Google has begun work on making YouTube a shopping destination. The video giant recently started asking creators to tag commercial products they feature in their videos. It wants to link those products to shopping and analytics tools from parent Google, Bloomberg reports.
The company's goal is to "convert YouTube's bounty of videos into a vast catalog of items" allowing viewers to peruse and buy almost anything they see on the platform without exiting the platform. Creators will have control over the products that are displayed on their channel.
It's unclear how much commission YouTube wants from those sales. The company recently started offering a subscription service for creators where their viewers can pay to see exclusive content. YouTube takes a cut of 30 percent from those payments.
Merchandising is now another strategy Google is mulling to diversify revenue for both YouTube and its creators beyond ads. The company's ad business has already taken a hit because of the COVID-19 pandemic. It reported its first-ever revenue decline in the second quarter of this year.
Meanwhile, e-commerce has boomed during the same period. With people forced to stay home, online product orders have increased and companies like Amazon and Facebook are reaping the benefits of it. Google has been watching this all from the sidelines and is now venturing into it.
Describing the recent development as an experiment, a YouTube spokesperson confirmed that the new features are being tested with a select number of creators. However, the company declined to share additional details on the plans.
YouTube shopping could become a reality soon
Analysts and industry watchers see YouTube as a big e-commerce opportunity for Google. According to Bloomberg Intelligence, the global e-commerce retail market, excluding China, could be worth $2.8 trillion by 2025. While there are already several players vying for a sizeable chunk of their own, the sheer size of the market and its potential growth in the near future makes it too big to stay out of.
"YouTube is one of the least utilized assets," said Andy Ellwood, president of e-commerce startup Basket. "If they decided they want to invest in it, it's a huge opportunity for them."
It's not like Google never thought about it before. Although ad business has been the company's primary focus, it has tapped into e-commerce multiple times in the past but with limited success. YouTube is central to Google's e-commerce strategy.
CEO Sundar Pichai recently suggested that YouTube's sea of "unboxing videos" could be turned into a shopping opportunity. There are also several other popular categories such as makeup and cooking tutorials. All such videos show several commercial products.
If a viewer wants to buy any of those, they have to look for an Amazon referral link somewhere in the description or search for the products on some other platform. Google doesn't want to miss an opportunity to sell those items on its own platform.
Google is also testing integration with Shopify on YouTube. It remains to be seen if these are two separate plans or if the Canadian online retail giant will be an integral part of the company's e-commerce efforts. Either way, YouTube's $15 billion-a-year business seems to be all set to grow even bigger.