A rivalry is heating up between Facebook and Amazon that could lead to a power struggle between the social networking giant and the ecommerce titan over everything from ad sales to where consumers shop online.
The latest salvo came on Tuesday when Facebook (FB) announced its newest venture into the ecommerce realm with the launch of its Facebook Shops storefront. Available now, Facebook Shops lets retailers set up their own ecommerce portals that are accessible from their existing Facebook profiles.
And just as Facebook is leaning more into ecommerce, Amazon (AMZN) is digging deeper into the online advertising market. In the company’s most recent quarter, Amazon’s “Other” business segment, which is made up largely of its advertising division, saw 44% year-over-year growth, topping out at $3.9 billion.
That’s still a far cry from Facebook’s Q1 2020 advertising revenue of $17.4 billion, but Amazon’s year-over-year advertising growth has been around the 40% range for the past five quarters, and according to a report from eMarketer, the company currently sits in third place behind Google and Facebook in terms of advertising market share.
It’s clear that Amazon is going to continue to push into advertising as hard as possible, which is sure to irk the higher ups at Facebook. But two can play that game, which is where Facebook Shops comes in.
To get the program running, Facebook is teaming with ecommerce heavyweights like Shopify (SHOP), BigCommerce, and others to help businesses set up their online portals. Shops won’t just be on Facebook, though. The social media firm says that it will bring a similar shopping experience to Instagram, as well as WhatsApp and Messenger. That would open Shops up to every one of Facebook’s 2.6 billion monthly active users.
“We see a material opportunity to improve user monetization across FB and IG in the eCommerce vertical (more relevant products, less purchasing friction = higher conversion rates),” BofA Securities analyst Justin Post wrote in a research note following’s Facebook’s announcement.
“Given the opportunity, we think any signs of traction for Instagram / Facebook shopping could be a potential catalyst for FB in '20/'21, while Amazon, eBay and Google could see some (small) sentiment risk,” he added.
Facebook will also add chat to its arsenal in its drive to becoming an even bigger ecommerce contender. The company says it will allow merchants to communicate directly with customers via Messenger, WhatsApp, and Instagram Direct to do everything from offering support to providing order tracking information.
And then there’s the live component of Facebook Shops, which will allow for a QVC-esque live video shopping experience via Instagram, which influencers are sure to glom on to the minute it’s available.
As Morgan Stanley analyst Brian Nowak points out, Instagram has the opportunity to bring in $4 billion in sales annually.
“We believe consumer ecommerce behavior is moving in FB's direction and over time these new offerings could lead to even broader social shopping (and FB monetization) from small and medium sized businesses … to larger retailers/brands,” he wrote in a research note.
Facebook will increasingly move in on Amazon’s share of the small and medium business marketplace, while Amazon will continue to strike into the advertising market. And while both companies will continue to maintain commanding leads in their respective sectors, expect them to view each other as greater rivals in their spaces, and make moves to push back against their new competitors in the years ahead.
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