Hearst Acquires Social Shopping Site

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In February, we wrote about an emerging e-commerce trend known as "social shopping." This week, Kaboodle, one of the sites we discussed, was acquired by the Hearst Corporation, a media titan that owns magazines like Cosmopolitan and Esquire and has over 20,000 employees worldwide. Though no details of the deal were released and Kaboodle does not disclose revenue figures, the deal has been estimated to be in the $30 - $40 million range.

Launched in February of 2006, Kaboodle was one of the first so-called social shopping sites. Marketing gurus have long sought to access "mavens" and "connectors," those rare consumers who can truly evangelize your brand. Social shopping is all about taking this vaunted power of word of mouth and moving it online. Sites like Kaboodle, ThisNext and Stylehive let users assemble lists of their favorite products and share them with others online. Betting that consumers are far more likely to buy a product that's been recommended by someone they trust, these sites each employ their own proprietary method of ranking the most influential recommenders and highlighting the latest cool products. After all, we all have those in-the-know friends we go to for music or book recommendations, right?

The entrepreneurs we talked to had some pretty impressive benefits from the social shopping trend. Many online retailers we spoke to found that a single recommendation on a social shopping site was more powerful than even some of the most trusted forms of traditional advertising. And social shopping doesn't seem to just be a trend. Kaboodle's traffic grew precipitously, to more than 2 million unique visitors per month. Hearst will likely use Kaboodle to add product recommendation functionality to magazine sites. It's not hard to imagine Cosmo readers compulsively sharing their favorite beauty products.

What do you think of social shopping? Do you think your customers would like a venue to share their favorite product recommendations online? Did Hearst overpay for a site in which people are doing little more than recommending products to each other, even if consumers are doing so literally by the millions? How crucial is a recommendation to the success of your business?