Call it a reality check. Facebook, Instagram and TikTok are now pulling back from social commerce after betting big on it booming following a pandemic-induced spike in online sales. Don’t call it a complete U-turn, though, these moves are more of a rethink of what social commerce means moving forward.
Here’s the rundown on how and why each platform has pulled back from social commerce, and whether this feature will ever catch on with advertisers.
What is actually happening?
Meta will shut down Facebook’s live commerce shopping program next month after sister site Instagram axed its affiliate commerce program in August.
It seems one of the biggest issues which drove this decision was the changes Apple made to iOS 14, with the depreciation of its IDFAs. “That caused a drop in attributed performance on Meta, and resulted in a lot of brands reassessing the role of Meta’s platforms in their campaigns,” said Mudit Jaju, global head of e-commerce at Wavemaker Global.
Then there’s TikTok. While not totally pulling the ripcord on social commerce, the short-form video app has announced its plan to streamline its commerce solution by creating three new advertising formats, with the aim of simplifying the process for marketers leading up to the busy Q4 holiday period of 2022. This came after The Financial Times reported the app had abandoned its social commerce expansion plans in Europe and the U.S.
“TikTok is innately built for a more immersive experience which enables brands to merchandise themselves better than they could on Meta’s platforms,” added Jaju. “Facebook Shops, for example, was the equivalent of popping a catalog on the internet, whereas TikTok is more like incorporating a home shopping channel on the platform. It’s a meaningfully different experience.”
Why aren’t consumers and marketers buying it?
According to Jaju, the reason consumers haven’t yet bought into social commerce is down to the clunkiness of the experience irrespective of the platform. “The process of selecting the product and building your basket isn’t seamless,” he continued. “The platforms haven’t made it easy for a manufacturing brand or retailer to do things so they don’t end up doing it because the juice is not worth the squeeze.”
Also, the industry still hasn’t come to grips with transactional buying on social media just yet.
“It feels like the industry has moved a bit too quickly and we’re trying to force the customer down that route when actually the level of comfort a customer has with purchasing in that way isn’t there yet,” said Sarah Penny, content & research director at Influencer Intelligence.
Another issue is these social commerce moves were expected to thrive at a time of economic turmoil. In the U.K., for example, households are embroiled in a cost of living crisis, and more broadly there is the risk of a global recession. In other words, it’s bad timing. “If we’re launching new ways of purchasing online and we’re heading into a UK cost of living crisis and risks of global recession, it’s not going to be easy for any industry to be buying, particularly when it’s a new journey for purchase,” Penny added.
As for why marketers haven’t fully jumped on the bandwagon, many are still figuring out whether it’s a worthwhile endeavor.
“Some think of it as purchasing everything in-app, some consider it as live streaming with an influencer selling products, while others believe social commerce is having shoppable tags on their content,” said Penny. “When we can’t fully define what we mean by it because it’s so new, it shows there’s real nuance within the industry that needs to enable all brands to catch up to be able to provide that uniformity.”
The challenge with purchasing outside social apps is advertisers’ inability to form consumer profiles. Rachel Tipograph, founder & CEO of MikMak believes many social platforms have been trying to own first-party data and thought they could monetize it by figuring out how to get consumers to complete their purchases within the social apps. But the native checkout hasn’t come to life in the way they thought it would.
Don’t call it a pull back
Despite so much uncertainty over the immediate future of social commerce, it’s clear that the platforms aren’t done with it. There’s too much money at stake.
Business consulting firm Grand View Research’s latest report stated the global social commerce market reached $584.91 billion in 2021 and is projected to grow at a compound annual growth rate of 30.8% between 2022 and 2030. Moreover, TikTok’s Chinese counterpart Douyin’s social commerce business has been going from strength to strength. In fact, in-stream commerce is the platform’s biggest money maker. According to Chinese publication 36Kr, Douyin achieved ¥22 billion ($3.15 billion) in gross merchandise volume for H1 2022, already surpassing its yearly goal of ¥20 billion ($2.87 billion).
“I think that audience was primed to do in-app shopping because they’ve grown up with the likes of WeChat where social commerce has been fundamentally intertwined in a way it hasn’t in platforms in the Western world,” said Jaju.
So while it seems these social giants are pulling the rug from under social commerce, it’s instead a chance to refine and rethink.
“The Chinese market is so critical to social commerce because it shows there is an opportunity there,” added Penny. “It accounts for billions of pounds of revenue every year. With these platforms getting cold feet, they need to give it a chance and let the industry mature and professionalize to get the right objectives. Everything’s happened so quickly, the customer sentiment needs to catch up.”