Wiser! Essay: Social media's advertising business model is broken. Influencer led e-commerce is the new black when it comes to monetising your attention.
Social Media needs a different business model
The issue for social media platforms is their reliance on advertising revenues. Targeted advertising has been the gravy train. However, with the move towards greater privacy, and Apple's decision to give users the option to opt-out of being tracked, social media needs to find new sources of revenue.
Hence the trend towards real-time, influencer lead, online shopping. Imagine that you're watching your favourite celeb online and they're wearing something you like. And up pops a button giving you the option to buy the same thing. It's like QVC meets Love Island. The social media platforms give the influencer a space on their platform to sell products.
This is the trend for live shopping and it is growing as one of the latest ways for social media platforms to get the attention of an already digitally-saturated audience.
If you want to see its impact on eCommerce, look West to China where live streaming has grown in popularity. In 2019, over a third of China’s online shoppers made a live stream purchase in a sector that hit nearly $165 million in 2020.
Consumers are increasingly turning to and being persuaded by influencers’ endorsements, and where better to see them than in a 60-second video on TikTok or on a Pinterest pinboard or live stream.
Firms are expected to shift digital ad spending onto influencer marketing to the tune of about $13.8 billion in 2021, up from $9.7 billion in 2020. This is already happening in China where the top influencers have their own shows and appear each night for 4 hours at a time, selling highly curated products, often at deep discounts.
The point is that every social media platform is vying for the attention of their users in the so-called Attention Economy. Pinterest is no different as they evolve into a go-to platform for streaming e-commerce sales.
Pinterest launches a Live TV channel
The unimaginatively named Pinterest TV will give influencers and creators access to the platform’s 454 million global users to sell them products. Similar to conventional broadcast shopping shows like QVC, Pinterest’s new offering aims to capitalise on changing consumer behaviour and the $100 billion creator economy.
To incentivise video creation, Pinterest announced it’ll dish out $20 million to creators for generating “inspirational” content. Pinterest also recently debuted a TikTok-inspired feature called Takes that allows users to tag products in their Idea Pins. The San Francisco-based firm hopes the move will make its content more shoppable.
This comes hot on the heels of TikTok's move into the eCommerce space.
TikTok exploit the Amazon ban on "made in china" accounts
Over a billion people a month watch TikTok's short-form videos. The super addictive platform that collects more data signals than any other social media platform is positioning itself as a place to shop and buy. Moreover, parent company Bytedance is taking advantage of the Chinese Government's push to create cross-border e-commerce trading zones. A move that means TikTok can go head to head against the likes of Alibaba and Amazon.
This all comes against the backdrop of what China is doing to promote international e-commerce by lowering export taxes and government fees. China is actively supporting the growth of online e-commerce businesses. For example, the Shenzhen Municipality (the so-called Silicon Valley of China) recently announced it would award 2 million yuan (c$310,000) to qualified Chinese merchants for each independent online store they launched.
It is no coincidence that ByteDance's move comes hot on the heels of Amazon's removal of an estimated 50,000 accounts of third-party sellers in China earlier this year. This has cost Chinese e-commerce merchants an estimated 100 billion yuan and stems from allegations that Chinese merchants used fake reviews and violated other rules, even though it is customary in China to give gifts to customers that write favourable reviews.
As a result of the Amazon ban, many of the "made in China, sold on Amazon" merchants are now looking for other ways to reach customers, which makes them an easy target for ByteDance's new service.
ByteDance is already building a domestic e-commerce capability in China and launched its own mobile payment service in January this year. Outside of China, ByteDance has begun rolling out e-commerce features on TikTok, including a Shopify integration that lets businesses add a shopping tab to their profiles (similar to what Facebook did last year.)
It is being reported that some e-commerce sites and factories in China are already using TikTok to reach shoppers in North America and Europe, even though the app is technically not available in China's app stores.
It is too early to say whether TikTok's Western users will want to try a new shopping service connected to their app. However, data from US Customs and Border Protection indicate that Americans are becoming increasingly comfortable buying goods from overseas companies directly, instead of relying on traditional domestic retailers.
The total volume of small packages imported into the US increased by 28% last year, even though the overall number of international mail shipments decreased by 19%.
Finally, I'll leave you to ponder this quote from Rui Ma, a tech analyst and the founder of the podcast Tech Buzz China;
"most Chinese entrepreneurs think Western e-commerce is backwards compared to China."
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