Amex is all potential in social commerce

After attracting attention last summer for social commerce initiatives with Foursquare and Facebook, last week American Express announced a new coupons hook-up with Twitter. While Amex can bring valuable assets and much-needed experience in loyalty programs to the sector, its efforts are scattered and haven’t gained much traction to date. In other words, it has the potential to be a powerhouse in social commerce, but so far that potential remains unrealized.

The upside

As my colleague Ryan Kim wrote in a GigaOM Pro long view last year, Amex brings a lot to the social commerce and local deals party:

  • Closed loop. Unlike other credit card companies like Visa and MasterCard, Amex is both the card issuer and payment system. That means it can identify purchase patterns across different products and merchants by analyzing data from its almost 90 million cardholders. Then it can use that analysis to help its merchants plan, create and target offers to different customer segments.
  • Merchant relationships. It has established marketing relationships with thousands of small businesses as well as big brands that market both globally and locally. Amex offers a rich collection of marketing services, including help with digital advertising and search for small businesses.
  • Loyalty program. Daily deals needs to move beyond new customer acquisition — what most merchants use Groupon for — into retention and loyalty. Amex has deep experience in this space via its Membership Rewards program. While startups like Swipely and ChoozOn let consumers manage and connect multiple loyalty programs, they usually have to work with big brands’ affiliate programs rather than directly.

As Colin Gibbs points out, American Express commands consumer trust that other potential social commerce players like Facebook and Google risk losing via media hype over privacy gaffes. Amex is also a contender in NFC-powered digital wallets, but NFC is a long-term play more likely to be driven immediately by ads and loyalty programs than wallets. If Amex emphasizes the former over the wallet angle, it might be able to add wallet functions to social commerce apps within 24 months.

Slow going so far

Amex’s “Link, Like, Love” Facebook app draws on social graph data like friend connections and check-ins and on user preferences via Likes. And the app has presented attractive deals from big brands like Whole Foods Market, Dunkin’ Donuts and Sheraton. But after an initial rush, it doesn’t seem to have caught on. As I write this, the app has fewer than 37,000 fans on Facebook, and market tracker Inside Facebook shows static usage with fewer than 1,000 daily users recently. This  could be a promotion and discovery problem: Apps need a critical mass of adoption before viral promotion can carry the load, especially as Facebook gets more cluttered.

The new Twitter effort has some implementation quirks that make me think it will have a hard time gaining user adoption too. While it has viral promotion built in (users tweet a hashtag to their followers to qualify for the offer), offer discovery may be pretty random, lost amid Twitter’s 600 tweets per second. Would-be coupon redeemers may or may not see the offer in their ever-moving feed and have to visit an American Express Twitter page to see what’s available. It’s not like they are getting a daily email or a personally targeted or geotargeted message. These coupons don’t require a purchase or expire instantly, but there is no place for a user to store them where they will be reminded they actually have them. The refund isn’t instant or acknowledged at purchase: It just shows up in the credit card statement some time later, perhaps as long as months later.

I have worked with American Express as an analyst, and like many big companies it has multiple business units that sometimes don’t seem to know what the others are doing. Amex’s social commerce initiatives feel pretty scattered, without a single driving focus point. Some of that isn’t the company’s fault. Although small businesses may be gaining digital marketing sophistication, they are not going to be able to use potentially powerful Amex data for preference analysis and personalization anytime soon. That’s an analysis service best suited to big merchants that target locally — the Facebook and Foursquare advertisers rather than the small business-focused Twitter self-serve products.

Perhaps American Express’ ultimate social commerce role is as a kingmaker rather than a king, a behind-the-scenes supplier of infrastructure services rather than a consumer-facing source of daily deals and flash sales offers. There would be no shame in that. GreyLock Partners’ Reid Hoffman thinks credit cards could be compelling app platforms because they connect the physical world with the digital. Even Facebook has gone back and forth on Offers and check-in deals: Its latest API enhancement for location services is aimed at third-party apps rather than its own Offers product. Amex would be in good company.

Question of the week

Will American Express emerge as a social commerce powerhouse?
Relevant Analyst
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David Card

VP Research Gigaom Research

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9 Comments Subscribers to comment
  1. Peter Mullen Monday, March 12, 2012

    Don’t be too dismissive of the ‘scattered’ approach as it only seems to follow the scattered approach of social media platforms in general. Only Zynga seems to have figured out F Commerce. At least Amex is doing something innovative around social commerce and perhaps experimenting with various hookups with Foursquare and Twitter to see if or how they can work. I’ve used and love the ‘check in with Foursquare, pay with Amex and get back a refund on your Amex bill’ promotion. Driving promotions with the larger retail brands would seem to make sense and one I would definitely use.

    1. Fair point. Facebook hasn’t even figured out F commerce beyond gaming goods.

      Do you buy our simple social commerce categories?:

      – Ratings & Reviews
      – Group buying
      – Shopping communities

      In that context, the first is farthest advanced, the last, least. Esp. if the context includes actual transactions rather marketing, new customer acquisition, etc., let alone loyalty.

      http://pro.gigaom.com/2011/03/the-near-term-evolution-of-social-commerce/

      1. Wish I could read it! Not a ‘Pro’ subscriber. On the surface, I like your categories: Yelp, GroupOn, Fab. However, I think we are in very early stages with various community models yet to be developed.

  2. To an outsider Amex approach may appear scatter gun but from inside Amex is making a lot of effort to stay relevant in the social and local commerce. It is taking a dedicated approach by partnering with relevant players like twitter, facebook and foursquare etc along with developing innovating solutions by bringing merchants and card members together through its exclusive relationship with both.

    For a 150 year old company, its a concerted effort to be relevant and innovative. The key to assess Amex’s offerings are to compare it with competition. All the major players are still trying to figure out the evolving social commerce paradigm and how to be an active participant in the payments and deals space.

    The likely winners would need to add tangible and measurable value to entire ecosystem of card users and merchants along with the ease of convenience to adapt the new solutions.

    May the best win…..

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