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Shopping on YouTube will first be tried in India before it’s rolled out globally: Google CEO Sundar Pichai

As new details emerge about its live commerce plans, YouTube’s laundry list of compliance requirements may also grow.

Shopping on YouTube will first be tried out in India before it is rolled out globally, Google CEO Sundar Pichai said on February 2 during Alphabet’s earnings call.

“When I look at YouTube in India, some of the commerce ideas we talked about earlier, you may see us first try it in India first because we can get quicker feedback; a very dynamic, youthful population. And so we’ll do it there, and then roll it out globally,” Pichai said.

While this news is exciting, YouTube’s entry into e-commerce will subject the platform to a whole new set of rules and additional scrutiny not just from retailer bodies but policymakers as well.

What is shopping on YouTube?

YouTube’s plans to enter e-commerce was first revealed in 2020 when Bloomberg reported that the platform started asking some creators to link products featured in their video with shopping tools offered by Google. “The goal is to convert YouTube’s bounty of videos into a vast catalog of items that viewers can peruse, click on and buy directly,” Bloomberg reported. While YouTube acknowledged the development back then, it did not reveal much information because the project was still under testing.

Since 2020, a lot has changed. The pandemic has fuelled the growth of e-commerce to new heights, offering YouTube all the more reason to double down on its plans and diversify away from its traditional advertising revenue.

In the earnings call, Pichai said:

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“Our commerce opportunity remains really exciting. We’re making it easier for viewers to buy what they see – and simpler for advertisers to drive action with innovative solutions like product feeds in Video Action Campaigns and emerging formats like live commerce. Backcountry.com generated a 12:1 return-on-ad-spend with product feeds in 2021 and plans to double its investment in 2022. While Samsung, Walmart, and Verizon partnered with creators to host shoppable holiday livestream events in the U.S.”

What stage is the e-commerce project in?

YouTube is still testing many of the e-commerce features and they are not widely available to the public, but here’s what we know from the earnings call:

  1. Will rely on common infrastructure: YouTube will rely on a lot of common shopping infrastructure that’s getting built across Search and other Google services, Pichai said.
  2. Focus is on onboarding: Pichai said that the company is focused on onboarding merchants so that YouTube can have “the broadest and the most comprehensive inventory available.”
  3. Partnership with other e-commerce platforms: “Our partnership with other eCommerce platforms is a basic foundational layer we are putting in,” Pichai said.
  4. Lots of pilots underway: Pichai said that there are lots of pilots underway such as a creator tagging pilot program that will allow “viewers get a choice to browse, learn, and shop products featured in their favorite videos,” shopping live streams with brands like Walmart and Target, and Video Actions Campaigns, which include product feeds within the video. The company is also testing how shopping can be integrated with Shorts, Pichai added.

YouTube’s acquisition of Simsim

The announcement that YouTube will explore its e-commerce opportunity in India first makes all the more sense when you look back to YouTube’s acquisition of Indian video shopping app Simsim last July. In making this purchase, Google said:

“As more and more shopping happens online, video has an important role in helping viewers discover new products and find expert advice they trust. Every day, people come to YouTube to compare products, watch reviews and find recommendations from their favorite creators. Today, we are taking another step to help viewers discover and buy products from local businesses.”

YouTube will be subject to E-Commerce Rules

If YouTube enters the e-commerce space and allows customers to buy directly on its platform and sellers to sell directly through its platform, it will be considered an e-commerce entity just like Amazon and Flipkart, and the E-Commerce Rules will apply. Since YouTube receives FDI, it can only operate as a marketplace e-commerce entity. Notably, YouTube will have to adhere to both, the Information Technology Rules 2021 (because it is a social media platform) and the E-Commerce Rules 2020.

YouTube can expect to navigate multiple challenges considering that the Indian government is looking to tighten the E-Commerce Rules. In June last year, the government proposed amendments that give the existing Rules more teeth. Some notable proposed changes that directly affect YouTube’s e-commerce plans include:

  • Related parties and associated enterprises cannot be sellers and cannot receive an unfair advantage: This means YouTube or Google-affiliated companies cannot be sellers on the platform.
  • Marketplace e-commerce platforms cannot sell to sellers on platforms: This rule prevents Google and YouTube from selling goods to sellers on its platform.
  • Marketplace e-commerce platforms cannot advertise a body of sellers: This provision will prevent YouTube from advertising specific sellers on the platform. This will be a tricky one for YouTube because the platform primarily relies on advertising and is very likely going to promote sellers on its platform
  • New labeling and display criteria for imported goods: YouTube will have to display country of origin, provide a filter mechanism, and suggest alternatives to foreign products.
  • No manipulating of search results: YouTube is not allowed to mislead users by manipulating search results or search indexes to give preference to certain sellers
  • Flash sales are not allowed: YouTube is not allowed to run flash sales on its site
  • Platform brand name cannot be used to promote products: Sellers on YouTube cannot use the YouTube name to promote products.
  • Cannot use sales information to improve the sale of own products: YouTube cannot use the sales information they obtain to improve the sale of their own products.
  • Appointment of a chief compliance officer, nodal contact person, resident grievance officer: As a social media intermediary, YouTube already has to appoint these roles as per the Information Technology Rules 2021. The same will probably satisfy the E-Commerce Rules as well.

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