media."

Nope. It's now been over two years since Yurcisin was recruited. He's active on Twitter, recently Tweeting "#amazon #socialsummit is rocking! #spurringgreatideas." Great. However, he has a grand total of 743 followers on Twitter (I'm one of them!) This number speaks for itself: nothing against him, but Amazon's director of social media does not exactly appear to be a social media maven, and one wonders what he's been up to for the last two years, other than attending conferences.

The truth is, it's probably too late for Amazon to fully catch up in social media. Facebook, Twitter, and others are far too ahead. However there is one key acquisition the company could make that could help it not only make great headway in social, but also encourage social commerce: online scrapbook Pinterest, which more than any other social platform, is all about commerce. Pinterest probably has over 50 million unique visitors to its website per month (based on recent estimates), all of them anxious to share photos of products and other items of interest, many, many of which could lead to sales with the right, broad-based e-commerce partner.

Pinterest's current reported valuation of $2.5 billion is a bit rich (Amazon currently only has $7.9B in cash on its balance sheet). However, Jeffrey Bezos is known for driving a hard bargain. Surely he could negotiate a decent parachute for Pinterest's founders and a decent exit for its top-notch VC backers, because there is no better suitor out there for the site. Fully-integrated with Amazon, Pinterest could point the way toward not only catching up in the one major area in which it has lagged for many years, but also toward a noticeable boost in revenue without huge associated costs: Pinterest is essentially a passive platform, and a relatively efficient one: its number of users per employee is healthier than Facebook's, for example. Already one of the world's biggest cloud providers, Amazon could host Pinterest in its entirety without blinking, and after integration operational costs. It reportedly only has around 100 employees, versus over 88,000-plus at Amazon: a relative drop in the bucket, not to mention that there would likely be considerable redundancy identified after an acquisition.

Integration with Amazon also does not have to mean Pinterest being shuttered or even losing any of its character or (frequently imitated) design flair. Integration essentially just ties the two together, not unlike an affiliate marketing arrangement. Indeed, the thousands of sellers that Amazon hosts could also conceivably be tied in with Pinterest, thus boosting their bottom line, as well, and making Amazon that much more attractive to them as a hosting destination.

Amazon's road to a major social commerce-driven revenue boost lies with Pinterest. Better late than never!

Disclosure: I am long AMZN, FB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no relationship with Pinterest, the firm's management or any of its backers.

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