Rick Watson’s What’s Next: Deep Dive Into Facebook Live Shopping
Those of us who grew up with QVC in the United States can perhaps be forgiven if we are still having a “So What? It’s Been Done Before.” moment with regards to Live Shopping in general, and Facebook’s efforts in particular.
It’s especially confusing if you don’t have a window into what’s happening in China. - the country that is undeniably leading the trend. You might even think this is something on the “edges” of eCommerce.
It’s not.
It has the potential to be its own enormous eCommerce channel. Today I’m here to pull back the curtain on why this matters, what’s happened so far, who are the players, and of course, what’s next.
Why Does This Matter? Could This Really Be Impactful?
How much should you care here? For that, I like to turn to relative numbers. Just to give you some idea what to compare this to.
For clues that this could be impactful, you must look to China - which for the past 5 years or so has been ahead of many of the eCommerce trends that you now see in North America. A few stats stand out to me:
In February, during the height of the coronavirus lockdown in China, the number of merchants on the Taobao livestreaming platform increased by 719% — I don’t care who you are, that kind of growth is rare.
In 2019, livestreaming eCommerce sales in China reached $61B. That number is expected to double in 2020 to $129B.
But how big is $129B? There are likely some Shopify fans in the audience. That is twice as much GMV as Shopify did in all of 2019.
But isn’t Shopify still an up-and-comer? How about Amazon? Surely they’re the king? Amazon’s Third-Party Marketplace generated $200B GMV in 2019. Yes, Amazon 3P is still bigger, but the fact that this is the first comparison which beats China’s Live Shopping business is noteworthy.
Amazon Marketplace launched in 2000. Taobao launched this in 2016. I would call this kind of growth breathtaking.
But, I hear you say, isn’t China bigger than the US? Even if you take into account that China is roughly triple the size of the US eCommerce market, it doesn’t make these numbers any less impressive. Let’s say the US is 4 years behind and 3 times smaller (which is roughly right from a # of digital shoppers perspective).
That means in 4 years, there could be a $32B Live Shopping market in the uS. By that time, the Live Shopping business could already be almost three times the size of Wayfair, currently estimated to clear about $12B this year. If Facebook captures 80% of that market, which I believe it could, that would put it at $25B in GMV. By any measure, that would be an impressive start for Facebook. Even without its other eCommerce initiatives, that would put Facebook in the top 5 of US eCommerce. I’m not saying it will happen, but it seems possible.
Even if you disagree that Facebook will be the one who captures that 80%, that is the size of the prize.
Spoils to the winner.
This gives you some idea the momentum behind Live Shopping, and why you should at least be paying attention. If you’re not in the investor world, you might be forgiven for not knowing there is a gold-rush acquiring Amazon FBA businesses right now. This could point to the fact that there might be a similar rush in the future to capture the best Live Shopping talent.
The Entire Purchase Funnel in One Place
It used to be said that if you knew what you were looking for, and it had a SKU, Amazon would beat you with a combination of price, selection and supply chain. And for many years that has been true in North America.
“The challenge is that the awareness and consideration process has been changing. Facebook and Instagram have become everyone’s default phone screen, which also means that more awareness and consideration are here than any other channel.
It could be that you just got home from a party and saw your friend’s cute shoes. You start wondering who else is wearing these shoes? The first place you go is Instagram.”
If you’re a marketer, you intuitively understand why this matters. This is your opportunity to get in front of potential buyers during awareness and consideration phases before anyone else. And the targeting? Better than any other platform on the planet. So good, in fact, that the creepiness factor has spawned its own cottage film industry.
Credit: SEMRush
Credit: Facebook
But until recently, you couldn’t buy anything on social media, unless it was through Groups (difficult to scale) or comments (not a great experience). Yes, there have been a few failed experiments with Shops, but it always felt like a bolt-on with less information than a brand’s own website.
Increasingly what I see happening is that Facebook is building Commerce directly into every form of video advertising they offer.
In the past, it’s still been clunky as hell to click off to a site you may not know anything about, only to find out they don’t have your payment information stored.
So that’s the ultimate challenge — once you find something you like, how can you buy in a frictionless way that feels less like shopping and more like inspiration? Let’s review what changed in 2020.
What’s Facebook Done So Far?
Mark Zuckerberg got into an eCommerce state of mind just at the right time. Famously at the beginning of the year, Mark Zuckerberg announced that Commerce was one of his top 3 priorities. The follow-through has been steady and impressive, when you lay it out.
March 19, 2020 - Facebook announces its upcoming Commerce plans, with another one of those unusually awkward Zuck videos.
May 5, 2020 - Facebook announces it is testing live shopping for Facebook and Instagram Shops.
July 16, 2020 - Facebook announces Instagram Shop.
August 25, 2020 - Facebook announces Live Shopping will be available for everyone on both Facebook and Instagram. Facebook announces Checkout out Instagram will be available to everyone. Facebook launches Facebook Shop in the big blue app.
October 5, 2020: Facebook announces Shopping is now available on its long-form video platform IGTV.
What’s interesting is if you look at these announcements, you might think that Facebook did a whole lot in one year - how was that possible? However, when you look more closely, Facebook has had its eye on this space almost from the beginning.
What’s Under the Surface?
