From Niche E-Commerce To Web 3.0

As you know, we’re working with many e-commerce entrepreneurs in 1M/1M. We see every flavor of niche company selling everything from eco-friendly lawn mowers to plus-sized women’s clothing to luxury yarns to fountain supplies to sheet music to window blinds to . . . you fill in the blank!

As I have studied these companies over the past few years, I have become convinced that the time has come for entrepreneurs to stop thinking about e-commerce and start thinking of their business as Web 3.0.

Let me recap what I have long thought to be the essence of Web 3.0. To me, Web 3.0 results from combining content, commerce, community, and context, with personalization and vertical search. Or, to put in a handy phrase: Web 3.0=(4C + P + VS).

Here’s what it means.

Web 1.0 was all about driving online commerce and trying to find “anything” in the tangled jungle of the Web. It produced companies like Google, Yahoo!, Amazon.com, eBay, Netflix, and Blue Nile. The rush for dollars also resulted in the dot-com meltdown. Even so, people’s habits of searching, and buying and selling, genuinely changed. Today, with 540 million people coming online in China, close to 100 million in India, and a few hundred million more around the world, it would be fair to say that we’ve still only scratched the surface of the potential of Web 1.0.

But meanwhile, Web 2.0 has come about, changing consumer behavior fundamentally. Facebook, with 500 million users, has been the most notable company to emerge out of the social networking phenomenon that exemplifies Web 2.0. But there are a plethora of others where you can “meet,” “connect” and “make friends” online these days – habits no longer considered weird.

At the same time, we’ve seen a great deal of investment in vertical search companies. If you are looking for a job, you can go to a site like Indeed.com and search across various job portals and career sites. Or go to Kayak if you’ve got travel questions, or TheFind if you’re seeking shopping advice. In each case, the sites have carefully customized search parameters (job seekers, for instance, can search on salary ranges, locations, levels, and so on). Therein lies the big difference with Google, which is a generic horizontal search engine. And today, even Google is trying to acquire into vertical travel search. Presumably, the company will try to get into other verticals as well. There has clearly been a verticalization movement on the Web in general.

Web 2.0 has also brought an onslaught of user-generated content in the form of blogs, podcasts, comments at the bottom of articles and reviews of restaurants, movies, stores, and hotels. Media have become truly interactive, as opposed to the one-way world we were used to. Many more voices are being raised and heard. The media industry, as we have traditionally known it, has been shaken to its roots.

The next wave – Web 3.0 – will organize itself around two different elements: context and the user.

By “context,” I mean the intent that brings you to the Web, your reason for surfing. Looking for a job is “context,” as is planning a trip or shopping for clothes.

Fundamental to context is the user. And when you fuse a specific user with genuine context, you wind up with truly personalized service.

Imagine this: You are planning a trip to Rome. You are looking for a hotel around the piazza di Spagna, not something large and impersonal – which rules out the Hassler Villa Medici. You like smaller bed-and-breakfasts with charm, warmth, and character.

You want an online travel agent who can understand your needs and preferences and find you not only the right hotel but really interesting restaurants, boutiques, and shows all aligned with your taste. Normally, you use Guide du routard as your travel guide, but today there is still a gulf between travel guides and online travel-booking sites – in other words, content and commerce are fragmented. In Web 3.0, you will see the content and commerce finally come together in a big way, no longer forcing you to hop from site to site to get your job done.

On this same trip, you would love to meet local people who share your interests – say, cooking, jazz, and opera. In Web 3.0, you will see the community elements of Web 2.0 pulled into the context, making it as easy to find new friends with common interests, even in a distant city, as it is to book a hotel room.

Some user-generated content is already becoming an integral part of travel planning today. At TripAdviser, for instance, travelers can report on their experiences at hotels around the world. The missing element, however, is the notion of the individual user and his or her personal needs. You don’t want to read reviews from anyone. You want to read reviews by people whose taste and judgment you trust.

In a Web 3.0 world, then, a personalized travel agent will help you find and book a highly customized itinerary, leveraging all the power of previous generations of Web technology – searching (both generic and vertical), community building, content and commerce. That’s how I get Web 3.0= (4C + P + VS) – the sum of content, commerce, community and context, with personalization and vertical search.

Now, as a niche e-commerce vendor, if you look at this formula, you will see a few things built in. The most important of these is the notion of content – both content that you produce, and also user generated content that your customers produce. I have often advised e-commerce entrepreneurs to invest in blogs and invite their customers to write guest columns on how they are using the products. If you are selling luxury yarns, you could ask your most passionate customers to come and teach their knitting skills and share secrets with the community. If you are selling eco-friendly lawn mowers, you could harness the passion of your environmentally-conscious customers and invite them to write about green issues. And with user-generated content, you also get to engage your community in ways that are meaningful to them.

Why is this important?

Because, 85%–90% of the web’s traffic consists of organic search. This is traffic you don’t need to pay for. This is traffic that naturally flows to your site based on content you have on your site. As long as you optimize for keywords and search engine algorithms, you will be able to harness some of this traffic, and today, a search engine optimized site that attracts organic traffic is the cheapest possible customer acquisition strategy.

You must apply it to your business.

Vertical search, also, is a low-hanging fruit that really helps users build loyalty to your site. Window blinds entrepreneur Jay Steinfeld has applied this principle to Blinds.com, and built one of the largest niche e-commerce companies that is tightly focused on the context of shopping for window blinds. The search capabilities of the site are tuned to help shoppers navigate the different nuances of this specific vertical.

The final frontier, of course, is personalization. That is a harder problem, and requires more technical expertise. One of my favorite companies that offers personalized recommendations is Baynote. By applying principles of neuroscience, they have created ways to predict what shoppers would be looking for. As your business grows, and as you can afford more expensive technologies, you could look into adding personalization.

Or, if you come from a technology background, you could build your niche e-commerce business around the personalization philosophy. It clearly is a significant differentiator.

E-commerce is booming. 20,000 e-commerce sites are coming online every week in America. As large populations in China, India, Turkey, Indonesia, and Brazil are added to this tremendous momentum, it is my firm belief that niche e-commerce – specialty retail, in the brick-and-mortar world – will be a tremendous wealth creator.

As an entrepreneur, as you approach your niche e-commerce business strategy, keep in mind my handy formula: Web 3.0=(4C+P+VS).

It will help.