An OMR Exclusive: Shopify to build an affiliate network with none-other than Tiktok as its first partner

Tobi Lütke, CO-Founder and CEO of Shopify, and Vanessa Pappas, Interim Head of Tiktok Globally, are affiliate marketing stans (image created by OMR)

The short-form video platform will transform its creators into affiliate publishers

This could be big, big news: Shopify is currently testing a proprietary “content and commerce” affiliate network, as OMR has learned from various sources. If true, the news would mean that Shopify would no longer be acting as just a shop software platform but as a traffic and sales broker to its merchants. The affiliate network’s first partner will be social video app TikTok, OMR has learned. Moving forward, Shopify merchants will be able to create promotion plans directly from the software’s backend, involving product placements in videos of Tiktok creators. The Tiktok creators will be able to earn commissions if they integrate products from the Shopify merchants in their videos and generate sales.

US newsletter 2PM first broke the news of Shopify building an affiliate network, in a brief tweet on March 2nd stating that Shopify is “is privately testing a ‘content and commerce’ affiliate network.” A Shopify spokesperson declined our request for comment citing its company policy not to comment on rumors or speculation. Several sources, both inside and outside the company, have confirmed to OMR, however, that Shopify is indeed building an affiliate network.

Shopify and Tiktok: partners since October

Shopify is set to act as an intermediary between its merchants and potential affiliate publishers. In that setup, the latter will be able to embed and recommend merchant products in their content, including a tracking link. If publishers are able to generate merchant sales in this way, they will receive a set commission. Unconfirmed reports indicate that Shopify will oversee campaign monitoring and pay-outs to publishers.

Apparently Tiktok is the first content partner on board, as OMR has learned through international sources. Shopify and TikTok became partners last October. Shopify merchants have since been able to access core TikTok ad manager features in their Shopify dashboards, provided that they have activated the Tiktok channel app in the Shopify App Store. The Tiktok features available in the Shopify dashboard include embedding a Tiktok tracking pixel, creating and running Tiktok ad videos on a CPC or CPM-basis, as well as monitoring a given ad’s performance. In February 2021, the partnership was expanded to include five European countries: France, Spain, Italy, the UK and our home market Germany.

Will Tiktok creators soon be publishers in Shopify’s affiliate network?

In an official statement announcing the partnership, both companies said they will “collaborate to test new commerce features over the coming months that will further empower merchants to expand their paid and organic reach in video and on profiles.” The co-op within the framework of Shopify’s “Content and Commerce” affiliate network would appear to be the latest such step.

The exact setup and structure of such processes are currently unclear. It is plausible, however, that merchants could solicit bids for affiliate-based promotions via their Shopify dashboard and search for suitable Tiktok creators for said campaign—presumable through access to the Tiktok Creator Marketplace. Currently, the Creator Marketplace enables Tiktok to connect advertisers with Tiktok creators. Also unclear at present are the conditions to join the Shopify affiliate network, meaning that it is also unclear if creators and merchants will have to surrender a portion of such sales to Shopify and/or Tiktok.

Tiktok to expand its shopping functionality

Independent of a possible partnership with Shopify, Tiktok has been rumored to be exploring ways of expanding its shopping and commerce features. A few days after the Financial Times reported that Tiktok was set to “take on Facebook with a US eCommerce push,” social media consultant Matt Navarra came across a microsite for future sellers on a Tiktok subdomain. One page from the corresponding “Tiktok Shop Seller University” indicates that the company plans to enable sellers to upload their product catalogues to the platform in the future (similar to what competitors Facebook and Instagram have done) and create a shop on the platform. The same page also encourages prospective sellers to use so-called product anchors for their products in videos and livestreams thus making them clickable. The merchant terms and conditions state that “TikTik charges for [the] use of the Tiktok Shop […] 2% of per order based on the amount paid by the User.”

