Commerce, Demand Generation and Mobile's Impact

Recently, Benedict Evans published a presentation titled, “Mobile is Eating the World,” where among other things he makes the claim that “ecommerce is much better at logistics than demand generation.”

He’s right, of course. Ecommerce and mobile commerce companies have excelled at getting things to you after you shown some interest and intent, but they have made little head away in the inspiration department. That’s for good reason as most people learned to make purchases online through the portals of Amazon and Google, where intent is king.

The rise of mobile computing via the smartphones has unlocked new opportunities for commerce (especially intent-based), but demand generation (inspiring buyer choices) is still lacking. Where is mobile commerce providing new opportunities for demand generation, guiding the user from inspiration -> intent -> conversion?

Theory of Disappearing Layers

In the Theory of Disappearing Layers, I put forth the idea that “as the amount of user attention available to internet services becomes constrained, the number of layers in an acceptable user experience moves towards 1.” When applied to the consumer conversion funnel, the theory suggests that ecommerce and mobile commerce companies that provide value at each level of the funnel will gain outsized favor (and dollars) from users.

A consumer’s time and attention are constrained, accruing to a few major outlets?—?commerce companies focused on intent-based purchases and incumbent social properties focused on user engagement via content that drives discovery and inspiration. Mobile’s growing ubiquity is quickly forcing these two worlds to collide in service of an optimal user experience, centered around the consumer’s needs and evolving preferences. Time is money and context, discovery, intent and conversion are the currency.

Mobile Commerce Opportunities Abound

There are a number of commerce companies attempting to build consumer experiences for this massive opportunity.

Button

Button is a mobile monetization startup powering a mobile affiliate marketplace that includes partners such as Uber, OpenTable and Hotels.com. Button’s value proposition is to be contextual commerce layer for discovering new apps and experiences, driving cross-app commerce and serving as a retention mechanism for repeat purchases.

Powered by Button’s APIs, the user experience is straightforward?—?open an app (For example, OpenTable), search for a restaurant in your town, book the reservation and you’ll be prompted to use Uber to book a ride to your destination. This experience can take place in-app or on mobile web; it doesn’t matter where the user starts her journey. The beauty of this experience is that starts with intent and conversion (opening and booking via OpenTable app) and then moves into inspiration and discovery (booking the Uber ride).

This particular user workflow would not have happened so seamlessly without Button powering it on the backend. The true test for Button will be proving that it can perform consistently well for lesser-known brands and publishers. New features like Customer Segments?—?the ability to reach users and dynamically serve them transactional experiences based on segmentation and user profiles?—?are a step in the right direction.

Pinterest

In Pinterest, Google and the Race to Win the Visual Commerce Market , I wrote about the Pros and Cons of Pinterest’s visual commerce initiatives:

As video becomes the dominant medium on mobile, having powerful search capabilities in its native videos will be a key component of Pinterest’s commerce opportunities…Pinterest [must] assure advertisers that its user base’s intent to purchase is incredibly strong and users are actively using these search tools in photos and native video, negating any limiting issues from being a walled-garden.

My initial concerns about Pinterest’s strategy centered around the very real possibility that its users used the platform purely for inspiration, forgoing any attempts to purchase on the service. In a recent Internet Retailer article, Macy’s Group Vice President of Digital Sedia Strategy confirmed as much stating that “customer adoption of buyable pins has been slower than we anticipated… there’s still a lot of Pinterest users who don’t understand how they work.”

Intuitive design is a major part of any great user experience. This is where Pinterest needs to work on the its user interface (UI) design, possibly highlighting specific user actions that are value-add to the user experience (UX). It’s not all bad news for Pinterest, as the Macy’s GVP explains that Pinterest is strongest in the “discovery and inspiration” department. Pinterest must leverage its strong position in discovery and inspiration to build context and guide the user to intent and conversion. Creating a user experience that naturally leads to a conversion on a social property requires context and intent.

Airbnb

Airbnb recently launched its Experiences product for users on its service. These Experiences, run by local Airbnb hosts, provide users with the opportunity to experience a host city through the eyes of locals. Once an user has booked an airbnb accomodation, airbnb will suggest a set of experiences in that host city. Each each Experience has own it cinematic promotional video that details the adventures that will take place for an eager traveler. The airbnb user can then select and book that Experience. Airbnb takes a 30% cut of revenues generated by the Experience.

Airbnb Experiences are intriguing for a few reasons:

1. The product expands Airbnb into a platform for hosts to make additional income, increasing host stickiness.
2. It opens the door for Airbnb to become the go-to OTA for the mobile era, allowing for partnerships with airlines and transportation companies such as Uber and Lyft.

That second reason is important because it speaks to Airbnb’s opportunity to own the travel-booking experience end-to-end. Airbnb handles the intent and conversion of booking accommodations and then begins guiding the user through the discovery and inspiration process with Experiences, airlines and transportation. From this perspective, Airbnb is playing at every level of the consumer conversion funnel?—?the epitome of the new mobile commerce opportunities ahead.

There are significant issues that Airbnb might run into with this strategy, namely lack of user adoption. Though its true that Airbnb has a loyal fanbase, its growth trajectory depends moving beyond that group into the early and later majority of users who may not be interested in the Experiences product and interacting with local hosts. This is could lead to other issues such as losing focus on the core product and use case to a detrimental degree, which may already be happening. And let’s not forget the quiet giant in travel, Google, whose revenues, dominant position with OTAs, and recently launched travel planning app present a real challenge in mobile commerce travel market. With all of that said, Airbnb has the network and the brand to build a major travel business beyond accommodations, centered around Experiences being the kind of end-to-end mobile commerce experience to bet the company on.

Mobile commerce is the future, that’s clear. The companies that focus on the user experience, build a strong network and platform will win. Network strength will be directly tied to quickly recognizing emergent user preferences and building services that become a part of the users’ lifestyles. These new emergent user preferences and behaviors will create constraints on traditional online commerce, forcing commerce companies to get creative fast.

Thank you for reading! Please share this post if you found value in it.

Interested in learning more about the mobile commerce and payments consulting services that Coin Labs offers? Please send inquiries to don@coinlabs.co or connect with me on LinkedIn.