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App Economy

Why Facebook, Twitter, and Pinterest Have Embraced The Buy Button

Social networks want shopping to be the next thing we do on their platforms. Are we ready to "heart" the buy button?

Why Facebook, Twitter, and Pinterest Have Embraced The Buy Button

[Illustrations: Jamie Jones]

When I moved into my new apartment a year ago, I tried to throw money at Pinterest. I felt too old for Ikea's Förhöja accessories and blank, asylum-white walls, and embarrassed not to own my own window treatments or know exactly what a duvet was. I needed interior decorating help. I needed Pinterest. Its ever-growing inventory of pictures of bespoke fashion, Etsy-esque knickknacks, works of art, and home decor now totals more than 50 billion "pins." I easily found the styles I wanted for my new place, but when I tried to purchase them, my nightmare began. The reclaimed-wood coffee table I coveted was no longer for sale at the retailer linked to in the pin; neither was the brand. A Google Images search was fruitless. This happened again and again. If Pinterest had let me buy, I would have purchased everything through it. Instead I was frustrated by having to search elsewhere.

This summer, Pinterest began rolling out "buyable pins," which finally lets customers purchase goods within its social scrapbooking service. Long one of the most requested features, according to the company's head of commerce, Michael Yamartino, ­Pinterest's new pins will soon be competing with buy buttons from its social media rivals. In mid-June, immediately after Golden State won the NBA championship, the Warriors' official Twitter account offered its nearly 1 million followers $35 commemorative T-shirts via a buy button within the tweet. If retweets and favorites are any approximation of sales, then that single post, shared after midnight, moved around $125,000 of merchandise. Instagram has been experimenting with a shop now button, so Nike can market pictures of its athletes and directly sell the apparel they're wearing. Facebook, too, has begun toying with a "buy" call-to-action for items that appear in the news feed (think of how many optical- illusion dresses or ice buck­ets Facebook could have sold in the past year). Even Google, despite not having any real social presence, is exploring integrating a "buy" feature into search ads. No wonder Kleiner Perkins partner and analyst Mary Meeker, in her widely read Internet Trends report, recently heralded buy buttons as the next big thing.

We've lived through this hype before. Between 2009 and 2011, the vision was, "Don't go to Macys.­com, go to the Macy's Facebook page!" recalls Bill Ready, SVP of next-­generation commerce at PayPal. No one did. In 2012, "gifting" apps—which culled milestones from friends' status updates and then suggested and facilitated a present—were supposed to enable the rise of social commerce, especially after Facebook launched its now-forgotten Gifts product. Around this time, Twitter partnered with American Express, to little effect. What makes today different? And what is this sudden interest in commerce really about?

The knock on previous attempts at social commerce has been that they reeked of cheap commercialism. Facebook was somehow sullying the sanctity of "happy birthday" posts by recommending that you send a gift. They were also often just too convoluted. Twitter's bizarre attempt to jump-start commerce, for instance, required users to tweet out a predefined hashtag to initiate a purchase, such as #­BuyAmexGift­Card25; wait for a response from Twitter under the @mention tab; and then tweet back a subsequent confirmation hashtag. You could go to the drugstore and buy a gift card in the same time it took for this to happen.

Since then, we've seen the widespread adoption of a number of underlying tools that facilitate shopping on smartphones, including sales platforms like Shopify; dead simple payment processors such as Stripe; and Apple Pay, which makes ­mobile transactions dramatically more elegant. In addition, users have indicated that they want to shop in at least some of their social feeds, in a way that they adamantly did not just a few years ago. ­Instagrammers have been dying to buy what celebrities and other influencers show off in the photo-sharing service, leading brands such as Nordstrom, Target, and Michael Kors to develop a hack to overcome Instagram's lack of support for commerce. "People are already buying lots of things they find on Pinterest, so this is not a new behavior," says Pinterest's Yamartino. "We're just making it a lot easier."

Indeed, purchasing an item on Pinterest isn't much more involved than pinning it. Come across, say, a fedora you like in the app, and if it's for sale, a blue buy it option will appear next to the red pin it button. Two or three taps later, the order is complete. Thanks to partnerships with big-name retailers including Macy's and Neiman Marcus, along with thousands of smaller merchants via its deal with Shopify, Pinterest counted more than 30 million pins as buyable after the product rollout.

This chance to be the platform for discovering what you want when you want is what excites the people who are most bullish on social commerce. "On Twitter, we know you're getting exposed to brands, restaurants, events, and products that influence your [purchasing] decisions, but can we show that the ad on Twitter was the impetus for you walking into a store?" asks Chris Sacca, a major Twitter investor who has been a vocal advocate for Twitter adding buy buttons (among other ideas). "If we can get to a point where advertisers see we're the impetus for transactions happening, then we get more and more ad spend, and make a lot more money—that's what's driving this right now."

Sacca's comment reveals the true opportunity in today's buy button mania: the ads. The impediments to the giants of social media mounting successful mobile e-commerce businesses are legion. When it comes to physical goods, Pinterest isn't going to stock 50 billion items, so it has no choice but to cede the most important part of the experience—fulfillment—to third parties. It's extremely unlikely that Facebook or Twitter would decide to maintain Amazon-scale fulfillment centers either. They likely can't afford to sell digital media—books, music, or videos—because Apple and Google get a cut from in-app purchases. A high-level source familiar with one major social network's thinking describes it as "a fucking holy war, where Apple and Google will not let any digital goods be sold without taking their 30%. And it's shocking the FTC and Justice Department haven't taken it on, since it's incredibly stifling to mobile development right now." All those logistical worries fade when you consider buy buttons as a conduit to selling more advertising, at higher rates, rather than as a second revenue stream. Pinterest, which spent several years debating whether to pursue advertising or commerce as its business model—it chose ­advertising—has made a point of saying that sellers don't pay to make a pin buyable. "The plan is not to take a cut at all of the transaction from either merchants or users," Yamartino explains. "Instead, we'll give the brands an opportunity to promote their pins. We think that's going to be really effective."

Twitter, according to a source with knowledge of its internal planning, is exploring "a number of different models with buy button partners," but they also revolve around selling more ads. The current possibilities either require brands to purchase a certain amount of Twitter ads in order to use the buy button, or they strongly suggest that the buy button campaign has a greater likelihood of success if supported by advertising. This strategy is akin to how Facebook and Twitter encourage brands to create content for their platforms and then build an audience for it through advertising.

This is a massive untapped opportunity. In the first quarter of this year, Facebook and Twitter saw a whopping 73% and 89% of their respective ad revenue come from mobile. Ad units that are more likely to result in an actual sale could be sold at a premium. If the social titans can make buy buttons ubiquitous, then they could make many more billions in ad revenue supporting them. A recent Citigroup report valued Instagram at $35 billion based on unrealized advertising potential alone. This is what Pinterest and Twitter are chasing, and what must be worrying Google.

The major social media players may eventually find themselves more interested in taking a cut of the revenue they help generate. For now, buy buttons may be ads for products, but they're also fantastic promotional tools for Twitter, Pinterest, and Instagram, too.

A version of this article appeared in the September 2015 issue of Fast Company magazine.

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