Walmart Buys Kosmix. What Does That Mean?
Color us confused. We’ve read numerous stories about Walmart’s
acquisition of Kosmix, a company that "filters and organizes content in
social networks to connect people with real-time information that matters to
them," and
we still aren’t getting it.
A Walmart spokesperson Lorenzo Lopez told Consumer
Reports, "This
move was about engaging customers where they are — social and mobile — and
developing ways to integrate the shopping experience between bricks and mortar
and e-commerce."
Okay.
Eduardo Castro-Wright, Walmart’s vice chairman, said, "We are expanding
our capabilities in today’s rapidly growing social commerce environment. Social
networking and mobile applications are increasingly becoming a part of our
customers’ day-to-day lives globally, influencing how they think about shopping,
both online and in retail stores. We are excited to have the Kosmix team join
us to accelerate the development of our social and mobile commerce offerings."
Right.
Walmart said it plans to integrate Kosmix into a new tech division called
@WalmartLabs, which is charged with developing social and mobile commerce technologies.
Got
it.
Our own visit to Kosmix to run a few searches on topics of interest left
us underwhelmed. Results coming back were not current and a few were not really
related to our search objectives. Not having visited the site before, we figured
it was just us. Then we came across a Consumer Reports article that
made us feel a little better.
"A visit to Kosmix’s Home Appliances page did turn up some general
articles on appliance buying from Kiplinger’s and Consumer
Reports,
including a video on how we test appliances. But news from the Philadelphia
Inquirer on building-material thefts, broken links to stories on Helium.com,
and brief stories from sites like wikiHow were less empowering. And along with
a plethora of Twitter posts, Kosmix’s Washing Machines page includes
a Wikipedia entry on washing machines, a totally unrelated article from articlebasement.com
on the importance of dreams, and some unrelated YouTube videos."
Ravi Mhatre,
managing director of Lightspeed Venture Partners and an investor in Kosmix,
has been able to connect dots not yet completely obvious to us.
He told The
Wall Street Journal, "Wal-Mart is going to leapfrog
into social and mobile commerce. All of these traditional retailers are going
to need to evolve or die. I think social media and mobile are going to completely
change the game."
Huh?
Rick Moss, co-founder and president of RetailWire, tried his best
to dumb it down for us.Â
"Working with Walmart, I would think the opportunity would be to develop
highly specialized search strings and algorithms that they would refine over
time to filter out what people are saying about their stores and their competitors. To
me, it looks like Walmart researched what company was able to do the deepest
dive into the data and bought them. They’ll now just start exploring the possibilities."
Really?
Discussion Questions
Discussion Question: Would you help us out? Please explain why purchasing Kosmix is a great move for Walmart.
Honestly, I don’t know what they’re thinking beyond “Oh wait…maybe we can get those comps moving again with this thing.”
I somehow don’t see Walmart’s core customer as a social network addict, but who knows? Maybe I’m wrong. Maybe I’ve been looking at the peopleofwalmart.com site too much.
David Letterman watchers will be familiar with his bit “Is it anything?” Someone comes out on the stage and does something–and then he and Paul Schaffer debate, “Is it anything?” I think that’s what we’re doing here, and my answer is–No, it isn’t.
Walmart needs a constant stream of new customers to increase like-store sales in the future. Kosmix is one possible way.
Since we are just guessing…Walmart may be trying what the articles describes as “integrate Kosmix into a new tech division called @WalmartLabs, which is charged with developing social and mobile commerce technologies.” It worked for Amazon whose cloud service is now so big, Amazon expects it to rival their consumer division, revenue wise, one day.
In other words, Walmart may have seen an opportunity to develop a “turnkey” analytics package to resell to other e-tailers. I am just guessing here but if true, and IF the product is as good as the hype (which it sounds like it is not…yet), that could be a new revenue stream and a good move for Walmart. Stay tuned.
Walmart likes to tinker and experiment.
Was its drive toward RFID “good” for Walmart?
Who knows?
Are social and mobile media going to be critical to almost all retailers?
Of course!
What better way to dip your toes into the social and mobile media water than to buy a social and mobile media firm and get to understand it from the inside?
I think Walmart watching sometimes drives people to really wrong conclusions. Even they probably don’t fully understand why they bought Kosmix, beyond acquiring a real world learning lab. And, in most labs, you fail more often than you succeed.
I could be off base, but I’m thinking that the acquisition is an opportunity for Walmart to reach out to customers using smartphones, not just those using social networking sites. Even without the logical extension into mobile devices, there is a much greater reach of sites like Facebook than most people realize–the numbers and the demographics indicate that it’s not just for Millenials anymore. If this becomes a cost-effective way to reach beyond the core Walmart customer–and to engage her when she’s actually in the store–good for them.
Walmart wants to be cool? Why aren’t better run stores and great products and prices cool? What about better customer service? When isn’t better stock prices about being cool? What happened to these measurements of performance in a retail environment as a factor of “cool”?
Having a social media strategy is going to be important for all retailers. Figuring out how to do that will not happen overnight. Walmart has decided to start. Walmart does not currently have the expertise to do this.
Is this the right company? Who knows? Is it a smart move to begin experimenting? Absolutely. Creating new offerings or using new vehicles is an important part of evolution in response to a changing environment. Trying and experimenting will enable Walmart to move forward.
Walmart is on the right track creating a lab focused on social and mobile, and the easiest way to jump-start the effort is to acquire a company. Why Kosmix? Probably more for the people than the product.
Walmart is not stuck on yesterday’s business. Given a dollar to invest in tomorrow versus increasing same-store sales, they will always choose tomorrow. They clearly know there is a limit to their brick and mortar business and if they want to grow it must be in other areas.
They have committed to challenge Amazon in online. They have expanded globally. They see themselves as distributing products to consumers (products being everything from toothpaste to cloud computing). This acquisition may have as much of an impact for Walmart in the future as a little known acquisition by Google of a small company named Android had for its acquirer.
Most simply, if Walmart is committed to grow as little as 5% annually (and, I speculate it is more than that), there is no way they can do it on the backs of a retail business that at best will grow only slightly more than population growth and require huge amounts of price cutting and promotional spending to do that. They must find alternatives.
The retailer has been in a rut when it comes to innovative ideas lately. RFID didn’t fulfill its promise for Walmart, and they recently backpedaled on SKU rationalization. I don’t know if we’ll be hearing anything about these Walmart labs in two years time, but the recent track record bodes ill for the Bentonville retailer’s newest idea.
With its purchase of Kosmix, Walmart didn’t gain a website or entree into social media (of course, they are already in it), Kosmix’ ability to make “semantic” data actionable is the gold in them thar hills. Text analytics and unstructured data are on every retailer’s mind right about now, and Walmart just took a huge leap ahead of the pack.
My sense is that Walmart bought Kozmix for the tool that aggregates (shopper) tweets around a media channel model. They’ve got a huge shopper base, so why not allow them to become a media channel that they can segregate and also integrate across key categories? I think it’s a big learning opportunity and very shopper-centric.
Most of the lack of understanding as to why Walmart did this is because the entire medium isn’t fully understood, and it’s possibly not yet at a point that it is understandable at all.
Wasn’t it Thomas Edison that said, in failure, he’d learned more than 10,000 ways not to build a lightbulb? I’m quite sure that Walmart understands much of that concept. That is, they will have a lot of failures. The likelihood, however, is that after one of them, they may have success. This is creating that ‘Menlo Park’ for them.
We all think of how successful Walmart has been at a lot of things. Nevertheless, they have failed at much more. The fact is they keep trying. They keep trying new things. They keep throwing the spaghetti at the wall until it sticks. They also do it in so many directions it’s hard for any other retailer to comprehend.
Who would have thought Buick would be placing ads on a hand held book device? Things change. Mediums change. Change and innovation in social media, phones, pads, and other unthought-of devices are moving at lightening speed.
Just because we don’t understand it, doesn’t mean we shouldn’t seek to do so–even if it is not understandable at this point. This is a means to do so. The spaghetti might stick and the light bulb might work. I’m quite sure that’s the whole idea. It’s just one leap in their many directions.
