Social commerce is supposed to be the next big thing in online retail, but Twitter Inc (TWTR) isn’t buying into the hype. On May 25, Buzzfeed reported that TWTR shut down development of its buy button with plans to focus on Twitter’s core business.
Additionally, head of media and commerce, Nathan Hubbard, reportedly plans to leave the company, but the two moves aren’t directly connected.
That stands in stark opposition of the competing social platforms of Facebook Inc (FB) and Pinterest, which have continued to step up their efforts to get people to shop through their platforms. Most recently, Facebook introduced bots for Messenger that allow people to buy things through the messaging app among other things.
If you’re still holding onto TWTR stock, you might be wondering if this is just another failure in a growing list at TWTR. While the shuttering of the buy button isn’t exactly good news, it’s a good management decision by Jack Dorsey and his team.
Why TWTR Is Leaving Social Commerce
TWTR invested a lot in social commerce over the last year and a half or so. Since introducing its buy button in September 2014, Twitter worked with several retailers to promote the use of the ad feature that lets people shop directly from the social network.
Last summer, it introduced product pages to give shoppers more info on the products featured on Twitter as well as Collections, which allowed brands and celebrities to put together collections of their favorite products.
None of these efforts spurred additional use of the buy button on TWTR.
Meanwhile, Facebook has taken several steps to grow commerce on its platform as well. Whether it’s adding buy buttons to brand pages or creating a dedicated shopping section in its app, FB is clearly putting a lot of effort into its social commerce initiatives.
It’s also promoting the use of localized “buy, sell, trade” groups, and making it easier for users to find or list items for sale. Pinterest rolled out its buy button last summer, and it expanded to even more commerce platforms in October.
While neither Facebook nor Pinterest provide any details about the progress of social commerce on their platforms, their continued investment is a sign that they both believe the concept is at least viable. After all, if you’re going to shop on mobile, you might as well use the app you’re already looking at most of the time.
TWTR stock is in a much different place than it was when Twitter first introduced the buy button. Investors are paying more attention to revenue and EBITDA growth. As such, Dorsey is refocusing Twitter’s efforts where it has strengths. The end of the buy button was part of the massive layoffs TWTR announced back in October to reduce bloat at the company.
Buy button developers that are staying on board are now working on improving Twitter’s customer service features (i.e., businesses interacting with customers through Twitter) and its new Dynamic Product Ads.
Dynamic Product Ads allow advertisers to serve ads based on what users previously viewed on the advertiser’s website. This works across devices and uses Twitter’ TallApart acquisition form the beginning of last year.
Bottom Line for Twitter Stock
In its first-quarter letter to shareholders, TWTR management said DPAs have a click-through-rate twice as high as average ads, and they convert twice as much. In the second quarter, it plans to expand the availability of DPAs to everyone through its ads’ application program interface.
Facebook offers advertisers a similar product to retarget shoppers, but it hasn’t disclosed any specific details on how it has affected the overall ad business at Facebook.
Meanwhile, Twitter continues to develop features around customer service, an area where it excels compared to other platforms. In February, it introduced the ability for businesses to message users directly that mention them in a public tweet. It also rolled out survey feedback cards, so businesses can see how their customer service on Twitter is being received.
By focusing on the areas where it actually has an advantage instead of trying to compete with more specialized social media companies or the behemoth that is Facebook, Twitter should be able to improve its operating efficiency. And with user growth practically non-existent and revenue growth slowing, management needs to find a way to make the company more profitable for Twitter stock investors.
As of this writing, Adam Levy did not hold a position in any of the aforementioned securities.
