Commerce Media: The Dawn of A New Era in Performance Media

Last November I created this post about the birth of a new form of media that could very well eclipse search and social media in size and scale. It has been almost a year since then and it is becoming clear we are witnessing each day the growing power and popularity of commerce media.

Commerce media, which is a broader and more encompassing form of retail media, can be defined as any media powered by 1st party product and services sales data. The emphasis here is on the term 1st party, and there is a reason for that. One of the biggest growth drivers of commerce media is the fact that 3rd party cookies, the primary mechanism for targeting of consumers, are going away in favor of consented 1st party data.

While many direct-to-consumer brands do have their own 1st party data, some of the largest marketers, such as CPG and other non-direct-to consumer brands, don’t. This means that the only precise mechanisms for targeting consumers lie in media providers that have direct access to such consumer data. Retailers of course have been the first and known providers of commerce media: the explosive growth of Amazon is testimony to how important that data has been to advertisers.

We are now seeing commerce media grow well beyond just retailers. Newcomers include giants like Uber, Amazon, Instacart, Doordash and the like. Uber, for example, reported its first profitable quarter in its 13-year history in Q2 2023, attributing $600M of the revenue to advertising. Yes, you read that right, that’s 600 Million dollars of advertising revenue generated by a ride-sharing and delivery company. In the same quarter, Amazon reported $10bn in advertising revenue, growing 22% year over year. Meanwhile, Instacart just filed for an IPO on the strength of its advertising revenue, which was around $740M representing 30% of its revenue.

There is a simple reason why advertising is so important to these businesses – gross margins. Gross margins on retail sales and the delivery business are razor thin. While their core businesses are margin poor, they are one of the most data rich businesses around with large volumes of consented 1st party consumer data – a treasure trove for marketers.

So, when you combine the loss of targeting precision from 3rd party cookie deprecation with the powerful data sets being offered by these commerce media businesses, it is easy to see how retail media is not only the fastest growing form of media but may quickly eclipse even the most established media channels of search and social media advertising.

As this market becomes more competitive with more retailers and practically anyone with 1st party consumer data entering the fray, it is also becoming clear that PLAs or product listing ads – also known as search ads on retail sites – need to evolve to much more sophisticated ad formats that appeal more to consumers creative-wise, and are more personalized than PLAs. Brands are quickly starting to see how consumers are reacting better to more personalized ad experiences on commerce media platforms. Afterall, isn’t that what the value of all of that data is to the consumers themselves? Here is a chart from Insider Intelligence sourced from Integral Ad Science that points to this:

This means that commerce media platforms need to quickly evolve to provide much more product centric and personalized advertising that incorporates advanced AI based recommendations for products. This means using algorithms like similar products viewed/purchased by other customers and other AI assisted algorithms that use the rich data sets available to these retail media platforms.

Dynamic Creative Optimization (DCO) technologies like Jivox, which are highly tuned towards data-driven personalization, are critical to achieving performance for retail media ads. Not all DCO platforms do this well. Many in the market today are heavily focused on just creative automation. They don’t have the sophisticated data and decisioning algorithms to truly use 1st party data from retail media platforms to deliver relevant ads both onsite and offsite, resulting in significantly greater campaign performance.

Jivox will be launching next week at GroceryShop Jivox IQ DaVinci, a new product tailored specifically to the commerce media industry. This breakthrough product is already in use by several large retailers and commerce media platforms. IQ DaVinci combines all of the power of the market leading Jivox DCO platform with a simple, easy to use user interface to enable commerce media campaign launch across several commerce media platforms in under 5 minutes.

If you plan to attend GroceryShop, come see it for yourself at booth MP-7 or email me at [email protected] to learn more.