YouTube's in-site commerce play

Posted by Q McCallum on 2022-11-14

Earlier today I stumbled across this tweet by The Transcript (@TheTranscript_). It’s an audio excerpt of a May 2022 interview with YouTube CEO Susan Wojcicki, in which she describes the company’s addition of in-site commerce.

The Transcript posted this while quote-tweeting someone else. That person had noticed YouTube’s “Shop products in this video” links that run alongside the main content.

I hadn’t heard of this before – I guess no one’s selling merch in the videos I watch? – but YouTube’s been at this since November 2021, almost a year ago:

Starting next week, YouTube will host a weeklong livestreaming event, called Holiday Stream and Shop, where select social media stars will sell their own merchandise and brand name products directly on the platform. In the coming weeks, some YouTubers will be able to hawk goods from their videos, a concept known as shoppable video. It’s all part of the company’s biggest push yet to become a shopping destination.

YouTube, part of Alphabet Inc.’s Google, has toyed with this idea for years, but its plans accelerated when the pandemic created a surge in e-commerce. The company also faces new competition in luring advertising dollars—its core business—from the likes of Amazon, which is quickly growing its ads unit.

(They’ve since announced a partnership with Shopify, as of July 2022.)

Getting some context

Why do I think this is such a big deal? It helps to go back to my O’Reilly Radar article on Disney+’s new ad-supported tier. I made the case that Disney+ could potentially run contextual ads – that is, ads based on the content, not the viewer – instead of the targeted, follow-you-around ads that we all know and loathe.

Contextual ads win out for two main reasons:

  1. They’re usually cheaper to run. Targeted ads require teams of data scientists, plus the infrastructure to support the data collection and real-time model hosting involved in tracking a person’s online activity. Contextual ads only require enough technology (or even, hand-curation) to tag the content.

  2. They steer clear of data privacy problems, since they don’t require personal info. Sooner or later, we’ll have real regulation around how companies may collect and use data about people. Smart companies are researching new revenue opportunities that avoid privacy traps.

I see additional perks in YouTube’s in-site commerce format:

  • At least for now, the video creators themselves describe and link to the products. Contextual ad solutions still require that someone (either by hand, or automated with ML) pair content to an advertisement. YouTube has spared itself a lot of hassle by leaving this work to the creators. And it should make the creators happy that they get control over what shopping links run alongside their content.
  • YouTube could still analyze the items chosen by the creator and mine that for signal. You may call it “the video creator picks the links”; I call it “a dataset that’s been hand-labeled by an expert.” There must be interesting second-order attributes YouTube could extract from that information.
  • Shoppable videos address the attribution problem that is such a challenge for online advertising. How do you really prove that someone made a purchase because they saw your ad? Here, YouTube can close that loop. They might frame it as: “someone watches the video, sees the link, and completes the purchase … all inside our platform.”

Frankly, shoppable video gets to the point: some videos don’t need ads, because the video is the ad. If you’ve chosen to watch some influencer for makeup tips or whatever, then chances are you want to buy the products they’re showing you. Shoppable video bridges that gap. And that’s what good marketplaces do: they build bridges.

Haven’t we seen this before?

Does this “the video is the ad” concept sound familiar? It should. Most good ideas resonate precisely because they’re a slight twist on what we already know.

YouTube’s shoppable video format is a twist on long-form infomercials, and shopping channels like Home Shopping Network or QVC. You see it there, you can buy it there. You’ve just called the on-screen number; the hosts can pretty much guarantee that you bought the item because of the advertisement-video you’re watching right now.

(Infomercials may sound quaint and low-tech in an age of e-commerce and ML-driven targeted ads. But ask yourself why that format has held such staying power. I’ll wait.)