A Media Company Mating with an E-Commerce Company

Josh Kopelman observed Friday that e-commerce has changed very little since he founded Half.com: more than half the top-15 media companies did not exist in 1999 while all but one of the e-commerce companies did. Josh concludes that “I believe we’ve seen more innovation… in eCommerce in the last 10 months than we have in the last 10 years.” Now this morning Fred Wilson wonders what this new wave of innovation in commerce, which he calls Commerce 2.0, will look like.

GREAT QUESTION! This is a topic we’ve discussed before, predicting last March that e-commerce would enjoy a new vogue, and publishing in 2007 our manifesto that e-commerce still had the most potential to fulfill the role that technology is always supposed to play in economics: making markets more efficient.

But we have never discussed what will set apart the new generation of e-commerce companies. My thinking about this changed last fall, when Menlo Ventures’ Shawn Carolan reviewed the pitch we used to raise money from Greylock, and concluded that Redfin was “a media company mating with an e-commerce company.”shawncarolan

What he meant was that Redfin generates its own traffic, functioning as a destination site for lookie-loos to browse homes they have no intention of buying, or that they have no intention of using Redfin to buy. And then we are also a commerce company, representing buyers and sellers in the purchase or sale of a home. As Iago would say, we’re a beast with two backs.

Building up our own bona fide media site frees us from the prison-house grind of buying and monetizing traffic, of merely offering a service for a few pennies more than it costs us to deliver it, and into a garden of delights: our project, with Redfin’s search site, is to please. Every time we consider an ad campaign, we decide we’d rather spend the money on an engineer to make Redfin search better. The only ads we’ll pay for are the ones we show to millions of people on our own site, for free.

This is why, as Bob Hagerty notes in last week’s Wall Street Journal, we built the top-rated iPhone app for real estate, even though the application is almost entirely free of any mechanism for users to work with one of our agents. The iPhone app accounts for 10% of our traffic on weekends, when home-buyers are out looking at properties in force. Using mobile devices to engage users deeper in the process is a big reason Redfin has taken off over the past 12 months.

So we would suggest that one characteristic of a commerce 2.0 company has to be that it generates its own traffic, by creating a sense of community, by publishing unique content or offering unique inventory. And we think that the commerce companies, once they stop merely buying and converting traffic with screaming “BUY NOW” sites, are often best suited to generate their own traffic, because we know what buyers want.

Imagine if you wanted to create a book review site without Amazon’s catalog of every book that has been published; it would be near-impossible. By the same token, Redfin now recognizes immediately when a home sells and for how much because we are members of the Multiple Listing Service used by brokers to list homes and record sales; we can be the authoritative site on where the market’s headed simply because we know a month ahead of everyone else what sold.

This advantage is not simply an artifact of the MLS’s exclusive rules. Since we write offers, we know that in my neighborhood offers just started going for above asking price for the first time in years; since we tour houses, we know that buyers are shifting to short sales due to new anti-foreclosure laws limiting REO inventory. We’re in the game, baby! By comparison, other sites seem to be watching the game on tape delay, from a Goodyear Blimp.

What Josh, Fred and Shawn made me realize is that we’re headed for a world where the whole division between e-commerce pure-plays and media pure-plays — which I have often emphasized — is a canard. The media companies could generate far more revenue per visitor if they took Ethan Lowry’s advice from the last Naked Truth: “get as close to the transaction as you possibly can.” And the e-commerce companies could get higher margins — which investors have been insisting on throughout the great e-commerce drought — if we stopped buying traffic and started making our own.

Discussion

  • http://www.plotehomes.com/corpsite_quick_deliver.php?search=all New Homes Illinois

    This is a great news. Thanks for sharing nice information here. Keep posting more.

  • http://jasonlbaptiste.com jason l baptiste

    Great post! I went to it after reading your comment on Fred’s blog. Ironically, this is in some respects how newspapers used to do it back in the day. The content they would write would bring the eyeballs needed to drive the ecommerce aka classifieds.

    Content+Social reduces Customer Acquisition Costs for ECommerce from arbitrage hell to as close to zero as possible.

  • charley

    Hi Glenn

    I would like to send a business proposal for RedFin. Kindly email me back to discuss.

    Thanks

    Charley

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