The Tiktok Shop Seller Center. Clearly visible to the left are “Product,” “Order” and “Promotion” (Screenshot source: Tiktok Shop Seller University)

Back in October, a Tiktok spokesperson signaled to Techcrunch as a part of the initial media blitz surrounding the Shopify partnership announcement that the company is interested in implementing similar features. One anonymous source confirmed to Modern Retail in February that Indonesian companies were able to test Tiktok shops in a closed beta. A Tiktok spokesperson declined to provide specifics to our request for comment, saying merely that “Tiktok regularly tests new features.”

Walmart tests teleshopping on Tiktok

A product anchor embedded in a Tiktok video (Screenshot source: Tiktok Shop Seller University)

A screenshot from the “Seller University” shows product anchors in the shape of an orange shopping icon, thus providing a possible glimpse of what product integration in Tiktok videos and livestreams could look like. If users tap the icon they would then be redirected to the advertising company’s product detail page in the Tiktok shop. There is strong reason to believe that product integration will be very similar to its sister Chinese sister app so Douyin. As Chinese social media marketing agency Walk The Chat displayed, the second time a video is viewed on Douyin a larger product banner appears. If a user then clicks the buy button on the product detail page, they are redirected to the shop.

Followers of the Tiktok account of Walmart already have gotten a first look at how Tiktok wants to implement social commerce features. The US retail giant apparently already was given access to the seller features on Tiktok’s platforms. Last December, Walmart held a kind of teleshopping event on its official Tiktok account. Popular Tiktok creators presented Walmart products, which viewers could purchase directly through the app.

 

Tiktok launches affiliate functions beyond its Shopify partnership

The Walmart Tiktok Shop

Furthermore, users who access the Walmart Tiktok account currently are displayed a shopping tab. Here, they can browse products and then purchase them in the Walmart shop within the internal Tiktok browser. At the time of printing this article, Walmart had had yet to embed its products in its short videos.

However, anchoring products in videos and livestreams does not seem to be limited to merchants and brands. As Tiktok stated in its “Tiktok Shop Seller University,” companies may also provide affiliates with the option of tagging and promoting products in their videos. Here, they need to create a promotion plan in their individual in “Seller Center” (where they are able to specify a certain commission rate) and then invite desired creators to take part.

The affiliate area in the backend of the Tiktok shop. Visible are the two available “Promotion Plans” (Open & Targeted) as well as the creator discovery feature (Screenshot source: Tiktok Shop Seller University)

Shopify is the only platform “currently participating” says Tiktok

Advertisers on the TikTok creator marketplace can now filter for creators who have activated the eCommerce anchor feature for products. Creators from the USA, UK, Australia, Indonesia, Japan, Malaysia, Russia and the Philippines are among those who’ve activated the feature. Stateside, some of the strongest creators in terms of reach and followers use the feature: Addison Rae Easterling (77.8 million followers), Bella Poarch (58.5 million followers), Spencer Polanco Knight (aka “Spencer X”, 51.8 million followers)  Dixi D’Amelio (49.6 million followers), James Charles (35.6 million followers) und David Dobrik (26.3 million followers) to name a few.

In Tiktok’s Creator Marketplace, creators who have activated the “eCommerce anchor” are listed

On an information page for the eCommerce anchor on the Creator Marketplace (that is only accessible to registered users), Tiktok says that the product anchor will only be embeded after providing a “valid URL.” Interestingly, in the next sentence TikTok lists Shopify as the only active eCommerce platform currently taking part in the program. It is unclear if this means that at present only links to Shopify Stores work when employing product anchors on TikTok. It does, however, officially confirm that Shopify and Tiktok are in fact collaborating on affiliate links in shoppable videos.

According to an information page on the Tiktok Creator Marketplace, Shopify is the only eCommerce platform currently using the “eCommerce Anchor” feature (Screenshot)

The first step (of many?) in Shopify’s mission to close the gap to Amazon?

