The worlds of ecommerce and social networking are rapidly converging and turning social platforms into powerful distribution channels for brands. The shift was slow to take off, but it is starting to accelerate thanks to a tipping point in global mobile adoption, the release of new shopping technologies by social media companies, and a disease outbreak in China. As such MRP is adding Long Social Commerce as a new theme that we will be tracking with a basket of stocks.

Worldwide, there were 3.8 billion social media users in January 2020. That’s about half of the world’s population and a 9% (321 million people) increase from a year ago. Furthermore, the average internet user now spends 6 hours and 43 minutes online each day, which equates to over 100 days of connected time per internet user per year. More than one third of that time – two hours and 24 minutes – is dedicated to social media.

While those numbers may sound puny at the micro level, they become more formidable when you aggregate and annualize them. Altogether, the world’s internet users will spend a cumulative 1.25 billion years online in 2020, according to the Digital in 2020 report, which means the equivalent of 420 million years of time will be spent using social media this year alone.

As social media’s influence grows, social commerce is becoming an increasingly important channel in online shopping.

Social Commerce Outperforms

Social commerce is the act of selling products directly within a social network. It is different than social media marketing which attempts to drive referral traffic from a social media site to a website or online store. With social commerce, the store — in fact, the entire shopping experience — happens without the customer ever leaving the social media site.

Shoppers like it because purchases rarely take more than a handful of clicks, thanks to the efficiency of chatbot checkouts and autofill for payment and delivery details. Sellers like it because the sales conversion ratio is multiple times higher than with social media marketing, and that too is thanks to the far more streamlined process of the purchase journey. With social commerce, you are effectively implementing Amazon’s one-click “buy now” button on multiple, popular social media networks.

The fact that social media offers unparalleled opportunities to tailor key messages to many different audiences is not lost on brands, which have been plowing billions of dollars into digital ads for years. Their latest hope is the promise of frictionless transactions completed on social media sites.

US Social Commerce

The majority of social commerce in the United States takes place on Facebook (FB), Instagram (owned by FB), YouTube (owned by GOOG), Pinterest (PINS), and Snapchat (SNAP). Facebook, with its 2.5 billion monthly active users, has enormous audience leverage. Facebook also happens to be the parent company of Instagram, the US platform that’s deemed to have the most potential out of the pure plays in the space.

Until now, US social networks have had to rely on digital ad sales to survive. Social commerce, however, can provide them with the type of revenue-generating potential that only Amazon (AMZN) and Alibaba (BABA) could claim. Instagram and YouTube are not publicly-traded companies, so investors would have to use FB and GOOG as respective proxies. Investors can also look to Pinterest (PINS) and Snapchat (SNAP) to gain exposure to US social commerce.

China Social Commerce

Nowhere is social commerce more advanced than in China. In fact, Chinese social networks were built with direct commerce in mind. By the time Facebook, Instagram and Pinterest were mulling the addition of a “buy” button, Chinese platforms had already figured out that social interaction and user-generated content could be an integral part of a consumer’s shopping journey.

Social commerce in China has caught on so rapidly over the last few years that it now accounts for over 15% of online retail sales, growing at twice the rate of the overall online retail sector. By 2023, social commerce could account for a fifth of all Chinese online sales  — a staggering $166 billion. Iqiyi (IQ) and Bilibili (BILI) are two publicly-listed companies that provide exposure to the Chinese social commerce market.