The Murky Future for Livestream Shopping

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Google may not be in the billionaire space race, but that doesn’t mean they haven’t achieved escape velocity.

As we foretold in our annual Predictions Episode this year, Youtube is the entertainment leviathan to beat this year. Ad revenues from Youtube alone topped $8.6B for Q4, beating out Netflix at a comparable $7.7B; driving their 365-day total in 2021 to a cool $28.8B.

But it isn’t due to their outsized influence on commerce and purchasing. It’s due to the growth of ad revenue.

When speaking about the future opportunities for the platform, Alphabet CEO Sundar Pichai made a verbal list of growth areas: “Podcasts, gaming, learning, sports, across all of these areas we will take a vertical specific look and find out how we can support creators better.” 

Noticeably absent: mention of contextual livestream shopping and commerce, a tactic we’re less-than-bullish on.

A lion’s share of the Youtube business model is ad-centric. If you’re as addicted to Five Minute Crafts as my children are, you’re all-too-familiar with Youtube’s pre-roll ads and interstitial programmatic ad insertion. There are ad units below the video content as well — called the Merch Shelf — where Creators can associate a print-on-demand service or Google Shopping ads on their channel, or even their video. While DTC brands test creator strategies, however, streamers are left to promote a product by promo code or URL. Or, as we put it:

If [contextual purchasing] was a significant source of future revenue growth we’d have A) seen it by now or B) seen breakout numbers from Meta (Instagram’s parent company) on their many tests and recent Shopify integration support. But we haven’t.

Recent growth of Youtube can be attributed to the attrition and migration of other audiences to the platform. Youtube as a whole is more generous than the rest, sharing up to 55% of revenue with their creators. While Instagram and TikTok subsidize live streams with flat dollar amounts for their creators to consistently host livestreams, Youtube has taken the Twitch-style approach for streamers. Streamers are encouraged to use features like Super Chat and Super Stickers, a model more akin to patronage than commerce influence. 

Recently, the SVP of Commerce at Buzzfeed, and frequent Future Commerce contributor, Nilla Ali, sat with Digiday for an interview discussing their own path with livestream. “I think you have to take another step back and think about what the psychological reason is for someone,” Ali said. “We’re still understanding that behavior, and that behavior is going to vary, depending on platform, price-point, talent.” 

While publishers and platforms try to understand a user behavior for stream-shopping entertainment, QVC’s core business is shrinking amid post-pandemic reopenings, down between 6.5-9% across business units. So, while livestream shopping might be growing in Asia, even the incumbents are losing ground here in the West.

So in 2022, Youtube isn’t going to need to compete with QVC, or teach their audience a new buying modality. Instead, they’ll compete for eyeballs and earholes, setting their sites on growing greater share of attention with the likes of Twitch (Amazon), with Spotify, and fandom like The Athletic (a New York Times company).

— Phillip