In March 2019, Instagram presented a new feature that enables users to purchase products directly on Instagram without having to leave the app. The “checkout with Instagram” feature launched in the United States with top brands such as Adidas, Nike, Prada, Warby Parker, Zara and Kylie Cosmetics.
Of course, Instagram will be charging sellers a selling fee, rather than placing a fee on buyers. An Instagram spokesperson said to TechCrunch, “We will introduce a selling fee to help fund programs and products that help make checkout possible, as well as offset transaction-related expenses.”
This move seems fairly in line with Facebook’s advertising ethos: Aggregate active and engaged audiences who will have higher conversion rates, and gradually charge sellers higher fees and advertisers higher cost per mille (CPM) to generate revenue.
While Instagram’s new update has e-commerce brands anticipating the new shift, many brands are likely preparing in the wrong ways. By only creating a single strategy to sell more products on Instagram with the new update, as opposed to a more holistic plan to build and own their audience, many businesses will end up playing directly into Facebook’s hand.
Here’s why: Keeping businesses entangled in the Facebook ecosystem as opposed to allowing them to build their own audiences off-platform is in Facebook’s best business interests. Most major updates since Pages have continued to push brands into “renting” their audiences from Facebook rather than owning them on their own channels.
The strategy is reminiscent of the days of AOL, when a user’s internet experience lived solely on AOL. Users had profiles, pages, friends, email, communication and all browsing within the ecosystem, and they very rarely had to leave. Facebook is essentially creating a similar ecosystem.
Users don’t need to go to a company’s website; they can simply go to its Facebook Page. Need to talk to your friends? Messenger. Need recommendations for events, restaurants or other businesses? Facebook. Want to go shopping? Now, Instagram.
There are plenty of data points that showcase the perils of leaning too heavily on Facebook’s platforms. One of the most burning warning signs of Facebook not being so nice is the tragedy of LittleThings. LittleThings was a self-funded site that spent four years building a massive audience on Facebook, catering to billions of users with short viral clips and live video. A whopping 75 percent of the site’s organic reach disappeared as soon as Facebook pushed an algorithm update that highly favored user posts over publisher content in the news feed.
LittleThings was hung out to dry, and the business model it had built through four years of careful algorithmic pivots was rendered useless. The site eventually shut down in 2018, putting around 100 employees out of work.
What can brands do to avoid a LittleThings fate?
The obvious answer is to avoid betting the business model farm on a single platform, whether under the Facebook umbrella or not. But even then, things can get hairy. Facebook is one of the most powerful advertising platforms the world has ever seen, and it’s hard not to get lulled into how effective it can be when used correctly.
Brands such as So Yummy, a food and recipe site, have incorporated an element of platform diversification into their customer acquisition and retention strategies. So Yummy has ventured onto platforms such as Snapchat and TikTok to avoid becoming overly dependent on a platform held by a single company.
Email lists have always been a strong asset for any brand but are starting to become increasingly more important as companies start to shift to more of an owned and operated (O&O) approach. Email allows brands to build and rebuild direct connections with their users and customers who would otherwise be lost in the social media scramble.
While brands should be making full use of whatever platforms work best for them, they should also keep their eyes on the long view. By simply running a few lead generation campaigns or contests aimed at increasing your email list, you’ll be able to start collecting a trove of valuable emails that can help bolster sales when the algorithm tides turn.
However, it must be noted that if you do want to pursue the email newsletter route, you will still have to do your due diligence to keep your subscribers engaged and at least aware of your brand.
The most innovative brands will always pursue a better customer experience, which tends to be a high priority for the Facebook umbrella. Instagram's checkout feature will enable the 130 million (and growing) people tapping Instagram’s product tags to only have to enter their payment information once and then purchase at will without the hurdle of having to enter their payment information again.
This is great for users, but the value proposition of a seamless checkout on platforms consumers use daily trumps the checkout flow of the sites for some of the best e-commerce companies. If users prefer to shop on Instagram, then so be it. However, brands should always have a plan for customer retention and platform diversification to avoid falling into algorithm quicksand.