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TikTok Is Taking on Facebook in E-Commerce

By Adam Levy - Feb 10, 2021 at 10:45AM

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The popular video platform is planning lots of e-commerce features for the U.S.

TikTok is planning to launch a set of tools this year to help creators monetize their presence on the social media app. It will focus primarily on social commerce, according to a report from Financial Times. Social commerce is a key piece of Douyin, TikTok's Chinese counterpart, and an area TikTok's been exploring outside its home country for a couple years now. 2021 could be the year it goes mainstream on TikTok.

TikTok isn't the only one investing in social commerce, though. Facebook (FB 1.39%) and its Instagram subsidiary are pouring money into new social commerce features. Similarly, Snap (SNAP -3.40%) is planning to run a lot of experiments around e-commerce in 2021. Both companies notably released TikTok clones within their apps last year.

Four teens on a couch all staring at their respective smartphones.

TikTok is especially popular with teens. Image source: Getty Images.

Social commerce could be massive

TikTok has the benefit of having a Chinese parent company. Social commerce is huge in China, where users will buy approximately $363 billion worth of goods and services through social platforms this year, according to estimates from eMarketer. That's about 13% of all of Chinese e-commerce. 

The research firm expects U.S. sales through social platforms to reach $36 billion this year, accounting for just 4% of total e-commerce. But that number's growing quickly. It'll increase 35% in 2021 after a 38% increase last year. The number of people buying things through social media apps will grow from 80 million last year to over 100 million by 2023.

While it's unlikely the U.S. will reach similar penetration levels as China, there's a lot of room to grow. People continue to spend more time on social media and less time with traditional media like television. Social media platforms like TikTok and Facebook are fighting for ad budgets as they shift from television and other traditional media to digital platforms. The easier it is to buy something on social media, the more effective advertisements are and the more marketers will pay for ad placements.

Does TikTok have an advantage in social commerce?

TikTok may already have an excellent road map for adding social commerce features to its platform based on the progress it's made with Douyin in China. That said, China is a very different market than the United States, and it's not guaranteed that everything that works in China will work in the U.S. Still, human nature doesn't change based on geography, so it should be able to influence similar behaviors with similar products.

TikTok is reportedly working on affiliate marketing links for creators, which will allow them to monetize their presence on the platform. When viewers click on a creator's link and buy something, the creator will get a commission.

That's an area of interest for Instagram as well. In an interview with The Verge last month, Instagram CEO Adam Mosseri said making affiliate marketing accessible to creators is the next piece after branded content, which is the way most influencers monetize today. He also said a third piece is merchandise. In other words, ways for brands and creators to have their own stores on the platform.

Douyin offers a stores feature and partners with Taobao, an Alibaba property, in order to allow accounts with enough followers to set up their own store. TikTok is reportedly planning a way for brands to showcase their catalogs on the app in a similar way, and it has a partnership with Shopify in place for ad creation.

But Facebook has its own social commerce capabilities already. It rolled out Facebook Shops last summer, building on Instagram Checkout. Instagram has already added the ability to tag products in Reels, its TikTok clone, just like users can do in Stories and feed posts. 

Facebook has been building up the infrastructure for commerce across its family of apps for years now. The faster TikTok rolls out features for creators to monetize their presence, however, the less likely it is to lose users to Instagram. 

Snap looks more vulnerable to TikTok, though. Its previous experiments with commerce have fallen flat. Those efforts will pick up steam again in 2021. "We plan to experiment rapidly and plant many seeds because we see this opportunity as very large and still very early in terms of maturity," CEO Evan Spiegel said during Snap's fourth-quarter earnings call. Snap will lean heavily on its augmented reality technology, which is a point of strength for the tech company compared to TikTok and Facebook.

TikTok is coming for the wallets of its competitors' users, and it'll be tough to defend against.

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