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Social Shopping Is Taking Off, and Facebook Is the Biggest Beneficiary

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The percentage of users shopping directly in social media apps increased 69% last year.

People are getting used to the idea of shopping on social media.

22% of consumers say they bought something directly from a social media app or website in the fourth quarter, according to a CivicScience survey. That’s up from 13% in the fourth quarter of 2018.

Much of that growth seems to be driven by Facebook (NASDAQ:FB), which continues to invest in its Marketplace platform and shopping on Instagram, and is also working on a nascent mobile payments platform in WhatsApp. Instagram, in particular, with the introduction of Checkout, new features in the Explore tab, and the ever-expanding presence of “influencers,” has had a big influence on shopping habits.

While other social media platforms like Snap‘s (NYSE:SNAP) Snapchat and Pinterest (NYSE:PINS) have tried to edge their way into consumers’ shopping patterns, Facebook has been the biggest beneficiary so far.

Three screenshots depicting Checkout on Instagram.

Image source: Instagram.

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The biggest effect so far

Two Facebook products have had the biggest effect on social shopping so far.

Facebook Marketplace, which is Facebook’s answer to Craigslist, launched a little over three years ago, and it’s now available in over 100 regions. Founder Mark Zuckerberg says Facebook sees millions of interactions between buyers and sellers every day on the platform.

Facebook is continually taking steps to improve Marketplace, from tools that help local sellers list items and buyers find them to expanding the platform to include inventory from e-commerce companies. The moves have made shopping on Facebook Marketplace a much different experience from Craigslist or other online classified advertisement sites.

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Facebook’s big push into shopping on Instagram may be even more noticeable. Instagram is one of the social media platforms users go to specifically to discover new products. Influencer advertising has become an entire sub-industry of digital advertising. And influencers on Instagram have more … influence … than most other social media platforms. 42% of daily Instagram users have made an influencer-based purchase, according to another CivicScience survey. That’s up from 34% in 2018.

There was a noticeable increase in respondents saying they’ve shopped directly on social media after Facebook introduced Checkout on Instagram. Checkout enables Instagram users to seamlessly buy items they see on Instagram without navigating to a merchant’s website. The product is still limited to select retailers, which means there’s a lot of potential for growth as the number of participating merchants expands.

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Competitors in social shopping

Facebook’s biggest competitor in social shopping may be Pinterest. Many Pinterest users use the platform exclusively for discovering things to buy.

There’s strong potential for Pinterest to copy Instagram Checkout. It already offers retailers Shopping Ads (as does Facebook), which provides users with details about items and then sends them to a checkout page on the retailer’s website. Developing a more seamless checkout process like Instagram Checkout could help Pinterest increase the value of those ads through higher conversions and increased engagement.

Meanwhile, Snap has been trying to edge its way into social shopping by using its advanced camera and image recognition capabilities. It partnered with Amazon in 2018 to offer visual search capabilities within its app, sending users to Amazon’s marketplace whenever they Snap an item they’re interested in buying out in the wild. Pinterest offers a similar feature, as does Amazon’s app.

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Importantly, Snapchat’s user base doesn’t use the app to discover items they want to buy like they do on Instagram or Pinterest. As such, the company has wisely shifted to investing in areas where its users have already made a habit of opening Snapchat — consuming content and connecting with friends.

Facebook, with its massive and highly engaged user base and head start in social commerce, sits in the catbird seat when it comes to capitalizing on the growing trend of shopping directly on social media apps.

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As always, management is thinking long-term. “We are optimistic on the timeframe of years, right, not driving next quarter’s business,” Zuckerberg said on Facebook’s third quarter earnings call. And with just 23% of social media users actually shopping directly in apps like Facebook and Instagram, there’s good reason to take the approach of expanding the reach of its products instead of trying to monetize them quickly.

Adam Levy owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Amazon, Facebook, and Pinterest. The Motley Fool has a disclosure policy.

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Updating Special Ad Audiences for housing, employment, and credit advertisers

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On June 21, 2022 we announced an important settlement with the US Department of Housing and Urban Development (HUD) that will change the way we deliver housing ads to people residing in the US. Specifically, we are building into our ads system a method designed to make sure the audience that ends up seeing a housing ad more closely reflects the eligible targeted audience for that ad.

As part of this agreement, we will also be sunsetting Special Ad Audiences, a tool that lets advertisers expand their audiences for ad sets related to housing. We are choosing to sunset this for employment and credit ads as well. In 2019, in addition to eliminating certain targeting options for housing, employment and credit ads, we introduced Special Ad Audiences as an alternative to Lookalike Audiences. But the field of fairness in machine learning is a dynamic and evolving one, and Special Ad Audiences was an early way to address concerns. Now, our focus will move to new approaches to improve fairness, including the method previously announced.

