If you ask a roomful of people what TikTok is, you’re bound to get a pretty wide array of answers. Is it a hub for teens to show off their cool dance moves? Sure. It’s also a trusted news source, a job maker and breaker, and a lightning rod for geopolitical angst.
Judging from the ByteDance Inc. social network’s pitches to potential advertisers, though, what executives really want TikTok to be known as is a digital shopping mall.
It’s a natural progression. The platform has shown an uncanny ability to drive offline sales of anything from leggings to containers of feta cheese with the help of its viral videos. Now TikTok is focusing on moving those offline purchases onto its own platform — and inventing new ways to track and target its user base in order to make that happen.
One of the latest gambits, MarketWatch has learned, involves TikTok targeting ads toward users based on purchases they haven’t even made yet. Thanks to the glut of data collected on users while they use TikTok and when they leave to check out other sites, the company claims it can gauge whether you’re likely to buy just about anything, from a tube of mascara to a new house.
The new offering hints at how massive TikTok’s commerce ambitions actually are. “Social commerce,” as it’s called, is a market worth more than $700 billion globally that has fallen flat in the U.S., despite the efforts of giants like Alphabet Inc. GOOGL, +1.37% GOOG, +1.47%, Meta Platforms Inc. META, -0.22% and Amazon.com Inc. AMZN, +0.42%. But experts say TikTok has a real chance to flourish where those other giants failed.
“TikTok pioneered a new form of ‘viral commerce’ that we haven’t seen replicated on any other platform,” Insider Intelligence analyst Jasmine Enberg said. “It’s a kind of shopping behavior that’s driven by a younger user base, and one whose purchasing habits are driven by a fear of missing out on the newest cultural trend. That sense of FOMO is ultimately what leads to products flying off virtual and physical shelves.”
But FOMO clearly isn’t enough to make TikTok a shopping destination — which might be why the platform’s started turning to the tactics of its more established American rivals. MarketWatch found TikTok siphoning data from more than half a million websites, including the online stores for flower shops, fashion outlets and more, all with the purpose of turning your shopping habits on those sites into purchasing potential on its own.
Right now, when you see the hashtag #tiktokmademebuyit, it’s typically referencing a beauty brand or streetwear label. But MarketWatch found TikTok promoting its predictive capabilities to marketers hawking a much wider spectrum of options, from real estate agents to high-school tutors and insurance brokers.
After all, if TikTok can make you buy a new pair of pants, who’s to say it can’t make you buy car insurance?
“A platform is always trying to interpret any interaction with you as some kind of signal,” said Ana Milicevic, co-founder of the adtech consultancy Sparrow Advisers. “Sure, you might not be on TikTok to buy car insurance, but with the sheer amount of time that folks spend in the app interacting with so many different types of content, it gives a lot of leeway to reinterpret those signals in very different ways.”
A staple in China, a potential boom in U.S.?
While the U.S. has seen a steady uptick in social commerce sales — predicted to reach roughly $53 billion this year after topping $39 billion in 2021 — those figures are still around one-tenth the size of China’s expected gains, according to one recent report from Insider Intelligence.
And while some Americans might have given social shopping a chance at the height of the global pandemic, Insider’s report shows that the percentage of new buyers using the format has started a fairly rapid decline year over year. In turn, over this summer alone we’ve seen Instagram reportedly scale back its shopping features, while Facebook scrapped its livestream-shopping program entirely. A number of influencers trying Amazon’s burgeoning QVC-esque live shopping platform, Amazon Live, meanwhile, reportedly ditched the effort in recent months after struggling to build a following on the service, while TikTok reportedly scuttled plans to bring its live shopping feature into the U.S. after seeing it flop in the EU (before reportedly reviving it earlier this month).
When asked what was behind the West’s less-than-enthusiastic approach to social commerce, Enberg — the Insider Intelligence analyst who authored the aforementioned report on the topic — pointed to a common thorn in the side of major platforms: privacy.
“A big reason we see social-media users hold off on making purchases on the social platforms — TikTok included — is because they don’t want to provide them with their payment information or their personal information,” Enberg said.
“For certain types of viral products that really ignite that sense of FOMO, or are limited-edition launches, there might be more impetus to overlook those security concerns and provide that information anyway,” she said. “But the promise of virality on TikTok is never going to be guaranteed.”
A person’s path to purchase is also never guaranteed. As Milicevic put it, there’s never been an ad-industry standard for, say, the four specific steps a person takes before buying a new car. A person might be considered a likely car buyer if their device’s location shows them walking past a car dealership, or if their search history shows them looking up the model they saw in their neighbor’s driveway out of sheer curiosity.
TikTok, meanwhile, was tight-lipped about its own calculus when determining whether a user is planning to buy a sedan or an SUV, though a spokesperson noted in an email to MarketWatch that “what users search for” is one factor considered.
How TikTok tracks your purchases
It’s not revelatory that someone looking up TikTok tips for buying your first motorcycle would, in fact, be interested in buying their first motorcycle — which is why TikTok is far from the first platform to provide this kind of data to advertisers. Google, for example, offers advertisers access to users with different “purchase intents,” partially based on their Google search and queries, while Microsoft offers a similar ad product using Bing.
In Meta’s marketing documentation, the company notes that any third-party site can use its Pixel — a tiny piece of code dropped onto websites that ties a person’s actions on that site to their specific social-media account — to collect signs of “purchasing intent,” like a visitor’s product searches or cart activity, which the site operator can use to pepper the visitor with ads the next time they open Facebook or Instagram.
TikTok debuted its own Pixel early last year as part of its then-burgeoning partnership with Shopify, and has since plugged into more than 500,000 websites, including those from retailers like Carvana Co. CVNA, -6.11%, Nike Inc. NKE, -0.55% and Nordstrom Inc. JWN, -0.20%. The data that TikTok gleans from these sorts of sites, according to TikTok’s Pixel documentation, can include everything from searches made and checkouts initiated to the specific types of items a visitor adds to their on-site wishlist.
In its email to MarketWatch, TikTok confirmed that Pixel data is part of the equation it uses when determining the products its users are likely to buy.
There’s a certain irony in TikTok’s commerce strategy. After all, if the average American is staying away from social shopping because of their (rightful) security and privacy concerns, then collecting more of their data off of more websites without their knowledge might not seem ideal. But this is just the latest sign that the company’s been shifting its priorities away from wooing shoppers, and wooing commerce brands instead.
The first move came this past April, when TikTok announced that the bulk of websites outfitted with its Pixel would now be required to drop a cross-site tracking cookie to collect and pass data straight back to platform. As some marketers pointed out at the time, this was an easy fix to a frequent gripe among TikTok’s advertisers — particularly advertisers in the commerce space.
TikTok ads, they pointed out, weren’t great at getting a person to actually “convert” — convincing people to buy the product being advertised — especially when compared to how effective Facebook or Instagram ads had always been. In part, this was because TikTok relied on “single user sessions” to measure ad effectiveness.
Here’s an example: Under a single user session, if you saw a TikTok ad for a cute dress, clicked the ad and bought it from the retailers’ site, then TikTok would connect the ad and purchase together. But if you saw a TikTok ad for a cute dress, ran off to do some errands, and later used your desktop to search on Google to find that cute dress you saw in the morning, TikTok wouldn’t tie that purchase back to the initial ad.
Cross-site cookies helped square that particular circle, as did TikTok’s following tweak that came in June, which allowed brands to not only track the impulse buys that their TikTok ads were generating, but purchases happening up to a month afterwards, too.
On paper, that might seem like a nothingburger of an update. But it’s one that points towards a pretty major shift from the types of potential shoppers TikTok wants to target.
How new ambitions will change TikTok’s content
In 2022, TikTok’s user base has pretty markedly exploded beyond trend-chasing Gen Z’ers. That comes with a pretty significant shift in the kind of content being produced on the platform (one report from TikTok last year noted a trend in parents posting about their home appliances), and the types of buying behavior that content brings.
Put another way: A user might buy a tube of mascara the same day that they see their favorite TikTok influencer raving about it, but no amount of FOMO is likely to make them buy a washing machine without doing a few days’ worth of research —even if it’s the same influencer hawking it.
By expanding the so-called “attribution window” available to advertisers, TikTok could now let them track the performance of ads for products like, say, dishwashers that potentially involved a few days (or weeks) on the buyer’s end before they actually put their money down. And In August, TikTok debuted a bevvy of new, shoppable ad formats that these companies could use to target TikTok scrollers directly in their feeds.
Enberg noted that these particular ad formats were “more akin to traditional e-commerce ads, which means they would be more familiar to the average marketer.” And the power to target people based on what they intend to buy is also, for better or worse, a familiar part of targeting ads across old-school ad platforms like Google — which means the logical next move on TikTok’s part was rolling out that data too.
“With advertising in general, everyone more or less follows the same strategy, and eventually there comes a saturation point,” Milicevic explained. “If you’re early to a particular market, you’ll always get more bang for your buck because your competitors aren’t there yet. It’s why you’ll get into so many conversations with brands about things like the ‘metaverse’ now.”
But unlike the path to normalizing whatever the heck a “metaverse” is, TikTok’s hurdles in normalizing social commerce are somewhat straightforward, according to Milicevic.
“If TikTok can find an easy way to normalize the actual ordering and delivery experience across a wide swath of different vendors that might want to sell on its platform, that removes that barrier to entry,” she said.
“The actual commerce delivery experience is often disconnected from the advertising conversation because advertisers usually just want to tell you about a product and make sure you convert,” she went on. “But to consumers, everything is digital. They’re not really drawing a distinction between advertising and customer service, or customer service and delivery, because to them all those touchpoints all converge within the app they’re ordering from.”
When a person gets mailed a knock-off Roomba after making a purchase on Facebook Marketplace or Instagram (which, apparently, is more common then one might think), it’s likely that they’re going to think twice before shopping on that particular platform again.
Historically in the West, “you pick a brand you know, and you pick a store where you’ve shopped before so you know their delivery doesn’t suck — or even better, you pick it up yourself,” Milicevic said. Winning consumers to its own shopping products might mean cozying up with delivery and fulfillment centers — an idea the TikTok has hinted at with its current job openings — or forming deeper partnerships with the likes of Shopify or Etsy, she said.
In other words, social commerce’s biggest hurdle right now in the U.S. — for TikTok or any other platform — is trust. Trust that the products you buy will actually be the products you receive, trust that they’ll get to you in one piece, and trust that the platform will treat you (and your data) with respect. And right now, it just doesn’t have that.
“I don’t think they’ve reached the level of reliability of something like Amazon Prime just yet,” Milicevic said. “But if someone has trouble with TikTok fulfillment, you’re likely to see videos about that on TikTok.”