Meta pushes further into growing social commerce market with Amazon partnership
Published: 14:45 13 Nov 2023 EST
Meta Platforms Inc (NASDAQ:FB)'s new partnership with Amazon.com Inc (NASDAQ:AMZN) which will allow shoppers to make purchases on the e-commerce platform without leaving its mobile apps could prove significant for the social media company, according to analysts at the Bank of America (BoA).
As announced last week, customers in the U.S. will be able to shop Amazon’s Facebook and Instagram ads without leaving the respective app.
They will see real-time pricing, Prime eligibility, delivery estimates, and production details on select Amazon ads.
For Meta, the BoA analysts pointed to several benefits from the collaboration, firstly the addition of more ad volumes from an important online retailer.
They wrote that the partnership will also accelerate Meta’s on-platform shopping capabilities, tapping into the large social commerce total addressable market, which is expected to reach $145 billion by 2027.
Other potential positives for Meta are growing lower funnel conversion and average revenue per user, capturing more first-party data, aiding engagement on the platform with improved targeting, and accelerating monetization for messaging assets, the analysts wrote.
“Meta and Amazon did not provide revenue-sharing details on the partnership, and we expect that the impact for Meta will likely be limited in the short term, but the deal could help with concerns on comping high Chinese advertising spend in 2024,” they wrote in a note to clients.
They added that, while Meta could be incrementally competitive with Pinterest Inc (NYSE:PINS) following this deal, they expect a limited impact on Pinterest's audience. “We see a Pinterest user as quite different from a Meta user,” they wrote.
For Amazon, the BoA analysts see the deal increasing top-of-mind product awareness for Amazon’s inventory given Meta’s strong targeting capabilities and will likely improve ad conversion given less friction before purchase.
However, they expect the customer lift to Amazon to be limited given the probable overlap in Amazon’s and Meta’s user bases and some customer resistance to linking their Amazon and social media accounts.
“Any incremental volumes from Meta, which should come at added marketing cost, should help Amazon drive retail leverage improvements into 2024 on excess capacity,” they wrote.
“Given Amazon's approximate 15% take rate on third party items and relatively low margins on first party, we estimate an 8% to 10% 'commission' for sales on Meta's sites, but companies are unlikely to disclose details.”
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