Shopify Illustrates Indirect AI Monetization Model

E-commerce use cases for artificial intelligence often will be indirect, as now is the case for 

Shopify Magic, the AI platform now offered to Shopify merchants.

The company says Shopify Magic "is a suite of free AI-enabled features that are integrated across Shopify's products and workflows to make it easier for you to start, run, and grow your business." In other words, the AI monetization comes from the fees Shopify earns from its customer retail operations. 

In 2023, about 68 percent of Shopify revenue was generated by Merchant Solutions, while about 32 percent comes from subscriptions.

In 2022, Shopify's revenue came from the following sources, subscriptions and merchant services, of which about 71 percent of total revenue was generated by Merchant Solutions. That includes such features as: 

• Shopify Payments, a payment processing service that allows merchants to accept credit and debit cards online and offline.

• Shopify Shipping: A shipping solution that helps merchants get discounted shipping rates from major carriers.

• Shopify Capital: A financing solution that provides merchants with loans to help them grow their businesses.

• Shopify App Store: A marketplace where merchants can find and install apps to add new features and functionality to their stores.

• Shopify Partners: A program that connects merchants with experts who can help them with everything from design and development to marketing and customer service.

Shopify also makes money from Subscription Solutions, which generate about 29 percent of total revenue. Think of that fee as similar to a mobile subscription, providing merchants access to the Shopify platform, as well as features and tools to help them create and manage their online stores.

Use of Shopify Magic is provided at no additional charge. Shopify expects to monetize the features by attracting more merchants who will use more Shopify services, including payment processing, shipping and finance, for example.

So Shopify monetizes indirectly, by gaining and retaining more customers, while generating fees for providing a variety of services supporting their retail customer sales.