Brief:

• Facebook-owned Instagram is reportedly creating a standalone shopping app that would let users look through goods from online merchants and buy them directly in the app, unnamed sources told The Verge.
• The new app may be called IG Shopping, in line with the name of Instagram's recently released IGTV app. A possible rollout date for the shopping app is unknown, and it has the potential to be canceled before ever being released, per The Verge.
• Sheryl Sandberg, Facebook's COO, said during the company's most recent earnings call that more than 25 million businesses have Instagram accounts and 2 million of those purchase ads, creating a fertile audience for potential e-commerce growth.

Insight:

The development of a standalone shopping app signals a major expansion into Instagram's focus on mobile commerce. IG Shopping, assuming it is released, comes nearly two years after Instagram first tested a shopping feature in November 2016 before a broader rollout the following March. The feature lets companies tag posts with individual products for users to buy. In June this year, Instagram began testing an e-commerce feature in Stories, pointing to the steady development of tools to engage users looking to more seamlessly browse and buy products on mobile.

A dedicated home for e-commerce is one way for Instagram to boost revenue for parent company Facebook and build upon the connections that the social media giant has with its network. Instagram users tend to be younger and more receptive to visually appealing content, making the platform a solid opportunity to promote clothing, accessories and other products. Social influencers like reality TV star and cosmetics entrepreneur Kylie Jenner have tested Instagram promotions that drive e-commerce sales.

More shopping features could also help Instagram gather more data about its audience, and reach them when they've indicated that they're in the mood to shop. That strategy underpins Amazon's effort to boost its advertising sales as people search through its online store for specific products they need. As Amazon has shown, e-commerce helps to collect a lot of data about consumers that's more detailed than what can be gleaned from imprecise algorithms that try to predict where ads appear and catch users as they scroll through a content feed. As The Verge notes, IG Shopping could help more online merchants build a business on social media by giving them more tools to handle transactions, similar to e-commerce platforms like Shopify, whose app store has plugins to promote and manage merchant activity on Instagram.

This development could also drive growth in the broader social commerce space, which is gradually becoming more popular as 55% of consumers say they've made purchases on social media apps, according to an Avionos report. Social commerce has seen some notable successes of late, such as sellouts on Snapchat of Nike's Air Jordan in February and Adidas's Falcon W sneaker last month.