Walmart shocked many in the retail, VC, and overall business community this week with their acquisition of Kosmix.
While the focus of this blog is specifically Facebook commerce, this acquisition is such an interesting move in the overall space that I think it’s big enough news that we should dig into it. Three factors that make this a very interesting move:
- Walmart hasn’t been very acquisitive in the e-commerce world. For them to suddenly wake up and make an acquisition AND it is in such a cutting-edge space, that says something.
- The price tag – AllthingsD’s Kara Swisher, reports that Walmart paid, “just over $300m” for the company. This is a company that as far as anyone knows has very little to zero revenue.
- The implications – to make such a big move, Walmart must have seen something in Kosmix that a) made it get of the dime and b) spend a pretty penny. If you go to Kosmix today or check out their ‘tweetbeat‘ Kosmix powered site, nothing screams unique or e-commerce. There are literally hundreds of ‘top trends on twitter’ sites and tons of sites that aggregate various social media into a more digestible format. But when you review these sites, the big question that comes to mind is….”Where’s the Commerce?!”
In this post, we’ll pull from a variety of sources to speculate on the acquistion including:
- Various other industry sources.
With that being said, let’s dig into this from three angles:
- What is Kosmix and who are the founders?
- What is Jeff Bezos’ involvement in Kosmix?
- What could Kosmix mean for Walmart?
What is Kosmix and who are the founders?
On the surface Kosmix pretty much has zero to do with commerce/e-commerce/social commerce. But to understand where it could (pure speculation on my part) be going and what caught Walmart’s attention (we assume it isn’t something publicly visible yet), you have to dig into the company’s background.
Kosmix was founded by Venky Harinarayan and Anand Rajaraman. Venky+Anand founded one of the earliest comparison shopping sites – Junglee that was acquired by Amazon and served as part of the technology core of their massive third-party platform. Venky+Anand stayed at Amazon and built mechanical turk as well as other great Amazon ideas. I don’t know for sure, but would be shocked if they didn’t also have their fingerprints on S3 and EC2.
What’ Jeff Bezos’ involvment in Kosmix?
While it’s been widely publicised that Kosmix raised $55m from Accel and Lightspeed, one factor that’s somewhat interesting and hasn’t been explored is that the company is funded by Jeff Bezos’ personal investment vehicle, Bezos Expeditions. Bezos is also on the board of directors.
What’s interesting in this situation is the obvious conflicts of interest. Amazon and Walmart are in a multi-year knife fight over e-commerce and it says something that Walmart won what I imagine must have been a pretty good bidding battle for this company. Bezos must clearly know what they are working on and has insight into what Walmart will do with the asset. I imagine somewhere within Amazon, a competing project is already spinning up to counter this action by Walmart.
What could Kosmix mean to Walmart?
That’s the background, but it doesn’t answer the ‘why Kosmix’ and ‘why Walmart’ questions. In other words, what does Walmart see in Kosmix that will generate oodles more revenue than the $300m investment?
When you look at Kosmix today, there’s really not much e-commerce there. I don’t think it’s TweetBeat or RightHealth that are of interest to Wal-mart. There is a poor-at-best CSE buried in some of the topics that are commercial in nature as you can see from this sunglasses topic->
So to understand what’s REALLY going on, I found it important to read between the lines of these three quotes from Anand:
“We are at an inflection point in the development of e-commerce,” Mr. Rajaraman wrote “The first generation of e-commerce 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.”
“The world of social media is exploding and for millions of consumers their social connections matter hugely in their daily lives,” said Anand Rajaraman, co-founder of Kosmix. “Our work has focused on developing a social genome platform that captures the connections between people, places, topics, products and events as expressed through social media — be it a feed, a tweet or a post. We are thrilled to join one of the world’s largest companies and combine our work with Walmart’s vast online and offline retail businesses.”
And my personal favourite->
“We are at an inflection point in the development of ecommerce. 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. Walmart’s enormous global reach and incredible scale of operations — from the United States and Europe to growing markets like China and India — is unprecedented. @WalmartLabs, which combines Walmart’s scale with Kosmix’s social genome platform, is in a unique position to invent and build this future.
The clues that lead to ideas about what they are up to I take away from these quotes are:
- Social identity – Quora has shown how important this can be for a simple Q+A site, it doesn’t take too much of a leap of logic to extend it to product reviews and recommendations. So maybe we are looking at socially-enhanced product recommendations and reviews?
- Conversations around products and events – Perhaps Kosmix has cracked the code on understanding when a social conversation is happening and is commercial in nature. That would be a great underlying technology for an ad network, social CSE, or a retailer to leverage?
- Social Genome Platform – One of the persistent problems in the world of e-commerce is taxonomy – What lives where do they fit, how do they share attributes, what to you recommend when, to whom? Perhaps this ‘social genome platform’ could be turned towards that problem with some social angle to become the ultimate recommendation engine?
There’s also a lot of talk on both sides that this is strategic for mobile which I really don’t see based on the current pieces of the Kosmix puzzle. In any case, it’s going to be interesting to watch this story develop and look back in 12-18 months to see if this was a brilliant acquisition on Walmart’s part, or did they totally miss the mark?
Facebook Commerce Strategies readers, what do you think Walmart+Kosmix are up to?