Google Tests Making YouTube an E-Commerce Marketplace

Google has plans to turn YouTube into a major marketplace and has already asked creators to tag and track products on their videos via YouTube software. Google will then link that data to shopping tools and analytics. According to sources, Google is also partnering with Shopify to test an integration for selling items on YouTube. A spokesperson, who confirmed the company is testing the features “with a limited number of video channels,” added that creators will maintain control over the products displayed.

Bloomberg reports that Google’s plans “have the potential to transform YouTube from an advertising giant into a new contender for e-commerce leaders such Amazon.com and Alibaba Group Holding.” “YouTube is one of the least utilized assets,” said e-commerce startup Basket president Andy Ellwood. “If they decided they want to invest in it, it’s a huge opportunity for them.”

In the current test, YouTube is “offering subscriptions for creators and takes a cut of 30 percent from those payments.” Bloomberg Intelligence reports that, excluding China, the e-commerce global market “may grow to $2.8 trillion by 2025.” “Facebook is ahead in this game,” said Bloomberg Intelligence analyst Jitendra Waral. “But the sheer size of the e-commerce market and its future growth makes it too big to stay out of.”

Until now, Google has had only limited success with e-commerce and stuck with selling ads rather than products. But, as COVID-19 has wreaked havoc with marketing budgets, Google has seen its advertising shrink even as e-commerce has skyrocketed. While Amazon and Facebook have seen soaring business, “Google suffered its first ever revenue decline in the second quarter.”

Bloomberg notes that, “for months now, Google executives have signaled that YouTube will be central to their e-commerce strategy,” including chief executive Sundar Pichai suggesting that YouTube “unboxing” videos “could be turned into a shopping opportunity.” In July, Google debuted Google Shopping, an online storefront integrated with Shopify “so that sellers could manage their inventory.”

In late 2019, “YouTube began testing a similar Shopify integration for creators who can list as many as 12 items for sale on a digital carousel below their videos.”

Motley Fool notes that, “currently, most YouTube ads are … all about introducing products and establishing brands.” But “facilitating the online shopping process all the way to the checkout page can be a lot more valuable for advertisers, who will likely pay more per ad impression if it leads to higher purchase rates, and those purchases are more easily linked to the YouTube ads.” Moving more ads to “higher value placements lower in the sales funnel could accelerate revenue growth for YouTube.”

It concludes that making an e-commerce play is “a big opportunity for Google to reinvigorate one of the biggest factors driving its revenue growth over the last few years.”