One of the most attractive parts of the recent TikTok deal — for Walmart and many other bidders — was the platform’s immense potential for video commerce. While it is clear TikTok is just getting started in this area, many of its Chinese peers, as well as tech giants and up-and-comers in the U.S., are already merging shopping and entertainment in exciting new ways.
Let’s take a quick stroll through time to explore the evolution of video commerce and why the next major players in the U.S. may not be the ones you’re most familiar with today.
A Brief History of Video Commerce
From the 1950s onward, with a TV set in each American household, video has been a go-to for the hottest brands of the day to reach savvy consumers. Soon enough, this rich, interactive medium would lend itself not only to the five-minute commercial break but to full-fledged commerce-focused TV channels that would reach millions of eager shoppers.
Perhaps the mother of them would be QVC (“Quality Value Convenience”), where celebrities and homegrown stars alike sell products on air to shoppers at home, who would phone in to nab everything from gag gifts to household tools. In fact, one of the best-known stars is Lori Greiner of “Shark Tank,” having been dubbed the Queen of QVC for over two decades.
But while QVC continued to cater to its small but loyal fanbase of TV watchers, the rise of the internet in the early 2000s ushered in new video platforms and, along with that, a new generation of stars: YouTubers.
Content creators on YouTube began posting videos showing off products and merchandise (more typically as affiliates), providing easy-access links for users to click through for purchase. These creators slowly banded together in multi-channel networks (MCNs) such as AwesomenessTV (kids) and Tastemade (lifestyle), which offered them support infrastructure in exchange for ad revenue.
Creators and MCNs also had access to tools such as Fuisz Media, which used computer vision to overlay interactive product click-throughs on videos across YouTube and other platforms.
Over time, however, the MCN model devolved, as sharing ad revenue with YouTube complicated monetization efforts and drove down profitability. In addition, the rise of Facebook, Snapchat and other social media platforms for content creation and delivery rendered multi-channel YouTube networks obsolete in favor of “multi-platform” networks.
The best MCNs evolved into independent, vertical-specific and cross-platform media brands that continued to scale, with some eventually being acquired at large valuation premiums by DreamWorks and Disney.
While techs such as Fuisz offered MCNs and their creators temporary refuge, YouTube fundamentally fell short in innovating upon QVC’s high-friction dial-to-buy model, as the onus still was on the customer to initiate and complete the purchase process.
And at the end of the day, many content creators simply “found it difficult to ask their friends for money,” says Sarah Penna, influencer Philip DeFranco’s manager and one of the first ever individuals hired to run a YouTube channel. Thus, while user engagement on YouTube remained strong, brands began looking elsewhere to fulfill their advertising needs.
Video 2.0: Livestreaming in Gaming and China
With customers craving a greater sense of intimacy and connection with the brands they love, the most innovative platforms in the past decade have replaced static video with livestreaming, which has seen explosive growth in gaming (Twitch) and the Chinese e-commerce market (Pinduoduo).
Twitch, introduced in 2011 and acquired by Amazon in 2014, allows influencers to livestream their gameplay to loyal fans, organically promoting the video games themselves along with gaming-related products. With over 15 million daily active users, the app is heralded as a highly successful social platform and the de facto community of young gamers.
Pinduoduo, now the world’s largest live shopping platform and China’s second-largest e-commerce platform, uses a team-purchase model by which groups of friends and family are able to band together to purchase products from suppliers at a discount.
When founded in 2015, the Chinese e-commerce market was dominated almost exclusively by JD.com and Alibaba, the existing Amazon-esque players in the East. Yet by replicating offline shopping through its gamified, interactive platform, Y Combinator notes, Pinduoduo managed to carve out a niche for itself and has seen over $144 billion in GMV (gross merchandise value) over the past year.
Fundamentally, the Pinduoduo experience is head and shoulders above traditional e-commerce, as it allows users to be passive and social, akin to window shopping at a mall, as opposed to active, intentional shoppers on a traditional e-commerce site (and as Western search engines and Amazon search experiences have trained us to be).
