Google is still trying to seize this massive advertising opportunity
It’s been almost seven years since Google CEO Eric Schmidt explained how he sees Amazon (NASDAQ: AMZN), not another search engine, as Google’s main competitor. And over the past seven years, the Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary has made several attempts to gain a foothold in e-commerce, but success has been difficult to find.
Google’s latest effort to gain a foothold in e-commerce is the live streaming on YouTube, featured on its “Small Biz Day.” But Google faces stiff competition from platforms such as Pinterest and Facebook‘s (NASDAQ: FB) Instagram as well as promising shopping services on TikTok from ByteDance. Not to mention, Amazon isn’t going anywhere anytime soon.
Make YouTube a shopping destination
YouTube is creating new ways for creators to monetize their content. In February, product manager Neal Mohan said YouTube was testing a way for viewers to make purchases directly from YouTube. At the time, its goal was to help creators monetize their content. YouTube’s Small Biz Day aims to turn marketers into content creators and live streamers to leverage YouTube’s buying tools.
This is just the latest effort to make YouTube shopping easier. Google has partnered with Shopify earlier this year to integrate the e-commerce company’s 1.7 million product catalogs into its websites, including YouTube. Last fall he started asking creators to label products in their videos. And it integrated Google Shopping ads in search results in 2019.
But Google is more than ever convinced that it can finally establish itself as a shopping destination. According to Kate Stanford, vice president of advertising marketing at Google, the number of viewers coming to YouTube to learn more about a brand or product has increased significantly over the past year.
That said, the competition is growing just as fast, if not faster.
Crack social shopping
Social shopping has been a tough puzzle to solve, and not just for YouTube.
Facebook introduced Instagram Checkout in early 2019 and expanded the functionality last year by opening the service to all merchants and launching Facebook stores. While there is huge potential and Facebook continues to invest in new Instagram shopping features, the widespread adoption of Instagram Checkout remains elusive.
Pinterest has done well in introducing product pins and shopping ads and rolling out additional shopping features for its users. CEO Ben Silbermann said about 20% of his advertising revenue came from retailers with sales targets in the first quarter.
But Pinterest is diminutive compared to Facebook and Google. That 20% of advertising revenue is less than $ 100 million for the quarter. It’s just a rounding error for its bigger competitors. Facebook and Google are looking for a much bigger opportunity.
Merchants spend a lot on e-commerce advertising
The amount of ad spend flowing to ecommerce channels is huge. Amazon, for example, is expected to generate more than $ 18 billion in ad sales in the United States this year alone from ads in its online marketplace. Total e-commerce channel advertising spending is expected to reach nearly $ 24 billion this year and reach more than $ 41 billion by 2024, according to eMarketer.
But advertisers will be looking to diversify away from Amazon, especially as they have started to see average ad prices climb this year. Google wants to grab the next $ 20 billion in ad spend that’s currently planned for ecommerce channels and give merchants the ability to make sales on YouTube instead of Amazon. It’s easier said than done, and YouTube has no shortage of competition.
But as more and more shopping moves online, new businesses start selling direct to consumers on the internet, and merchants shift their ad spend to keep up with e-commerce sales, the opportunities are growing. Don’t expect YouTube (and its competitors) to give up social shopping anytime soon, as small investments could now turn into billions in ad revenue in just a few years.
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