Commerce Media: The Big Shifts Ahead

One of the skills of an entrepreneur is being able to see ahead and make bets on how markets are going to grow and evolve. While this can sometimes seem like a superpower only entrepreneurs like me have, it’s actually a more basic skill – that of listening and learning constantly to anticipate changes in consumer or buyer behavior with some amount of risk- taking thrown in the mix towards ideas that show great promise.

At Jivox we made the bet on Commerce Media (fka Retail Media), over 2 years ago, when it had just started to feel that Retail Media would be a significant growth opportunity in the advertising industry. Since then we have not stopped listening and learning about the market as it continues to evolve and change., I thought I should share some of these learnings with the broader industry as we all embrace this new and exciting form of advertising.

On the face of it the concept behind Commerce Media is quite simple. It is the use of consumer purchase data to power personalized advertising. The reason Commerce Media has grown so quickly is not only because consumer purchase data can be significantly more effective at predicting future purchases but also because there were several tailwinds helping it grow. Here are a few:

Key Tailwinds For Commerce Media

1. Loss of data signals in open web (aka programmatic) advertising. Ever since Google announced the deprecation of 3rd party cookies (with actions by Apple and Microsoft even before that), brands have been forced to find alternative ways to improve the precision of targeting and personalization of advertising. Retail Media provided a great replacement for that signal loss by using 1st party retailer data to provide significantly greater precision than third-party cookies ever did
2. MFA (Made for Advertising) sites. Generative AI has had many positive impacts on advertising in general. One of its negative impacts has been the ease with which unscrupulous players can easily generate fake websites with content that appears to be real which is then fooling the programmatic platforms into placing ads on them where no real humans are. This is forcing advertisers towards a flight to quality by seeking out higher quality publishers and well known retailers are a great solution, especially given many brands sell their product through those retailers – so it’s a win-win
3. The Meta and Google duopoly. The rise in advertising power of Meta and Google who respectively control 18% and 39% for a combined 57% of digital advertising is making a lot of advertisers very uncomfortable. This has been exacerbated by the news last year of Google adjusting auction pricing to meet their revenue goals. While the open web has provided a good alternative, cookie deprecation is significantly reducing the precision of targeting compared to what Meta and Google provide and advertisers are flocking to Commerce Media rather than running into Google’s and Meta’s arms

Commerce Media at one point was mostly just Amazon.  Amazon was not only first to market with retail media solutions, it also had the benefit of an all – digital ecosystem where data was plentiful and available at a scale no retailer could easily or quickly match. While Amazon still dominates retail media – currently having about 75% of market share, other retailers like Walmart, Kroger, Albertsons, Home Depot and several others including delivery platforms like Uber, Instacart and Doordash are quickly becoming very viable alternatives. There are however several challenges these retailers have faced in scaling up retail media operations, though none of these are insurmountable and investing in growing their retail media business is a top C-level and board-level priority.  Given the very high gross margins of retail media – between 80% (onsite) and 40% (offsite) – it has become a great and important way for retailers to improve their margins, even Wall Street is cheering them on.

In the last several months I have been speaking with several large retailers, brands and commerce media networks and platforms and it is clear that Commerce Media is in its very early innings and represents a growth opportunity for retailers much larger than anyone might have imagined.

Impending Shifts In The Commerce Media Landscape

What has become clear to me through these conversations, is that there are several big shifts occurring in the Commerce Media Landscape that advertisers and retailers should be aware of. Since we at Jivox have been working with some of the leading retailers and brands embracing retail media for over 2 years now, we have had a unique vantage point from which to see how Commerce Media is evolving. Over the next few weeks I hope to share some of these big shifts that are occurring and how they will change the face of Commerce Media.

1. The move from Onsite to Offsite retail media.
   Unlike Amazon who has a very large and outsized digital footprint and almost limitless digital ad inventory, other retailers simply don’t. What they do have, however, is a significant amount of product sales data collected from consumers visiting their physical stores. Given Commerce Media is really all about this data, retailers can leverage this data to deliver ads on digital inventory outside of their website and this is opening up a significant increase in offsite retail media investments.
   Read Full Article: The move from Onsite to Offsite retail media
2. The move from Sponsored Listing Ads to Display and Video formats.
   In the early days of internet advertising and even today, search ads have dominated. In the world of Commerce Media the equivalent has been sponsored listing ads which coincidentally are also mostly powered by search on the retailers website or app. Much like internet advertising evolved from search to display, video, CTV and social formats. Commerce Media advertising is also following a similar trajectory. This is being driven by retailers and advertisers alike for somewhat different reasons.
3. The use of 1st party data to personalize ads.
   While the early forms of retail media have primarily been driven by search data, the real treasure trove of retail data is product sales data which both online and store based retailers have plenty of. The power of this data has not been fully realized by many retailers. Partly because search was much easier to implement and sell but also because aggregating and making the data available in a privacy-safe manner requires some work but it is an area retailers are investing in heavily, especially as they realize this is an asset Amazon readily has and is using to great effect.
4. Evolving from managed service offerings to self-service.
   Retailers and Retail Media Networks that have achieved any amount of scale are quickly realizing that the people costs of managing advertising for brands can quickly eat away at the high margins of retail media. Retail media campaigns compared to other channels are very promotional in nature and often have lots of much smaller campaigns that need to be activated. The managed service model of defining audiences, doing the creative work and trafficking and launching campaigns and providing reporting to brands quickly gets overwhelming and expensive. Much like most of Amazon’s advertising (and in fact Google’s and Meta’s) is self-service, it is critical for retailers to adopt self-service adtech which can enable them to scale their retail media business profitably.
5. Automating Creative is a critical evolution retailers need to get their arms around.
   While Onsite sponsored listing ads don’t require much by way of creative, Offsite ads do. Almost all Offsite ad inventory consists of display ads, video ads, CTV ads, social ads etc. all of which require creative. This is quickly becoming a big source of frustration for brands and retailers alike as the retailers understandably want to control the look and feel of the ads since purchases are directed to their sites or stores, while brands also want their brand identity represented in the ads. This translates to more work for both. Creative automation technology is critical to making this work.
6. Measurement and Attribution will become a competitive advantage.
   This again is one of the areas of frustration for Brands looking to shift spend to Retail Media. Many retailers are only now starting to be able to attribute lifts in sales to retail media spend. This of course is much harder to do in physical stores than online. Physical store attribution is of course critical as for many retailers this represents between 80-95% of sales. New technologies are starting to make this easier and more precise. There is also a need on the brand side, as they start to buy across retail media networks, to have consistency in how attribution is measured.
7. Retail Media becomes Commerce Media.
   As more non-retailer companies launch retail media networks – the recent ones being JP Morgan Chase, Paypal, Intuit and United Airlines, it is clear Retail Media is evolving into the much broader Commerce Media where consumer transaction data of all kinds are being used to improve personalization of ads and precision of ad targeting. This is likely to continue to grow.

These are all large shifts that will play out in the coming months and years.  What is also clear is that Retail Media growth has already been underestimated – with several analysts revising their growth estimates upwards. As some of the shifts above play out completely, each of them will translate into even higher growth for the market.  Stay tuned for more in depth posts I will be making in the coming months about how Commerce Media is evolving and how purpose- built Commerce Media campaign activation platforms like Jivox IQ DaVinci can help Brands and Retailers scale up their Commerce Media efforts.