1Mby1M Deal Radar 2010: ShopIgniter, Portland, Oregon

As we saw in the recent Tech Stocks post on Amazon and eBay, retail analysts expect e-commerce to increase at a much higher rate than traditional sales this November and December. Social commerce is still small: blogs and social networking sites are the first step in the shopping process for just 3% of customers. But companies such as ShopIgniter, the creator of a social commerce suite called sCommerce, believe that this number will only grow and that the 2010 holiday season will be a defining period for the blending of e-commerce and social networking.

Portland, Oregon–based ShopIgniter was founded by Jason Glover (creative director) and Dan Warner (CTO) in 2009. CEO Matt Compton joined the company as a VC from Madrona Capital, the group that lead the investment in Amazon. As a partner at Madrona, Compton studied social media and e-commerce. Previous to Madrona, Compton spent several years at Yahoo!, most recently as VP of media and strategic partnerships. He ran product and marketing for the music division and headed sales and marketing for the business services division, which included Yahoo! Store. Prior to joining Yahoo!, Compton was CEO and co-founder of uShock, a local portal company, and a founding partner of M2 Consulting, a product and marketing strategy consultancy.

ShopIgniter’s flagship product is the sCommerce Suite, which has three main components: a Facebook store, a social promotions engine, and an e-commerce platform. One in six minutes spent on the Internet is spent on Facebook, says ShopIgniter, and Facebook is becoming increasingly intertwined with online commerce. The enterprise-grade platform enables full control of products, pricing, options, categories, and collections while allowing customers to search for and buy products on Facebook. It can also integrate with a client’s existing e-commerce platform. The social promotions engine wraps around the Facebook store. Through software that enables retailers to run referrals and promotions, group-based sales, timed sales, VIP sales, and social badging programs, it aims to increase customers’ awareness and loyalty such that they become advocates and talk about what they have purchased on sites such as Twitter and Facebook. Finally, the e-commerce platform handles the back end of product management and can integrate with existing platforms, other ShopIgniter products, or both.

ShopIgniter products are available on a subscription basis, starting at $500 a month and going up to $10,000 month depending on software features, number of channels and modules (e.g. Facebook, website, social promotion engine), and order volume.

ShopIgniter says that $190 billion is spent annually on consumer e-commerce transactions and approximately $10 billion–$15 billion on the technologies that support this. For companies looking to make their existing e-commerce infrastructure social, ShopIgniter targets top 500 Internet retailers and large brand manufacturers. For retailers looking to use the company’s entire e-commerce suite, ShopIgniter serves small and medium businesses with total sales of $2 million up to $250 million and online sales of $2 million up to $100 million.

ShopIgniter was bootstrapped for the first year and a half. In March 2010, Madrona invested $3 million. Tom Alberg, the founding partner of Madrona, who also sits on Amazon’s board, is one of ShopIgniter’s board members. The company may consider raising more money as it gains momentum. Revenues range from $1 million to $3 million. ShopIgniter’s more than 100 clients include speciality boutique Olly Seven, lingerie store Lille Boutique, private student shopping community Kembrel, and earphone store SoundEarphones. Sports brands and media properties are also clients.

The market is becoming increasingly competitive. There are many players in the space that are beginning to deliver standalone social functionality like Facebook stores, couponing, or social badging and group sales functionality. Competitors include Fan Appz, Payvment, Badgeville, ChompOn, Magento, and Volusion (covered in this blog on Deal Radar and in an interview with Kevin Sproles), among others. ShopIgniter aims to stand out by offering comprehensive, module-based products as opposed to a single product (e.g., a standalone Facebook store) accompanied by widgets and focusing on the ability to transact in Facebook, thus having better reach and higher awareness translate into, retailers hope, more sales – the trickiest part of the equation.

ShopIgniter believes that this holiday season will be a watershed quarter for social commerce. It anticipates clear winners and best practices emerging, with compelling ROI case studies. From there, social commerce will transition from experimentation to broader adoption, and leading vendors will begin accumulating market share. ShopIgniter expects considerable growth through a direct sales strategy to targeted, social commerce, conducive segments.

As for an exit, Compton says, “The goal is to maximize value for our investors and employee shareholders. We believe this is best achieved by focusing on innovative products and delighted customers to rapidly grow revenue with an eye towards profitability when the industry growth curve begins to slow. If we do this, we will have several options for liquidity.”

Recommended Readings
The Rise of Social Commerce by Brian Solis
The 1M/1M Incubation Radar: ShopSocially
Deal Radar 2010: Plimus

This segment is a part in the series : 1Mby1M Deal Radar 2010