Arun Sudhaman 20 Apr 2011 // 10:00PM GMT
Walmart’s decision to buy a social media firm may have raised eyebrows in digital circles. After all, the giant retailer was accused of all manner of digital crimes when it ran a memorable deceptive blog in 2006.
Still, five years is a long time in the digital world, and the retailing juggernaut’s new purchase appears to demonstrate that its social media mindset has moved on dramatically. Not content with taking the usual route of hiring talent and agencies to handle its digital needs, Walmart has instead spent an estimated $300m to acquire Californian social media outfit Kosmix.
Kosmix is best-known for its social media platforms, which allow users to filter the bewildering array of online conversations to find information that they want. Tweetbeat.com is a real-time filter for live events, while RightHealth is a health-focused vertical search engine. The Kosmix team will now form the core of a fashionably monikered new @WalmartLabs unit, charged with thinking up technological solutions to help the retailer build its online and mobile commerce offerings.
“They didn’t just buy it for social commerce,” says Ruder Finn digital strategies director Ged Carroll. “They are buying people who can steer them through the future. They are basically buying a reinvigoration of innovation.”
Walmart’s current ecommerce solution - via its retail website - has performed creditably. However, one source familiar with the company noted that when compared to the likes of Amazon and TripAdvisor “it has not been groundbreaking.” This is particularly so in terms of social appeal, an aspect that has risen in importance alongside the growth of peer reviews, location-based marketing and group-buying platforms.
It is this lag that Walmart may be trying to address. “This doesn’t leapfrog them or even draw them level but it does bring them into the game,” said the source, adding that Walmart’s decision to acquire is emblematic of a company that “has never been afraid to carve its own route.”
Specifically, Walmart wants lots of data. The company already possesses a massive data center that tracks every purchase made at its stores. “They are the poster child for data mining,” says Carroll. “Think of beers and nappies put side by side in stores.”
Kosmix’s capabilities offer Walmart a way to better link data back to individual needs - in the manner of a sophisticated CRM scheme. “Buying Kosmix means it will have a greater view of what their customers want, are thinking about and how they interact with their peers,” explains Lewis PR digital director Eb Adeyeri. “Social CRM is very much rising up the marketing agenda for many companies and it's something more companies will start to look at in more detail as consumers increasingly live their lives in the social web.”
Kosmix founder Anand Rajaraman explains the shift on his blog:
The first generation of ecommerce was about bringing the store to the web. The next generation will be about building integrated experiences that leverage the store, the web, and mobile, with social identity being the glue that binds the experience.
As Rajaraman notes, one in 10 customers around the world shop at Walmart online, and that proportion is growing.
More and more visitors to the retail stores are armed with powerful mobile phones, which they use both to discover products and to connect with their friends and with the world.
Inevitably, and particularly when Walmart is concerned, this interest in online data will pique the interest of NGOs and pressure groups. “From the perspective of the customers, this will be a good thing if Walmart is able to get the balance right between stalking them and actually providing a truly tailored service,” points out Adeyeri.
Meanwhile, the Kosmix purchase is unlikely to have escaped the attention of Walmart’s rivals. Tesco’s Clubcard programme is already considered one of the more sophisticated schemes of its kind, but it has yet to demonstrate that it can apply its CRM savvy in the social media space.
“You’re inevitably going to get people like me selling it to retailers for whom it won’t necessarily do much,” explains Carroll. “It won’t necessarily always provide the ROI. You always have an over-correction before people settle down and figure it out.”
In short, not every retailer should rush out and buy a social media agency. As Carroll points out, a number of factors come into play: the needs of the retailer, the context of the purchase and the consumers being targeted.
For Walmart, at least, the Kosmix purchase appears to make sound sense, if only - says Carroll - because of the company’s heritage as a risk-taker. “Walmart has innovation in its DNA.”