Instagram sees its future as a rival to Amazon rather than as an entertainment network.
The social media platform has introduced a bevy of changes over the last couple of years as it has become the most popular network for younger consumers. It introduced IGTV and copied features from rival Snapchat as it worked to take up more and more consumer attention.
However, ads might not be the future for social media.
Instagram’s parent company, Facebook, recently announced a new focus for its operations that might drive the network away from ads and into direct sales. If CEO Mark Zuckerberg stays true to his plan to focus on privacy and creating smaller communities, social media platforms might start to look a lot more like an online marketplace.
Users will still be able to find their favorite brands on social media channels, but brand managers will have a much harder time broadcasting their various messages to new audiences.
Instagram is introducing features that will help brand managers make the most of this sea change.
Instagram took its next step to becoming a full-fledged commerce business today, announcing that it is bringing a checkout feature to its mobile apps. With checkout, you can store your payment information with Instagram to make purchases more quickly. In return, Instagram is charging retailers a selling fee. More than 20 brands will use checkout to start, including Nike, Adidas, Dior, H&M, MAC Cosmetics, Michael Kors, Oscar de la Renta, Prada, Uniqlo, Warby Parker, and Zara.
Items eligible for in-app checkout now have a big blue “Checkout on Instagram” button below them. Tap it and you’ll be asked to provide your email address so that the seller can complete your order. From there, you enter your delivery information and payment method, and after reviewing your details you can place the order.
How is this different from what’s already available in the app? Currently, potential buyers have to navigate away from the Instagram app to a pop-up menu to buy. Because many customers are shopping on their phones, staying within the Instagram app might offer significant advantages.
Previously, completing a purchase on Instagram has required using a pop-up web view on the retailer’s site, where users are more likely to abandon their shopping carts in frustration. Instagram hopes that allowing people to complete their purchases inside the app will inspire them to shop more — and to create a big new business for parent company Facebook, which has recently signaled that it expects commerce and payments to represent the future of the company.
For now, payment information stored with Facebook will only be used on Instagram. But it’s easy to imagine Facebook letting you use your credentials elsewhere in its family of apps. (The company is also working on a separate payments product involving the blockchain and WhatsApp.) In the meantime, Facebook says it won’t share your payment information with other users or with retailers.
Instagram believes shopping represents a massive new business opportunity. The Verge reported last year that the company is building a standalone shopping app. It also said Monday that 130 million people a month tap on product tags in shopping posts.
What’s the cost to merchants for using Instagram’s tools? For now, the company won’t get specific.
An Instagram spokesperson confirms to TechCrunch, “We will introduce a selling fee to help fund programs and products that help make checkout possible, as well as offset transaction-related expenses.” When we asked how much the “selling fee” would charge merchants, the spokesperson told us, “We aren’t sharing the specific number right now. We are testing a selling fee with businesses during the closed beta. It will not change the price of the items for consumers.” That indicates Instagram wants merchants to cough up the fee in exchange for higher purchase conversion rates rather than forcing users to pay a convenience fee for buying through the app.
Instagram’s ad business could also get a boost as Checkout could convince brands that the social network produces better return on investment because there are fewer steps before purchase.
The name of the game is convenience, and Instagram seems to be pursuing as much integration with other online services as possible.
Users can pay with PayPal, Visa, Mastercard, American Express or Discover. Instagram plans to allow merchants to integrate their Shopify, BigCommerce, ChannelAdvisor, CommerceHub and other tools with the Checkout feature. Meanwhile, Instagram confirms that interacting with Checkout will be used as a signal for ranking which content you see. Payments are processed by PayPal — an area of business Facebook has been content not to invade, and PayPal’s fees will likely be covered by Instagram’s selling fee.
“We started using product tags to make shopping more convenient for our customers,” writes Warby Parker co-founder and co-CEO Neil Blumenthal. “Checkout takes this experience one step further, making it even more intuitive and seamless for people who have discovered products they want to purchase instantaneously.”
Making checkout easy will likely only improve what’s already one of the best shopping experiences online, while simultaneously providing Instagram with even more detailed data on what its users like to buy. In that convenience lies an existential threat to users: By making its advertising feel like a service to customers, Instagram and its parent company help disguise their oft-criticized surveillance and data-collection practices as a boon to people’s everyday lives, rather than a problem of consumer privacy.
Instagram is useful in part because there is too much stuff on the internet and most of it is organized poorly. If you want to buy a pair of shoes, you can look at retailers you already know, but finding a new brand or different look is still mostly dependent on those retailers deciding to carry something novel. Google doesn’t do you much good unless you already know something exists, and most lifestyle and shopping blogs that would have provided curation before social media have migrated much of their efforts to Instagram. It’s hard to browse the internet like people browse a mall, because there’s nowhere to stroll and let something to catch your eye.
The moves seemingly tie in with CEO Mark Zuckerberg’s desire for his social media empire to refocus on privacy and get away from data collection and advertising revenue.
The company has announced sweeping changes to overhaul the social media juggernaut. The watch word, says CEO Mark Zuckerberg, is privacy.
However, critics say the changes will require a completely new business model for the company, and Zuckerberg doesn’t have a base of strong consumer trust to build upon. If the company is successful in making the changes, it could upend how brand managers, marketers and PR pros interact online.
Mr. Zuckerberg, who runs Facebook, Instagram, WhatsApp and Messenger, on Wednesday expressed his intentions to change the essential nature of social media. Instead of encouraging public posts, he said he would focus on private and encrypted communications, in which users message mostly smaller groups of people they know. Unlike publicly shared posts that are kept as users’ permanent records, the communications could also be deleted after a certain period of time.
He said Facebook would achieve the shift partly by integrating Instagram, WhatsApp and Messenger so that users worldwide could easily message one another across the networks. In effect, he said, Facebook would change from being a digital town square to creating a type of “digital living room,” where people could expect their discussions to be intimate, ephemeral and secure from outsiders.
“We’re building a foundation for social communication aligned with the direction people increasingly care about: messaging each other privately,” Mr. Zuckerberg said in an interview on Wednesday. In a blog post, he added that as he thought about the future of the internet, “I believe a privacy-focused communications platform will become even more important than today’s open platforms.”
The changes seem to mirror consumers’ wishes and current online behavior.
However, the move also helps Instagram fight back against Amazon, which has been steadily snapping up more and more of the digital advertising market.
Though only in beta, Checkout also marks perhaps one of the biggest pushes Facebook has made to compete more closely with the e-commerce heavyweight Amazon, which is starting to snap up a larger share of the digital advertising market dominated by the social networking giant and Google. If Checkout manages to take off, it could command a considerable audience of mobile-minded shoppers, as more than 130 million Instagram users now tap products in shoppable posts per month, according to data shared by Instagram.
“Instagram’s influence in commerce continues to flourish. Our merchants have seen incredible success using integrations with Shopping on Instagram to convert fans and followers into loyal customers,” Jimmy Duvall, chief product officer at BigCommerce, an Instagram partner working on in-app transactions, fulfillment and shipping, said in emailed comments to Mobile Marketer. “This latest capability allows brands to continue doing just that, without the risk of losing sales by asking consumers to shift to another platform to check out.”
How will these changes affect your social media strategy, PR Daily readers?