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Shopify announced a new feature on Tuesday that’s designed to help merchants more effectively find new customers using advertising platforms at a time when it's getting harder and more costly to do so.
Shopify Audiences provides key digital marketing data that has become less freely available following privacy changes made by Apple this year. It works like this:
- Brands choose a product that they want to promote to more potential customers.
- Shopify uses machine learning to build an audience with high purchase intent for the brand.
- The audience is “directly and securely exported” to an advertising network, Shopify wrote, where it can be used to target potential customers.
Attracting new customers is the lifeblood of a consumer brand, and direct-to-consumer businesses rose over a decade by leveraging powerful digital advertising tools from platforms like Facebook to scale.
But this well-trodden advertising route has been getting rockier in recent years. As the number of consumer goods companies went up, ad space on platforms like Facebook became more limited and expensive, driving up customer acquisition costs. At the same time, Apple’s privacy-centered changes that rolled out with iOS 14.5 in April 2021 decreased the number of users opting in to provide the data that powers mobile advertising. Shopify said Audiences aims to address these issues.
“We know that independent merchants may have to pay twice as much to find a new customer as they did a year ago. In fact, one merchant told us their customer acquisition cost climbed 80% over the last year," said Kaz Nejatian, VP of Product at Shopify, in a statement. “We've also seen merchants’ return on ad spend drop, reflecting the growing difficulty of using digital marketing to find new buyers. That’s why we’re launching Shopify Audiences to fix it—without compromising privacy standards.”
Shopify’s new feature aims to provide a key piece of the digital marketing equation: an audience that has a high purchase intent for a product. With data on intent, platforms can target the users that are more likely to buy a product. Shopify is using machine learning to assemble these audiences using its own platform – which has data from its 1.7 million merchants – and tailor them to a merchant. Shopify Audiences “leverages our unique perspective on purchasing intent from supporting merchants and their buyers,” the company wrote in a news release. Then, it exports the audience to a brand’s preferred advertising network, where they can run “look-a-like” campaigns to target people who match the profile of the user lists generated by Audiences.
The company is accounting for privacy with this feature: merchants can opt out of sharing their data, and the company states that Facebook deletes data after it is exported and matched to its records.
Currently available to Shopify Plus members, the feature is currently available for Facebook and Instagram. Meta properties have been important platforms for DTC brands. In turn, Facebook has taken a big hit in digital advertising post-iOS 14.5, reporting earlier this year that the privacy moves would cost the company $10 billion.
At a later date, Shopify plans to make Audiences available for TikTok, Snap, Pinterest, Microsoft Advertising, Criteo, and others.
Shopify said the Audiences feature is designed to help brands increase conversion rates on their ads, and generate better Return on Ad Spend (ROAS).
Seeking to address another area where iOS 14 brought big and challenging changes, Shopify is also looking to provide accurate attribution with the new feature. The company said it would provide measurement at the audience level, rather than at the campaign level.
“Having a transparent attribution model is essential so that merchants can have a high degree of trust about what marketing tactics are driving conversion and deploy their spend accordingly,” Shopify wrote.
Shopify has long offered the tools to help brands set up online stores where shoppers could browse and buy items. Under this model, it was up to brands to turn to platforms like Facebook to attract customers to those websites. Audiences is one sign of Shopify making a move to help brands not only man the store, but go out and get shoppers into it, as well.
Business Insider first reported on the development of the new feature last year, and characterized it as part of a big push into advertising by Shopify.
"I think it's the first step to Shopify building out a much more robust advertising offering for their merchants — it's the low-hanging fruit of interesting data to help better advertise on platforms," an executive told Business Insider at the time.
One outgrowth of the iOS 14.5 shifts was a move by retailers to build out advertising networks on their own platforms. The prior report indicates Audiences might be a building block for Shopify to make a retail media move of its own.