What’s happening: We’re removing the ability to create Special Ad Audiences via Ads Manager beginning on August 25, 2022.

Beginning October 12th, 2022, we will pause any remaining ad sets that contain Special Ad Audiences. These ad sets may be restarted once advertisers have removed any and all Special Ad Audiences from those ad sets. We are providing a two month window between preventing new Special Ad Audiences and pausing existing Special Ad Audiences to enable advertisers the time to adjust budgets and strategies as needed.

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For more details, please visit our Newsroom post.

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Impact to Advertisers using Marketing API on September 13, 2022

For advertisers and partners using the API listed below, the blocking of new Special Ad Audience creation will present a breaking change on all versions. Beginning August 15, 2022, developers can start to implement the code changes, and will have until September 13, 2022, when the non-versioning change occurs and prior values are deprecated. Refer below to the list of impacted endpoints related to this deprecation:

For reading audience:

  • endpoint gr:get:AdAccount/customaudiences
  • field operation_status

For adset creation:

  • endpoint gr:post:AdAccount/adsets
  • field subtype

For adset editing:

  • endpoint gr:post:AdCampaign
  • field subtype

For custom audience creation:

  • endpoint gr:post:AdAccount/customaudiences
  • field subtype

For custom audience editing:

  • endpoint gr:post:CustomAudience

Please refer to the developer documentation for further details to support code implementation.

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Introducing an Update to the Data Protection Assessment

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Over the coming year, some apps with access to certain types of user data on our platforms will be required to complete the annual Data Protection Assessment. We have made a number of improvements to this process since our launch last year, when we introduced our first iteration of the assessment.

The updated Data Protection Assessment will include a new developer experience that is enhanced through streamlined communications, direct support, and clear status updates. Today, we’re sharing what you can expect from these new updates and how you can best prepare for completing this important privacy requirement if your app is within scope.

If your app is in scope for the Data Protection Assessment, and you’re an app admin, you’ll receive an email and a message in your app’s Alert Inbox when it’s time to complete the annual assessment. You and your team of experts will then have 60 calendar days to complete the assessment. We’ve built a new platform that enhances the user experience of completing the Data Protection Assessment. These updates to the platform are based on learnings over the past year from our partnership with the developer community. When completing the assessment, you can expect:

  • Streamlined communication: All communications and required actions will be through the My Apps page. You’ll be notified of pending communications requiring your response via your Alerts Inbox, email, and notifications in the My Apps page.

    Note: Other programs may still communicate with you through the App Contact Email.

  • Available support: Ability to engage with Meta teams via the Support tool to seek clarification on the questions within the Data Protection Assessment prior to submission and help with any requests for more info, or to resolve violations.

    Note: To access this feature, you will need to add the app and app admins to your Business Manager. Please refer to those links for step-by-step guides.

  • Clear status updates: Easy to understand status and timeline indicators throughout the process in the App Dashboard, App Settings, and My Apps page.
  • Straightforward reviewer follow-ups: Streamlined experience for any follow-ups from our reviewers, all via developers.facebook.com.

We’ve included a brief video that provides a walkthrough of the experience you’ll have with the Data Protection Assessment:

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The Data Protection Assessment elevates the importance of data security and helps gain the trust of the billions of people who use our products and services around the world. That’s why we are committed to providing a seamless experience for our partners as you complete this important privacy requirement.

Here is what you can do now to prepare for the assessment:

  1. Make sure you are reachable: Update your developer or business account contact email and notification settings.
  2. Review the questions in the Data Protection Assessment and engage with your teams on how best to answer these questions. You may have to enlist the help of your legal and information security points of contact to answer some parts of the assessment.
  3. Review Meta Platform Terms and our Developer Policies.

We know that when people choose to share their data, we’re able to work with the developer community to safely deliver rich and relevant experiences that create value for people and businesses. It’s a privilege we share when people grant us access to their data, and it’s imperative that we protect that data in order to maintain and build upon their trust. This is why the Data Protection Assessment focuses on data use, data sharing and data security.

Data privacy is challenging and complex, and we’re dedicated to continuously improving the processes to safeguard user privacy on our platform. Thank you for partnering with us as we continue to build a safer, more sustainable platform.

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Resources for Completing App Store Data Practice Questionnaires for Apps That Include the Facebook or Audience Network SDK

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Resources for Completing App Store Data Practice Questionnaires for Apps That Include the Facebook or Audience Network SDK

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