Customer acquisition via a proprietary affiliate network would be a new way for Shopify to increase value for its base of merchants and thus increase their loyalty to Shopify’s platform. If moving forward Shopify is not only able to provide merchants with a shop platform but also deliver customers, then that would be a distinct competitive advantage compared to other shopping software providers, such as Woo Commerce, Magento, Demandware and Big Commerce—one possible explanation for the strategic move. Last, but not least, it would figure to help Shopify negate one of its core disadvantages to Amazon, namely the “included reach” Amazon has as over half of all product searches, at least in the West, begin right on Amazon.

Amazon’s partner program figures to have contributed to the fact that so many searches today begin directly on its platform. There is a significant financial incentive for affiliate publishers to recommend and link directly to products on Amazon—since Amazon has the absolute trust of its users, with many already in possession of a customer account. For many affiliate publishers, Amazon thus represents an essential source of monetization. This powerful position has permitted Amazon to aggressively cut merchant commissions and expand its terms and conditions. Today Amazon is less and less dependent on external traffic. There figures, however, to have been a time when “outsourcing reach generation” to its affiliate publishers was an essential growth lever for Amazon.

More than 1 billion Tiktok users already?

So from Shopify’s point of view, it makes business sense for them to copy these moves. While “Goliath” Amazon constantly places its focus on end consumers, “David” Shopify focuses on its merchants. Founder and CEO Tobias Lütke views the company as “a type of a union for SMEs,” which he said in the OMR Podcast (In German) in the summer of 2020. According to the most recent quarterly financials, there are over 1.7 million active merchants on the platform. Lütke emphasized in the OMR Podcast that it was Shopify’s mission to grow along with its customers Lütke went on to emphasize that Shopify wanted to grow along with its merchants. “We want these merchants to remain on Shopify and not switch to another software down the road.”

Building an Affiliate Network as an acquisition channel could certainly help this matter.

Although it may be hard for Shopify to achieve a success of a similar scale as Amazon did with its partner program, landing Tiktok as its first partner does provide Shopify with a massive amount of potential reach. According to various estimates, Tiktok has been the world’s most downloaded app over the past year. App analytics tool App Annie projects that the platform will exceed 1.2 billion MAUs sometime in 2021. The most successful Tiktok creators (article in German) currently have followers in the two to three-million range and views in the double-digit billion range.

Tiktok can retain creators and acquire new advertisers

For Tiktok, affiliate marketing (and its partnership with Shopify) could be one way of facilitating monetization for medium-sized and smaller creators—and thus boost creator retention to the platform. Furthermore, Tiktok should be able to push its own social commerce plans with the assistance of affiliates. When a company’s products gain in visibility on the platform thanks to the creators, that should, in theory, lead to more sales. If Tiktok succeeds in housing the entire value chain, from awareness to sales, that would not only improve their tracking capabilities, but also increase the potential for revenue. Thanks to the recent partnership, Tiktok gained access to Shopify’s 1.7 million merchants—many of which are surely not active advertisers on Tiktok.

Just where could additional reach come from for Shopify’s affiliate network; Who could be next on Shopify’s partnership wishlist? Via co-ops and “channel apps,” Shopify-merchants are already able to place products on their own accounts on Facebook and Instagram via the Shopify dashboard; starting last year the same has been true for Pinterest. Since February, merchants can embed Shopify’s pay service Shop Pay on Facebook and Instagram. It is therefore well within the realm of possibilities that Shopify is in negotiations with both Facebook and Pinterest regarding a similar affiliate partnership. For Shopify, the crown jewel of the bunch would figure to be Instagram, as it has established itself as the most important marketing platform for direct-to-consumer startups, dropshippers and creator brands, i.e. the same target audience for Shopify.

Instagram developing an internal affiliate function

Italian mobile developer Alessandro Paluzzi discovered that embedded in the Instagram programming code is an affiliate function and provided screenshots in a Twitter thread as proof. Facebook responded to our request for comment saying that “[Instagram CEO] Adam Mosseri shared last year at our Instagram virtual creator event that we’re exploring affiliate as one of the many ways we want to help creators make a living on Instagram.”

Further reading on this topic