Is TikTok the Next eCommerce Greenfield?

Social media has experienced an evolutionary arc from human interaction to commerce. Though the former is still primary, social channels like Instagram are increasingly shoppable. And this is a natural pairing if you think about it: people like to share tastes and brand affinity, thus giving products a viral kick.

This phenomenon has applied to Facebook’s News Feed, Instagram and Snapchat among others. And the shoppable formats often follow these channels’ organic formats — everything from scrolling feed/post interfaces to more animated fare like stories. This makes shopping integrations more natural.

But the wild card in the world of social media is TikTok. Moving past some of its geopolitical uncertainties, the questions now shift to how its unique discovery-based use case will translate to ad formats. Much like the above channels, those formats will be modeled after their organic counterparts.

As we discussed with TikTok’s Rebecca Sawyer at Localogy Place 2021, that organic flow on TikTok is all about raw and genuine content. So the brands and SMBs that are having the most success on TikTok are those that match the platform’s organic vibe, creating videos that organically capture brand personality.

Place Rewind: ‘Creative is King’ on TikTok

Integrations & Accelerants

The latest development in the world of TikTok monetization is Shopify’s expanded partnership. The eCommerce powerhouse had already announced direct integration, where merchants can easily distribute their products on TikTok. This essentially bakes TikTok’s ad creation and distribution right within Shopify.

This direct integration lets Shopify merchants to create ads in their familiar Shopify dashboard. It also lets them apply existing product images and store info. They can track conversions and target TikTok users by demographics and behavioral profile; or apply contextual targeting for video categories.

The expanded deal that Shopify and TikTok more recently established lets merchants add a “Shopping” tab on their TikTok profile. All they need is a Shopify merchant account and a TikTok for Business account. The new deal essentially links the two, and gives Shopify merchants formalized stores on TikTok.

The expanded integration also lets Shopify merchants tag parts of their TikTok creations so that any users who click will be brought back to their TikTok-hosted store. And the integration is kicking off with a notable accelerant: Kylie Jenner’s cosmetics brand, Kylie Cosmetics. It will be s a launch partner for the new features.

Lastly, an analytics component adds value. Shopify can track users that originated on TikTok to see if future sales resulted, regardless of where they ended up. It does this by identifying users by credit card or email address, thus sidestepping common challenges in tracking users who originated in social walled gardens.

Shopify Extends Shop Pay to Google and Facebook

Downstream Revenue

As for the terms of the deal, Shopify won’t charge merchants for this distribution, nor take a rev share of any paid amplification on TikTok. It’s rather interested in the downstream revenue that’s aligned with its business model. In other words, it benefits from sales lift for Shopify merchants through payment processing.

Shopify also indirectly benefits from merchant retention – a factor that drives several recent moves. Those include its distribution deals with Walmart and Google. In all cases, it’s driven to boost merchants’ sales and validate its value as a platform. The more distribution, the greater its value proposition and retention.

Meanwhile, Shopify’s Amir Kabbara tells AdExchanger that social channels are the fastest-growing source of sales for its merchants — up 270 percent year-over-year. That partly rides the coat-tails of broader eCommerce inflections but is also propelled by the inherent virality of social media, as noted earlier.

Another dynamic that Shopify attributes to this growth is the way that social channels can collapse the shopping funnel. With increasing time spent in social feeds or TikTok video discovery, making these channels shoppable prevents users from bouncing from those venues to the mobile browser to buy a given item.

This dynamic could continue to drive social/eCommerce integrations, which have certainly accelerated over the past year. The wild card will continue to be TikTo, as it continues to develop its audience; its persona as a content discovery engine; and its revenue model to turn that discovery into dollars.

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