Experts on How Shopify Could Get Into Digital Advertising

  • Shopify has reached out to merchants about a new tool that uses shopping data to target ads.
  • Experts said that Shopify could cut into Amazon’s dominance for e-commerce ad dollars.
  • Shopify could be targeting smaller businesses that heavily advertise on Facebook and Google.

Some retail experts predict that Apple and Google’s moves to impose restrictions that block third-party tracking for advertising can benefit Shopify.

Shopify sells software that brands use to set up and build their own e-commerce websites and has hinted that it wants to dip its toe into advertising with a tool called Shopify Audiences, which will allow advertisers to use shopping data to find audiences of people interested in their products by advertising on Google and Facebook.

Shopify is already an e-commerce giant, and experts are speculating that the company could become a significant player in digital advertising to diversify its revenue away from its core retail and software business.

“Given the amount of data Shopify has internally and the pullback of the attribution coming from

social platforms

, it makes perfect sense for Shopify to launch their own ad platform,” said Troy Osinoff, cofounder of the agency Juice, which helps launch companies as well as grow brands with paid and organic marketing. “Shopify is perfectly positioned for this play.” 

Shopify did not respond to numerous requests for comment about its advertising ambitions.

Shopify could help give advertisers more data

Nick Shackelford, CEO and managing partner of Structured Agency, an agency that works with brands that sell on Shopify, said that Shopify reached out in October to some of the merchants he’s represented to give them early access to Shopify Audiences. He said that Shopify still hasn’t gone public with this information and only a select group of premier merchants are getting access. Some of his clients are beginning to use the tool but declined to name them. 

Merchants are losing access to data across Facebook and Google and getting access to more audiences through Shopify could help advertisers, he said.

“They’re realizing that we’re desperate,” he said. 

Shopify is already backed by big brands

Nik Sharma, CEO of Sharma Brands, which invests in and helps grow direct-to-consumer brands, said that Shopify has built a “Ferrari engine” that powers websites behind the scenes and also gives brands the data they need to make informed decisions.

He added that Shopify has provided a platform that significantly simplifies the often complex and costly process of launching an e-commerce website in a way that’s easy to use and operate by nearly all of Sharma’s clients.

Shopify could cut into Amazon’s ad dominance

Dave Gaines, founder and CEO of the media agency Media By Mother, pointed to an October report by eMarketer showing that total e-commerce ad revenues for 2021 are projected to be $28.25 billion, up 50.9% from last year. Amazon will make up the bulk of that money, with ad revenue expected to hit $22 billion, up 54% from last year.

That dominance gives Shopify a chance to cut into Amazon’s ad budgets, he said. Amazon has grown its advertising business by organizing and packaging up its data for advertisers.

“By doing the same, Shopify presents a very appealing and viable alternative,” he said.

Sharma explained that Shopify has realms of data similar to Amazon that can help merchants understand what people buy, how much they spend, and the type of credit card they’re using to make those purchases. 

“Shopify has a ton of data points that they can anonymize and help create customer personas, which would make the ad targeting or the audience development a lot stronger,” he said.

However, Sharma doesn’t see advertising becoming a core business for Shopify. He views it as more of a service and a way to be more helpful to the entrepreneurs that sell items on Shopify.

Shopify could target small businesses with advertising

Structured Agency’s Shackelford cited a recent Shopify partnership with adtech firm AdRoll that makes it easier for smaller merchants to run ads. These merchants are “lower spending” advertisers on Shopify and find it challenging to get the word out about their businesses, he said.

But small and midsize advertisers are Facebook, Google, and Snap’s lifeblood of advertising revenue.

He said that if Shopify adds more marketing partners, it will make it easier for small and midsize businesses to start running ads on Facebook and Snap because Shopify arms brands with shopping data.

Brands would need to opt-in to sharing Shopify data 

Erik Huberman, founder and CEO of Hawke Media, which manages marketing for over 600 brands, said there could be limitations to Shopify pursuing advertising. Unlike digital ad platforms like Amazon and Facebook, Shopify doesn’t own any properties to sell ads — instead, merchants use its platform to sell products.

He could envision an opt-in approach for merchants that want to share their data with other non-competing merchants — like a sock brand sharing data with an underwear brand. 

But he said that the strategy of sending customers to another site historically hasn’t been successful for companies.

“It’s a really hard thing to pull off because I may not want to distract my customers with some other brands unless it’s very synergistic,” he said. “I strongly believe there’s a great opportunity, but you need an incredible executor to actually make it happen.”  

Osinoff added that Shopify must be careful about not sacrificing the trust of their customers, who wouldn’t want to be worried that their data is being resold. 

“It’s a delicate balance,” he said. But “if they can pull it off, it can be massive.”