What’s Next: 2020 and Beyond
Pinduoduo and Twitch’s quick dominance in their respective markets is ample evidence that it’s only a matter of time before livestream commerce platforms become commonplace in a variety of U.S. markets. With their network advantages, Instagram, Google, Amazon and Poshmark have, not surprisingly, moved quickly to launch in-house video commerce offerings of their own, many of which are making the old new again by bringing QVC-style shopping to smartphones.
Just weeks ago, Instagram launched Live Shopping, where consumers can purchase products from livestreaming sellers without ever leaving the Instagram app. Beauty influencers in particular have been flocking to the livestream tool, with trans beauty influencer Nikita Dragun (8.3 million followers) seeing over 43K users and 5K products purchased in her first livestream.
Similarly, longtime social commerce marketplace Poshmark rolled out Poshmark Stories in April, allowing some 60 million users to engage and shop from over 8 million sellers through short-form videos.
Amazon also has recently begun allowing influencers to livestream on the Amazon platform and earn sales commissions, while Google launched the app Shoploop, an Area 120 project that allows users to scroll through TikTok-esque videos and purchase the promoted products in-app (typically makeup, skin and hair care).
Speaking of TikTok, its early forays with brands have delivered promising returns. Assuming the Walmart deal is blessed by China, expect the company to take advantage of its new investor’s commerce chops and ramp up these capabilities quickly, including livestreaming.
The secret sauce of a successful live shopping experience blends interactivity and community, whether following your gamer of choice on Twitch or buying fun items with friends and family on Pinduoduo. In fact, Twitch was the platform that pioneered interactivity in gaming with its “loot drop”model, allowing users to receive in-game rewards from watching their favorite streamers.
While the mass social platforms are still requisite for most, their breadth and versatility can inherently be counterproductive to the organic growth of focused niche communities. And so we at Signia believe the video commerce players of the future will likely be those with footholds and first-mover advantages in popular consumer verticals.
In obvious ways, the rich medium of video livestream lends itself well to the promotion of beauty products. Glamhive, a virtual styling platform, offers both one-on-one video sessions with prominent beauty experts and livestreamed shows hosted by the same stylists to attract customers. Newness, a beauty livestreaming platform still in beta and founded by former Twitch product leaders, is building a community in which consumers can interact directly with beauty influencers and purchase their promoted brands in-app.
In the fashion world, video integrates well with the peer-to-peer marketplace model. Existing shopping platforms such as Poshmark and Etsy have both developed video selling tools for their purveyors. Similarly, YEAY offers Gen Z an opportunity to participate in social shopping. A cross between TikTok and YouTube, it allows anyone to create short recommendation videos on consumer products (typically apparel) that are viewed and interacted with by the app’s community.
Video commerce platforms have even found niches within apparel. NTWRK, a “blend of QVC and Twitter and Twitch,” hosts in-app live shows where users chatter as new sneakers and streetwear (such as Nike’s Pigeon Dunk) are “dropped.” The shows attract over 50,000 users and add a fun live twist to the fashion-drop model popularized by platforms such as Supreme and MSCHF.
Though beauty, fashion or apparel can be great initial footholds, the livestream video commerce model offers even greater immense potential. As car sales slowed to a crawl in China during COVID, the industry was livestreaming on sites such as Taobao and Pinduoduo, which offered a potential lifeline to hundreds of dealerships.
For video commerce platforms, the pandemic-driven virtual habits of consumers are likely to continue to accelerate the adoption of video commerce apps in verticals and geographies far and wide.
Sunny Dhillon is a founder of Signia Venture Partners, a VC fund based in San Francisco and Los Angeles. The fund is backed by L.A. movie studios, Asian entertainment companies and the Smithsonian, among others, and focuses on early–stage investments in consumer interactive entertainment and e-commerce technology startups. He was voted one of the Wall Street Journal’s Rising Stars in Venture Capital and is regularly noted in LinkedIn’s annual Top Voices in Venture Capital.
Special thanks to Signia’s Kevin Wu for co-authoring this article.