There are questions about where such a network would live on Shopify, as individual brand websites don't offer the same kind of traffic pull that usually leads to advertising. But as Ben Thompson of Stratechery wrote earlier this year, the attribution challenges of the post iOS 14.5-landscape – namely, determining who sees an ad – could present an opportunity:
Here Shopify’s ability to act on behalf of the entire Shopify network provides an opening: instead of being an advertising seller at scale, like Facebook, Shopify the company would become an advertising buyer at scale. Armed with its perfect knowledge of conversions it could run probabilistically-targeted campaigns that are much more precise than anyone else, using every possible parameter available to advertisers on Facebook or anywhere else, and over time build sophisticated cohorts that map to certain types of products and purchase patterns.
To be clear, Shopify hasn't detailed any plans, or addressed whether this is the concept it's building. But it's worth reflecting on the fact that Audiences shows some symmetry with what's presented.
For one, the feature's ability to assemble merchant-specific audiences geared around particular items sounds like it could be at least a step toward building "sophisticated cohorts that map to certain types of products and purchase patterns."
There is also a sign that Shopify views its network as a strength that can be harnessed. In its news release, Shopify writes that Audiences "taps the collective power of our platform so merchants can reach new customers more effectively."
It might be a different approach from where Shopify started, but it would still be arming the rebels.
Trending in Marketing
Can Shop Cash entice more users to use the app for browsing and buying?
Shopify is launching a new rewards program for items purchased through its checkout system.
Shop Cash will provide the opportunity for consumers to earn 1% back on purchases made through Shop Pay.
The feature includes a direct tie-in with the Shop app. Users can check their balance through the app, and the rewards are redeemable for future purchases through Shop, as well.
“This is a coming of age moment for Shop. It’s become an incredible app that allows shoppers to discover great brands, check out with one tap, and track orders in real time,” said Harley Finkelstein, president of Shopify, in a statement. “Shop Cash represents the next evolution of Shop, connecting independent brands to more shoppers, and rewarding those shoppers for being loyal fans.”
The launch falls on Shopify’s 17th birthday, so the ecommerce software company is giving away Shop Cash to celebrate. For Shop Day, Shopify partnered with dozens of merchants, including Trixie Cosmetics, MrBeast and Monday Swimwear. They’ll share custom links across channels that offer cash to spend on the Shop app. In all, Shopify will give away more than $1,000,000. Brands will also be running exclusive Shop Cash offers throughout the day.
The rewards program marks a new way that Shopify is aiming to transform Shop into more of a shopping app where users can discover new items, extending beyond its initial use for post-purchase order tracking and management at launch in 2020.
Shopify has been making moves over the last year to provide more opportunities to browse and buy recommended products, as well as giving brands more tools to showcase storefronts and tell their stories. With Shop Pay, the app offers one-click checkout. There are signs that it is all inspiring users to seek out the app. Shopify said 35% of the orders on the Shop app are repeat purchases.
With more brands joining the app and infrastructure for the shopper experience and checkout in place, rewards can help make the app stickier for consumers. The opportunity to earn cash, redeem it and even check a rewards balance are all reasons to keep returning to the app, and make it a destination to shop.
Shopify has long been known as the infrastructure layer of commerce, as it provided the tools for brands to run and manage an online store under their own name. With the Shop app, it is aiming to make Shopify itself a destination for shopping. It remains a nascent effort, even as more brands have taken advantage of the new features to enhance storefronts.
This comes as marketplaces continue to rise across ecommerce, and giants like Amazon and Walmart experiment with tools that do more to boost discovery of new products.
Social media has long been the engine of discovery in ecommerce, especially in the direct-to-consumer realm that Shopify has owned. Users found products on Facebook or Instagram, then finished checkout on a brand's phase. With the push toward privacy making performance marketing more difficult and customer acquisition costs rising, the ecommerce platforms are attempting to take that power into their own hands. With advertising placed close to the point of sale through retail media and the ability to check out on the same page where a user sees a product, marketplaces and Shop are realizing new opportunities to attract, convert and deliver for users within one app. For Shop, the trick is to attract more shoppers to the app. Rewards like Shop Cash are a carrot to do just that.