Michael Dougherty of Quorus

A growing number of Seattle area startups are experimenting with “social commerce,” looking to tap the popularity of online social networks to drive e-commerce sales.

The group includes Quorus, which is developing a discussion tool that lets people shop online with their friends; Tippr, a discount deal website that encourages group buying; and Yubit, a local online coupon business that wants people to share their favorite restaurants and coffee shops with friends. Seattle’s Madrona Venture Group invested in ShopIgniter, a Portland firm that builds e-commerce platforms that integrate with Facebook and Twitter.

Many retailers already use Facebook and Twitter to build brand awareness and connect with customers. But the explosive growth of social networks, and the large amount of time people spend on them, has many entrepreneurs thinking there’s an opportunity to turn groups of friends into shoppers.

If social commerce takes hold, it could give a variety of businesses in Seattle and elsewhere a powerful new channel to sell and market their products. But the idea of translating social network activity into actual sales is still young and largely unproven. And big e-commerce companies such as Amazon.com are taking a cautious approach, for now, as the various smaller players test the new models.

“People are talking to their friends and sharing things with their friends,” said Scott Jacobson, a partner at Madrona Venture Group and former Amazon.com executive. “The question is how can you use the various social services, whether it’s Facebook or Twitter or whatever, to drive transactions.”

It’s not hard to see why the e-commerce sector is interested in social networks. They represent a huge potential customer base. In April, Facebook was the third most popular online brand after Google and MSN/Windows Live/Bing, according to internet research firm Nielsen Online. The average visitor spent some six hours on Facebook that month, more than was spent on the top two brands combined.

Quorus, a Seattle startup, is trying to bring social networking to the actual shopping experience.

The company has developed a discussion tool that people can use while cruising a retailer’s website. Shoppers can invite their friends via e-mail, Facebook, Twitter or instant message to consult with them while they’re considering an actual purchase. The tool also allows users to bring a customer service representative into the chat.

“E-commerce in its current-day incarnation is very sterile and transactional,” with Quorus CEO Michael Dougherty, who previously co-founded Seattle online real estate startup Redfin. He’s aiming to replicate online the experience of shopping in a physical store with a spouse or friend.

“You want opinions, advice, validation,” he said.

The Quorus discussion tool is being used on the websites of Zip Realty, 1000 Markets, and Brooks running shoes, and Dougherty said he’s talking to other e-commerce companies.

One area of social commerce that’s getting a lot of attention these day is online group buying, epitomized by websites such as Groupon and Living Social (both have raised large rounds of venture capital this year). These sites offer daily deals from local merchants (a $30 meal for $15, for example). In the case of Groupon, the discounts require a threshold number of buyers, which encourages people to share the deals with friends.

Here in Seattle, veteran technology executive Martin Tobias is building a group buying service called Tippr. The service, which is now available in eight cities, offers it own twist: “accelerated” deals that give the coupons more value if more people buy them. Tobias, former CEO at Seattle biodiesel firm Imperium Renewables, is also positioning Tipper as a technology platform, selling the service to smaller sites, such as the Facebook blog “365 Things to Do in Austin, Texas.”

Despite the rush of startups into the social commerce arena, however, many retailers are taking a wait-and-see approach.

“The value of social media to marketing goals is clear, but e-commerce benefits are less clear,” said Brian Walker, a Seattle-based e-commerce analyst for Forrester Research, a technology research firm based in Cambridge, Mass. “Most online retailing leaders will tell you that they still see potential with social commerce, but results are not significant yet.”

One key question for social commerce is whether big players such as Amazon.com will adopt some of the new concepts.

A pioneer in areas like customer reviews and ratings and tagging, Seattle-based Amazon was early to embrace the idea of tapping into networks of people for content and feedback. More recently, the company has made extensive use of Twitter to spread the word about web deals.

But Amazon is “treading lightly” with some of the new social commerce ideas, said Jacobson, the Madrona Venture Group partner.

“I have no question that when the right models are figured out that Amazon will be successful applying them,” he said. But, he said, there are “sticky potential privacy issues” that have to be figured out, about how Amazon customer data might be integrated with social networks, for example.

“These startups, they screw it up and they disappear. Amazon has a lot more stake,” Jacobson said.

One area often categorized as social commerce is the "private sales" phenomenon led by such sites as Gilt Groupe and Rue La La. These sites sell luxury brand overstock items at a deep discount in "flash" sales that typically last a few days. They rely heavily on social networks to spread the word on deals.

Online auction giant eBay recently started to experiment with flash sales. TechCrunch reported in December that Amazon was in negotiations to acquire Vente-Privee, a large European private sales club, though Amazon has declined to comment on that report.

Amazon didn’t respond to a request for comment on social commerce trends.

Madrona Venture Group, Jacobson’s firm, led a $3 million investment in Portland e-commerce platform startup ShopIgniter, in March. ShopIgniter, among other things, helps retailers build online storefronts inside Facebook and offer customers after-sale online coupons to distribute to their friends.

Tom Alberg, a Madrona managing director and Amazon.com board member, joined ShopIgniter’s board as part of the investment.

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