What is a data exchange network that uses aggregate conversion data across all opted-in eCommerce merchants to generate a custom audience for a given merchant’s product? What used to be ‘People who bought this also bought’ in Amazonland has come to be monetized as Shopify Audiences. Market basket analysis-meets-lookalike modeling, at scale – a tweet paraphrased it.

Shopify Audiences was in the news this week because Harley Finkelstein, President, Shopify touted this tool as a panacea to the inflation-wrecked downturn in the economy. Merchants are becoming increasingly data driven because of brand competition, saturated ad channels, and rising CAC that’s hurting margins. “Especially right now, merchants want to be able to find more customers,” Finkelstein tells the Financial Times

‍Shopify what?

Audiences gives Shopify’s merchants the benefits of scale and sophistication of a larger retailer. Retailers typically aggregate their customer data and upload it to Meta’s advertising platform. Marketers were then able to target ads at “lookalike” customers who are similar to the customers who bought from the retailer’s website (which Meta was able to track before the iOS14 update.) Allowing its opted-in merchants to leverage the targeting data / insights that the other 1.7M plus merchants have generated and feeding that into their marketing campaigns is Shopify’s gameplan to join the Amazon Ad-mageddon bandwagon.

While Audiences is now limited to only Shopify Plus merchants, are they tracking purchase intent just from these merchants’ websites or across the entire Shopify eco-system? How is Shopify’s data first-party? Don’t merchants own their customers?

Shopify Audiences is not an ad platform. It’s a data play. They offer the data to fine-tune targeting in other platforms like Meta and Google. Shopify eventually makes more merchant services revenue due to increased conversions that lead to increased payment processing & fulfillment fees.

‍Performance talk

The Snow Agency reports that CPMs are 30 - 50% higher on this audience, because of the higher intent-ness. Conversion rates are higher too, bringing down CPA.

Why Is Shopify doing this?
While singing their ‘Arming the rebels’ anchor anthem, Audiences strengthens Shopify’s value proposition, helping merchants amplify their distribution and marketing, leading to better customer acquisition. With targeted scale up comes better ROAS.

As eCommerce companies graduate to mid-market and enterprise stages, they need solutions that work at scale. Custom software builds via headless commerce gains prominence for this reason. SFN, Audiences, Promise, etc, too are ways in which Shopify positions itself to as a partner for scaling.

Last summer, we spotlighted the accelerated uptake of Shopify Plus among retailers – better than any of its competitors’ enterprise offerings – and posited a pivoting point for Shopify, towards the enterprise segment. ‘Commerce Components’, announced last week, has signaled Shopify’s intent to focus on large retailers. 

With comparably low take rates, forays into Deliverr-powered SFN, Shopify Capital and Markets, expect Shopify to provide greater degrees of optionality and technical freedom to its merchants. Net net, the constellation of curated services currently in Shopify’s stable are all geared towards empowering merchants to measure up seamlessly and deliver meaningful shopping experiences.

Shopify Audiences is one such step in the direction of enterprise focus. Mid-market and large retailers that want to spread their bets across retail media platforms outside Meta, Amazon, and Google, now have a whole host of options and Shopify Audiences is a lucrative option – albeit it not being a full-fledged retail media platform, for now.

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