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Why Walmart Spent $300 Million On A Social Media Startup
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Wal-Mart spent $300 million yesterday to acquire social media startup Kosmix, AllThingsD's Kara Swisher reports.
Kosmix runs a social media platform that organizes content by topic. How does that fit into Wal-Mart's business of selling stuff?
There's actually two big reasons for the acquisition, with the second one most important:
1) Team.
Kosmix was founded by the team that started Junglee, one of the first price comparison search engines, which was acquired by Amazon. The company will form the basis of a newly formed @WalmartLabs division. So to work on innovative projects Walmart is getting entrepreneurs with a great track-record and knowledge of online commerce and social media, which makes tons of sense. But the biggest reason is...
2) Social commerce is becoming a reality.
People have been talking about "social commerce" since people have been talking about "social", but it's fast becoming a reality. Referrals to e-commerce sites from social networks are growing really fast, and on the internet, especially commerce, traffic is money. The sites that had great Google rankings in 2003 when Google was just starting to be huge made tons and tons of money. If Walmart.com, which always has been a kind of also-ran in e-commerce, can crack the code to get widely shared on Facebook, like SEOs cracked the code of getting good Google rankings, that could make it a rocketship.
The bottomline is that social commerce is starting to turn into a reality. People are turning to social networks more and more to decide on what to buy, and the businesses who are on the forefront of that trend will reap a windfall.
For a $400 billion revenue company, a $300 million option on social commerce makes a ton of sense.
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