You might be forgiven for not knowing who Eric Feng is. A former partner at the VC firm Kleiner Perkins Caufield & Byers (KPCB), Eric started a video Commerce startup called Packagd, with the ultimate vision of, wait for it…...:
“Creating QVC for the Mobile Generation”
What’s different about Eric is that his company was acquired by Facebook in September 2019, as announced by Bloomberg, for an undisclosed sum. Now Eric is Head of “Commerce Incubation” for Facebook.
So, you’re telling me that Facebook bought a video eCommerce startup at the end of 2019, and then in August 2020 announced full availability of Live Shopping for everyone across all Facebook and Instagram? Yes, that happened, and it’s not coincidence.
What I find interesting is they raised $6M prior to the acquisition, some of it by GV, so Google had a pretty good idea what was going on. Perhaps they bid and passed. Perhaps they bid and made Facebook pay a bit more. But that’s not all.
Around June 2019, Facebook invested approximately $25M in Indian YCombinator alumnus, Meesho, according to TechCrunch. Meesho connects sellers with customers on social media platforms, and in particular through Facebook’s WhatsApp platform. The company had attracted over 2 million resellers, primarily in apparel, home appliances, and electronics items, according to India Times.
What I’m saying here is, at the intersection of social media and eCommerce, Facebook used 2019 to plant some seeds that are really starting to bear fruit in 2020. But it goes back even further than this. Facebook did some limited Live Shopping testing in Thailand going back to 2018! This experiment was shut down, but seems like it proved a point — there is more to do in this area.
I’m sure to the outside world this looks haphazard, but this kind of determined, and most importantly, patient eCommerce investing bodes well for Facebook’s future.
Who else is looking at this?
Facebook, given its platform reach, has a huge lead here relative to other platforms. It’s almost like what happened when eBay in 2002 realized “oh no, people aren’t just using auctions to purchase items.”
Credit: Business Insider Intelligence
“It feels to me like Google And Amazon have had their “Holy Shit” moment in 2020 with regards to Live Shopping.”
Despite the initial traction of NTWRK (acquisition target?), the two players to watch, are the ones not on the chart above: Amazon and Google. I think the big challenge I see here, the investments are not as big or as bold as Facebook’s bets — and Facebook is already ahead. That’s not a good trajectory. This means Facebook is way ahead and extending its lead.
Let’s take Google first.
Google’s biggest asset in this space is YouTube, the largest video platform on the planet. There has long been commerce-related behavior on the platform, but it’s never been monetized very well, except by the influencers themselves.
This year, Google’s R&D division called Area 21 introduced the Shoploop app in July. The whole project feels like a ripoff of Tiktok or Instagram - 90 second vidoes designed for influencers to introduce new products to customers.
Although there are rumors that Google is giving this project a lot of investment, it still seems like Google+ to me — remember that? Me neither.
Here, Google - the company whose very name implies scale - also has a scale problem. Unless it’s on YouTube, who will find it? How can an interface which obviously looks like an Instagram ripoff ever hope to challenge Instagram? From a company that really, truly, does not get social?
I don’t see it. Now, that said, I think they have the best chance of challenging Facebook. But if there is any hope, it absolutely must be done through YouTube.
Now, Amazon.
Amazon is not standing still, either The company as early as February 2019 launched its own Live Shopping channel QVC look-alike — to not much fanfare. More recently, Amazon launched Amazon Live for influencers in July 2020.
The big problem for me is this: more people go to Amazon when they already want to buy - less so for inspiration. Live Shopping on Amazon is not a natural fit for a platform that is designed for this type of activity.
So you have a buyer intent issue. These are the types of problems that are not easily solved. You think of Amazon as a place for unlimited selection. But in terms of inspiration, it is extremely limited compared to a place with billions of people producing new content daily, like Facebook. And this means Amazon has a scale issue as well.
Let’s be clear — I’m not saying they won’t grow their GMV here. But can they challenge Facebook? I never like to count out Amazon, but, well, I don’t see it here either.
“As a creator, why would I put my best content on Amazon? I have no clear answer to that question.”
What’s Next?
Basically, Live Shopping is launching on Facebook and Instagram just in time for the holiday season. What’s next is something that is relatively easy to predict: truly explosive growth for in the next 5 years, and you know about it in advance. How any brand is not investing in this channel full-force is beyond me.
Although you don’t necessarily come here for “How-To,” I thought I would provide a couple of tips if you are excited and you want to find out more. I would first start at the source. Get yourself setup on Facebook Commerce and figure out if you are eligible. Review this page carefully. After you get that, you might also check out Facebook’s Best Practices Guide.
Facebook does face an existential risk here. It will undercut its own eCommerce investments with an ad model. In fact, Zuck himself is quoted as saying about Facebook Shops:
“Long-term, Shops and other e-commerce products could help Facebook drive more ad sales,” Zuckerberg said. “Our business model here is ads, so rather than charge businesses for Shops, we know that if Shops are valuable for businesses they’re going to in general want to bid more for ads,” Zuckerberg said. “We’ll eventually make money that way.”
Does this sound like someone trying to build eCommerce infrastructure like Shopify? Me neither. And probably that’s right where Facebook should be.
Interesting in reading more? I write about Facebook quite frequently. Check out a few of my other articles here.
Next time,
- Rick
