Social Commerce is a new phrase which is a mash up of two of the internet’s most pervasive technologies – ecommerce and social networks, but is it a real phenomenon and what’s the size of the market?

With average conversion improvements of 40%, Social Commerce is real and there are 2 key aspects; Recommendations and the power of groups.  Recommendations is something that’s 2/3 years old on the web – it’s basically where a product shows customer reviews from real people.  Our partners at Bazaarvoice are leaders in this respect and have some interesting statistics – 85% of people will trust a customer review over the site content and having reviews increases a conversion by up to 70% (on a reviewed site, 0 reviews leads to a –30% downturn, 1-5 reviews 20% increase – even if they’re negative, 5-15 reviews 40%…).

The power of groups is all about automatically twittering / facebook status updates during the path to purchase, with the real power being that a friends list contains groups of people who are demographically similar.   For example, a customer buy’s a Plasma TVs and his Twitter account is updated:  “Jim bought a new 46” flat screen”.  Human beings are status driven animals, and posts like this will compel friends think about buying buy a 50″ flat screen.  Our partners at ATG support this automatically with version 9.0, and Bazaarvoice support this with their SocialVoice product again with measurable impact on business.

SKU based retail (clothing, electronics etc.) is taking a lead in social commerce but other industries will catch-up and as always the first to implement will benefit from being the first to market.  For instance, recommendations are becoming common for direct to consumer financial services products such as credit cards, but is not common in insurance.  The first health, general and life insurance companies to implement recommendations should see a big increase in direct to consumer sales.  Again, social network updates will also impact this market, if a friend broadcasts that they received 12 months for the price of 10 on home insurance with Provider X, it’s likely to impact sales in a positive fashion.

The next step is to embed the path to purchase into the social network.  With the ease of use of the Facebook and OpenSocial APIs this is a fairly trivial task and one which could lead to a revolution in internet commerce.

With the launch of Facebook connect, web users have immediate access to over 120 million registered Facebook users.  We’re helping our clients take advantage of this by integrating their site’s with Facebook at registration time – if a user is registered on Facebook they can register on a “Facebook Connected” site with a single button click.  By removing a barrier to entry, registration numbers increase and more users are attracted to the web experience.

The 2nd level of integration is the ability to share event data between the sites.  Imagine you have a web site that tracks steps in a financial process, or your progress in a sports league.  By integrating this with Facebook the event notifications appear in the Facebook status notifications, building your brand and attracting new visitors to your site.

As social networking becomes the standard web application, it’s important not to lose business to competitors who understand the value of recommendation marketing.