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Meta and Amazon teaming up
One of the more interesting stories from the past few weeks of the social web involves a tech giant we normally don’t think of as involved in social media - Amazon. Quoting from Bloomberg:
Two of tech’s largest players, Amazon.com Inc. and Facebook parent Meta Platforms Inc., are testing a feature that lets shoppers buy Amazon products directly from ads on Instagram and Facebook.
The initiative, which involves asking consumers to link their Amazon accounts to their social-media profiles, could make Meta more attractive to advertisers and let Amazon attract more shoppers from outside its web store.
This is a logical move if you understand Amazon as a business. Amazon is effectively world-class at three things, only one of which the every day consumer recognizes. First, they’re the biggest storefront on the internet (that’s the obvious one). If you’re tech savvy you probably also know that Amazon is the industry leader in cloud computing services with Amazon Web Services. But the least recognized part of Amazon’s dominance is that Amazon is the greatest logistics company in the world (and perhaps ever).
Most people have become so used to living in a world with Amazon Prime that they forget how bad shipping internet purchases used to be. In the pre-Amazon Prime world, orders would frequently take weeks. And that shipping would cost you 20 bucks, thank you very much. Amazon’s promise of two day shipping was widely seen as impossible, ludicrous - until they managed it. And at much, much lower costs than anyone could have predicted. Now Amazon frequently offers one day shipping on hundreds of thousands of items, and sometimes even same day. It’s an absolutely extraordinary feat of supply chain management and logistical capabilities.
Given that Amazon is the only company with the scale and knowledge to have this quickly-delivery supply chain dominance, there are two paths to use that dominance for success. First, you can simply drive everyone to your store - it’s a huge competitive advantage to ship faster than anyone else. But Amazon’s already the 800 pound gorilla of internet retail. A second option is to rent your dominant shipping abilities to other retailers who can’t hope to match it - become not just a storefront, but a shipping and logistics provider.
Amazon already hatched a deal like this with Shopify earlier this year. Their ‘Buy with Prime’ deal allows any independent seller using Shopify to opt-in to using Amazon’s speedy shipping capabilities for their customers. And now they’re expanding in a similar move with Meta, where you can buy products to be shipped by Amazon directly from ads on Instagram and Facebook. It’s somewhat of a risk for Amazon to turn Facebook and Instagram into the storefront rather than Amazon.com. Lots of people are trained to go to Amazon directly when they need to buy things, and it’s a risk to train them to buy directly from social media sites instead. But that risk isn’t terribly large given how dominant Amazon is, and with their control of the shipping and logistics arms it’s unlikely Meta will really be eager to edge them out too much. This deal looks mostly win/win to me - Meta gets to capture a slice of the pie and Amazon extends their reach beyond just being a simple storefront.
The other angle here is that Meta is pretty clearly attempting to blunt challenges from TikTok, which has been quick to adapt this type of direct buying scheme. Meta has a pretty good track record of quickly adapting to challengers - adding Stories in response to Snapchat, Reels in response to TikTok, etc. I’d expect this to be another win.