This is a long-term play and I am guessing Walmart likes the team at Kosmix as much as the actual technology (or the customer base). It’s a big price tag but if you look at Kosmix, it appears that they are trying to eliminate the noise we all experience online and even in our social media websites. How much of what we see on Facebook or Twitter is interesting to us? There are a bunch of companies working on this problem but if Walmart can help customers get more relevant news/updates, they can also potentially influence your purchases.
I picture it like this. It’s football season and Walmart decides to run a hot 24-hour special on hibachi grills. They put the word out on their Facebook page, mobile apps and Twitter streams. They have a general idea what demographic they want to hit, so they target as best they can with some Facebook ads and sponsor a Twitter “trend.”
Now comes the fun part–tracking how those messages make their way from Facebook friend-to-friend; who does the re-tweeting; where references turn up in the blogosphere. Based on what they see, on the fly, they write new messages and adjust their targeting. They track online sales and see what connections can be made back to social influencers; which sales resulted from viewings on mobile apps and from views on their mobile website and Facebook commerce page.
When it’s all done, they “dashboard” it all and refine their approach for the next tailgate-related promotion, cataloging a list of tailgate influencers and write rules for the best dissemination of messaging.
I’m not getting why we’re not getting this.
I would assume (and hope) that they are acquiring the people. I could definitely see how the right people, combined with the promise of social media and Walmart’s reach in a “lab” environment, could possibly create something great. At the right price, why not place a bet?
Interesting. Clearly social media is one part of the digital landscape that is already transforming retail. There is still a lot to play-out on this transformation, but sitting on the side-lines until it plays out may not be the best strategy. You have to be in it to learn what works and to influence the direction and speed of the change.
At this point, it seems there are various ways Walmart could go with this. The only thing that stands in the way is execution. Based on our brief time on Kosmix, we have some serious questions on that end. In the final analysis, however, it may be that $300 million seems like a lot of money to many people and companies, but not Walmart. They can afford to see if Kosmix’s promise pans out.
Some moves that retailers come with clear measurements. This includes adding promotional space (Action Alley), announcing new store openings (Chicago), and acquiring overseas assets (ASDA).
Other moves are harder to measure. An acquisition announcement seems like a dramatic step, but can actually unfold slowly over time.
Gene notes how Google’s acquisition of Android combined for dramatic results. But perhaps a more appropriate analogy is Yahoo’s acquisition of Overture, which, though unknown at the time, led to the reinvention of search from organic to paid.
Brisbane is very different than Bentonville, and @WalmartLabs will be very different than the Home Office.
A wonderful point in George’s story (the one that we’re supposed to be commenting on) is the item that no one has yet commented on. He described his own research efforts on Kosmix as having “left us underwhelmed” and then he cites research from Consumer Reports that makes the same point.
This brings us to the obvious question: When Walmart dropped more than $300 million to buy Kosmix, it was ostensibly to buy social site searching brilliance. If Kosmix itself can’t master rather routine searches accurately, how much brilliance are they obtaining for their money? (Let’s be clear. Even for Walmart, $300 million plus is not a rounding error. If it fails, it won’t kill the chain, but a $300 million investment that goes nowhere is going to sting even Walmart. And the Wall Street Journal is saying that it’s at least $300 million. This could be much worse.)
Some folk have talked about Walmart buying the people and not the company. We at StorefrontBacktalk made essentially the same argument about employees, but raised doubts about whether they’ll stay.
The very nature of Walmart is so radically different than the environment Kosmix’s more talented people bought into, that alone could force quite a braindrain. The top talent may be contractually required to say for a time, but once their motivation is diluted, it’s unlikely they’ll manage in the same way. Entrepreneurs are funny that way. Put them on a Walmart payroll and their magic starts to fade.
That all said, I agree with the essence of the comments here that Walmart is simply trying to learn social media. If they can use it as the world’s best consumer research thinktank (and, going to back to George’s original point, there’s an argument to be made that Kosmix may truly NOT be that), this might work.