Walmart's $300 Million Social Media Shopping Spree

Last Updated Apr 19, 2011 10:15 AM EDT

When the going gets tough, the tough go shopping. With sales flagging and lawsuits mounting, Walmart (WMT) went out and bought Kosmix, a social media start-up focused on e-commerce, for about $300 million.

Vice chairman Eduardo Castro-Wright wisely noted, "Social networking and mobile applications are increasingly becoming a part of our customers' day-to-day lives globally, influencing how they think about shopping."

The move puts the money where the world's largest retailer's mouth is. Walmart just set in motion a major strategy shift of its in-store stock including adding back 8,500 products. Meanwhile, in its electronics department, TVs are tossed aside to focus on devoting space to more mobile devices.

As for the company it's keeping, Walmart has chosen well. Six-year old Kosmix is a social media platform founded by Venky Harinarayan and Anand Rajaraman, the dudes who developed Junglee, an online shopping venture they sold to Amazon (AMZN) in 1998 for $250 million.
The new firm will join the @WalmartLabs division and work on building the retail giant's online shopping experience-with a whopping dose of social media. If Walmart execs are smart, they'll step off and let Kosmix's elegant curation abilities take center stage. Note how Rajarman explains this on his blog Datawocky:
At Kosmix, we've been building a platform, called the Social Genome, to organize this data deluge by adding a layer of semantic understanding. Conversations in social media revolve around "social elements" such as people, places, topics, products, and events. For example, when I tweet "Loved Angelina Jolie in Salt," the tweet connects me (a user) to Angelia Jolie (an actress) and SALT (a movie). By analyzing the huge volume of data produced every day on social media, the Social Genome builds rich profiles of users, topics, products, places, and events.
With some finessing, it appears that new and improved @WalmartLabs could go above and beyond the standard, "Customers who bought this also purchased," most commonly seen in the sidebars of e-commerce sites and provide finely-tuned suggestions for shoppers.

Right now, Walmart's Facebook page boasts over 5 million fans. WalmartLabs has the potential to turn all those thumbs ups and comments into clicks and cash. Given its sales declines and rising legal bills, the timing couldn't be better.

image via Walmart
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