E-commerce for social media platforms: Co-opetition and traffic distribution

In recent years, social media platforms (SMPs) such as Douyin have amassed large user bases and substantial traffic by offering engaging content services. To capitalize on this traffic, many SMPs have integrated in-app shopping features, seeking to monetize user engagement through self-operated or agency-based e-commerce models. However, this strategic shift inevitably introduces competition with well-established traditional e-commerce platforms (TEPs). Given the complementary strengths of SMPs in traffic volume and TEPs in traffic conversion, fostering cooperation is considered an effective strategy for mitigating this emerging competition. Unfortunately, the dynamics of such co-opetition have not been systematically analyzed. To address this research gap, this paper pioneers a systematic exploration of co-opetition strategies between the SMP and the TEP from the perspective of traffic and its distribution strategy. Our results are as follows. First, while cooperation can enhance the traffic conversion rate (TCR) for the SMP’s self-operated product, it can also intensify market competition. As a result, cooperation may reduce both the SMP’s profits and the e-commerce market’s overall average TCR compared to non-cooperation. Second, although the TEP can gain additional traffic and revenue through cooperation, it can be detrimental when the market size is small. Finally, there is a significant misalignment in the cooperation preferences between the two platforms. Mutual benefits are primarily achievable in moderate-sized markets. Even worse, when the SMP’s relative traffic conversion efficiency is high, cooperation may paradoxically lead to a lose-lose situation. We further extend the model in several directions and demonstrate the robustness of our main findings.