Thomas Cornelius is a guest author. To submit a guest post, click here.
Throughout the short history of the Internet, successful online categories have always emerged in parallel with the commoditization of pieces of their ecosystem. Once major new categories (like e-commerce or social networking) are established, other companies then step in to innovate and establish profitable niche plays within them.
One such category with much activity right now is the daily deals space. In it, the top players, Groupon and LivingSocial, fall into one type of group you typically see: early entrants who trailblaze these new areas but then fail to recognize the power of a network and instead try to ride out their “early mover” advantage. But in a world of instant connectivity, trying to defend against the inevitable democratization through networks is the wrong move. Ultimately, as the playing field within a category levels, it becomes more valuable to deliver problem-solving solutions that use networks and connectivity to their advantage.
Major market makers Amazon and Facebook have recognized the importance of participating in developing an ecosystem and rather than defending data — they share data and open up infrastructure, allowing others to participate and build upon their platforms. Because Facebook’s core value is derived from the aggregation of connections, the company has been smart to create its platform with open APIs and Facebook Connect. Such a move allows developers to access and utilize its information and user identity data across other applications. The result after these changes has been accelerated user growth across the world.
But what is now holding back many new companies is the lack of accountable online-to-offline-enabled commerce transactions. If mobile commerce is to move ahead, the current closed structures around offline data will need to to change. Our society’s perceptions of what is acceptable private and public information have changed, and we will need a similar paradigm shift in retail and consumer commerce data provisioning.
Data Sets That Need To Be Freed
Credit card processing companies hold the data of their merchant’s transactions. The merchant has access to the data and can analyze monthly statements based on customer spend, repeat visits, et cetera. This data can already be obtained by a merchant’s marketing partner (with the merchant’s consent) from the back-end processors like First Data, TSYS, Chase Paymentech and others. It can also be obtained directly from the consumer, by gaining access to their statement.
Level 3 SKU Data
Today merchants’ and retailers’ point of sale (POS) and business management systems have SKU-level data with rich transaction history and inventory levels. This data can be extracted from the POS in most cases, and some systems today provide an actual data feed.
Merchants and brands create various types of offers, coupons and promotions for a variety of channels. For each online-to-offline or offline-to-offline promotion partner they are working with, they use a different process to set up the promotion, and a different process to track and measure it. Access to offer data should be standardized and the content should be made readily available.
Brands and merchants use a variety of systems to manage redemption; their existing POS, mobile redemption applications, web-enabled redemption, and card-linked redemption. There needs to be a standard gateway to measure access to these redemption methods.
Commoditization Leads to Democratization
Some of this data and functionality is already available, other data still needs to be freed. But all of the data needs to be normalized, aggregated and made available via a single access point to drive innovation.
The point of democratization is not to kill competition, it’s usually to enable competition and innovation to take place at a higher level than was previously possible. Providing free, standardized distribution of the kind of data listed above will empower application developers and online content providers to increase the discoverability of available offline products, services and events.
New entrants will be able to tap into these data streams as a utility and create new products and services that will help the consumer and merchant to find and transact with each other. Ultimately the readiness of data will bring not only opportunities to new entrants, but will increase the overall market size of online-enabled offline commerce and will bring new growth to existing companies that facilitate closer connections between merchants and consumers.
Application developers see the most direct benefit, as they will gain new opportunities to synthesize and utilize this data, and will be able to focus on extracting value for their audience (rather than having to build diverse connection points into retail on their own).
The majority of this evolving data ecosystem is already built. Online commerce had created the infrastructure that will power data-driven commerce. The next phase will be to create an online network that will connect players with data.
The Rise of the Commerce Network
Platforms and systems are, by nature, fragmented. I’m not talking about the creation of another Facebook. This phase of the Internet’s evolution is really all about taking cross-platform connectivity and data exchange to a new level, not creating a new paradigm.
But the concept of reducing online-to-offline commerce data to a single, unique, universally recognizable and usable identifier is still exciting. Once we create this type of “commerce network,” we will start to have an online equivalent to magnetic credit card rails, and the connections between different kinds of commerce will become clearer. Meanwhile, as the social graph is put on top of this data, marketers will be able to move purchases closer to purchase intent — and we will have real time accountability of transactions.
This guest post has been edited for length and clarity. You can read the unedited, original post on the author’s blog.