The Most Valuable Lessons of 2023 Revealed and The Surprising Impact of TikTok Shop

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

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As most of you know, this newsletter took a short break during Q4 while I was on maternity leave. I'm thrilled to be back and excited to see what 2024 has in store for us all.??

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Holiday shoppers spent a record-breaking 222 billion dollars during the holiday season (November - December), just shy of a?5%?increase. While this was the expected outcome, some trends emerged that will have continued implications for 2024.??

1. ?Half of all online sales came from mobile. It's nothing too groundbreaking, but it's the first year we saw mobile making a large chunk of online purchases. It proves that people are now very comfortable making purchases of all sizes on their phones. Add to that the prevalence of social advertising, which is almost exclusively mobile, and you get a consumer base that discovers and buys products on their phone. The merging of shopping and social media is now part of lasting consumer behavior change, which is one of the reasons people are so bullish on social commerce even though it hasn't exactly taken off yet. However, the growth of mobile isn't exclusively because of consumer behavior changes. Don't forget the changes websites have implemented to make that experience easy, including better load times, easy navigation, and one-click checkout. Brands must continue to lean into mobile experiences for consumers through their .com and by investing in social commerce opportunities.??
2. Adobe found that?BNPL?purchases spiked 42.5% on Cyber Monday from last year to $940 million, marking the biggest day on record for BNPL purchases. When you look at the entire month of November, buy now, pay later transactions increased 17.5% from 2022 to $9.2 billion, making it the biggest month on record for BNPL. While consumer confidence is on the upswing, most are still financially cautious and looking for ways to stretch their dollar.? ?

There are a lot of positive economic indicators, including slowing inflation and consumers starting to see real wage gains. At NRF, Steve Liesman, senior economics reporter at CNBC, also?said?a recession is likely not in the cards.

Despite these positive indicators, some consumers are less than comfortable with the economic outlook, and even trends like?loud budgeting?encourage consumers to be fiscally conservative due to financial anxiety. This uncertainty will fuel these alternative payment methods like BNPL. For merchants, having flexible payment options will continue to bolster online shopping. Most should also see a bump due to the?election effect. Expect 2024 to be more of the same with increased use and comfort with BNPL.

Since the expectation is that consumers will increasingly spend more dollars online this year, you can expect all of the major marketplaces to double down on capturing advertiser spending and creating better consumer shopping experiences to take advantage of this growth. So what is everyone up to??

Amazon is doing everything possible to make the shopping experience easy and seamless for those looking for products. Most recently, they added an?AI-powered shopping assistant?that allows customers to ask questions about the products.?The response will pull from the product details and reviews to respond with an AI-generated answer.

Walmart?also opened up access to an AI tool that allows shoppers to search for products by specific requirements like "what to wear to an evening wedding."?We should expect both of these major players to lean more into AI, especially as?McKinsey?estimated that AI would create between $400 and $660 billion in value for the retail and consumer goods industry. Both Amazon and Walmart see the value of investing.??

On a more tactical note, Walmart has recently launched brand term targeting. Now, brands can (and should) launch branded campaigns, allowing consumers to find your brand. I recommend analyzing which of your competitors you can conquest before they implement a brand defense strategy, as you can steal a little marketshare at a low cost. As more sellers diversify away from Amazon Walmart will continue to launch new ad units and targeting capabilities as their marketplace scales. For sellers, keep an eye out and begin testing these new opportunities before your competitors.??

TikTok?is also attempting to grow the size of its US e-commerce business to $17.5 billion this year.?This year more purchases will be made directly on TikTok and Meta with an increased focus on social commerce. As consumers (especially GenZ) say they want to be able to buy where they discover a product, TikTok could prove to be a real threat to Amazon in the coming years. However, the one thing that must be mindful of is ensuring that the platform experience stays positive. Like CTV had to find the sweet spot for the number of ads without having people churn, these social platforms will also. TikTok specifically has faced some?negative?reactions to its increasing focus on Shop as consumers feel like TikTok is turning into "an ad-filled wasteland." Social platforms must strike a balance between being a place where users consume content and where users can shop. If any one platform feels like a QVC, it will stunt the growth of social commerce.??

Let's pivot to the other big focus this year: streaming.??

Consumers continue to shift from linear TV to streaming. However, it's more nuanced than streaming gaining what linear is losing. Streaming subscription-supported services are losing in favor of advertising-supported ones, with?21%?of streaming subscribers intending to reduce the number of services they subscribe to in 2024 because of rising costs.??

Enter ad-supported streaming.? ?

Disney+ saw nearly?60%?of its new subscribers in November opt for this more affordable option, and at CES, Amy Reinhard said??Netflix Says Its Ad Tier Has 23 Million Users.?As we start 2024, Amazon Prime has officially introduced its ad-supported tier, and streaming will never look back. CPMs for Prime are between $30 and $35 (and as low as $26 through its DSP) and?much lower?than the ad rates for streaming rivals, including Netflix ($38 to $55), Max ($33 to $53) and ESPN+ ($38 to $48).?

So why are advertisers so excited about Prime outside of the lower costs??

?1. Scale. They will be opting Prime subscribers into the ad-supported tier, which has an audience of 115 million.??

2. Targetability. Do I have to talk about the level of first-party data Amazon has access to?

So what does this mean for those looking to the future of streaming? First, it's finally starting to feel like there is some real scalability here. Second, we may start seeing prices decrease with larger inventory pools and increased competition. Netflix can no longer demand?$60+CPMs. Third, I hope we continue to witness innovation and improvements in targeting, ad products, and measurement. This year will be when many brands start testing CTV in a very real way. If you vetted something in 2023, put it front of mind again.?

Finally, on January 4th,?Google?released a new browser that, when activated, will cut off a site's access to third-party cookies.?It will be activated for 1% of a randomly selected group of Chrome users globally, with a larger rollout later in the year. With only 1%, we don't expect a significant impact, and some think we will only see a substantial impact when around 30% of cookies are depreciated. However, that remains to be seen. We have talked about this in length, so I won't rehash it here, but I hope everyone has or is working towards what a world without cookies would look like.

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Megan Conahan is an 18-year veteran of the digital marketing industry. Over the last 18 years, she's consulted with Fortune 1000 brands on negotiating the ever-changing demands of the digital marketplace and creating unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency.