Feature
The Gist
- There’s a new type of publisher in town. The kind that sells everything from groceries to holiday packages. And they are monetizing their audiences to earn advertising revenue.
- Growth is through the roof. As a result, “commerce media” and its avatar “retail media” are the fastest-growing media category in the world right now.
- Will consumers pay the price? Will commerce media’s explosive growth ruin the shopping experience just like digital ads ruined our reading experience?
As a dystopian post-ID, cookieless future dawns, a new superhero rises.
Our hero promises to save not just advertisers but also businesses, shoppers, and even, in some ways, traditional publishers!
Who is our caped crusader? Commerce media.
Its most potent avatar — retail media — has already clocked over $60B in the US alone — double the global ad revenue of YouTube. It is set to cross $100B in the US by 2026 alone and has growth potential in the trillions. With a T.
Not surprising, considering a recent survey found that nearly 70 percent of advertisers find retail media performance significantly or somewhat better than other channels.
Let’s take stock of its superpowers. Commerce media can:
- Transform any consumer focused brand with a sizable audience — from hospitality to airlines, retail to telecom — into a formidable media company with access to high-quality first-party shopper data.
- Turn regular shoppers into ready-to-target consumer segments at each stage of the funnel — from brand awareness to conversion, and on any channel — digital or physical, as close to the POS as possible.
- Elevate product listings and supermarket aisles into premium-worthy ad inventory earning high-margin revenues for its owners.
- Deliver measurable, brand-safe, privacy-compliant, full-funnel reach-at-scale to advertisers in a post-ID world.
Cookies May Be Passe, but Advertising Must Live On
While advertising where the shoppers are — malls, airports, physical stores, or digital stores — is not new, a number of advanced attributes make modern-day commerce media distinctly more valuable to all stakeholders — advertisers, media owners and customers.
Commerce media enables the notion of thinking holistically about every consumer touchpoint in the “phygital” non-linear path-to-purchase through the funnel, says Nich Weinheimer, executive vice president of strategy at omnichannel marketing platform Skai. That means commerce media offers opportunities to engage shoppers with upper funnel brand ads as well as conversion-led performance ads, across the digital and physical realm.
The multichannel element is crucial in understanding the potential of commerce media. Its access to rich first-party data fills two important gaps that have hounded advertising so far.
With digital advertising, while segmenting, targeting and measurement were possible, meeting the shopper at the point of sale was a challenge. There was always a gap between the ad (on a publisher's site) and the actual conversion (on the merchant’s site). By making ads shoppable at the point of sale, it's now possible to close that gap.
As Tim Nedden, managing director of ecommerce management at Front Row puts it, with commerce media solutions, digital advertising can now be like traditional in-store and physical point of sale (POS) media, only more advanced with real-time segmentation, targeting and measurement capabilities.
For in-store media, while the message is delivered as close to the point of conversion as possible, real-time segmentation, targeting and measurement have always been a challenge. That’s changing with tech advancements. Computer vision technology for smart signage solutions is giving in-store advertisers access to real-time data for campaign optimization.
The game-changer with commerce media is that commercial entities (such as retailers, travel portals and hotel chains) can harness valuable first-party shopper data at each stage of the funnel, explains Nedden. This can be used for sharper shopper segmentation and targeting directly within the shopping environment — powerful proposition indeed.
Chris Hogue, head of strategy and product, CX and commerce at Merkle further elaborates. Aside from being full-funnel, commerce media is such a success because it “closes two loops.”
The first is the transactional loop as it enables the viewer to purchase at the point of inspiration versus having to click/tap an ad to go to a different location to complete a purchase.
The second loop is the attribution loop. Moving from ad to purchase enables the advertiser to see the full journey, and which touchpoints are driving the most sales. It also collapses the funnel from a multistage process to one where “inspiration to transaction” can happen in a single step.
Related Article: 5 Must-Know Social Commerce Trends for 2023
Ad Clutter Ruined Our Reading Experience. Will It Ruin Our Shopping Experience Too?
Okay, so commerce media sounds invincible. The flip side of that, like it or not, is we will see a whole lot more of it. Could that end up being its kryptonite?
Just as our content consumption (aka “reading”) experience was severely hampered by ad-cluttered publisher sites, will commerce media too ruin the joy of virtual or physical shopping? Will a simple shopping trip feel like hunting for a pearl in an ocean of pop-ups?
Andy Friedland, chief revenue officer of retail tech solutions provider Swiftly is quite sure that commerce media can significantly enhance the shopper experience, mainly due to the ability to deliver more targeted offers that enhance consumer experiences while they are in shopping mode and already in the shopping space.
Commerce media, especially retail media, is essentially a native ad format, adds Weinheimer. That means that the advertised content looks and feels like organic content on the property, even though it's paid media. In fact, in a Skai survey of 1,000 consumers, over half reported they don’t remember seeing ads in the Amazon search results in the last 30 days! That means commerce media will not disrupt the reading experience — and may even enhance it if done well.
Aside from their non-intrusiveness, relevance, and timeliness lower down the funnel, even upper funnel ads and off-site ads, which tend to be further from customer intent, feel more contextual and relevant because of the sophisticated audience targeting and segmentation possible with retailer first-party data.
Hogue reminds us, however, that while important, the “right balance” is not a standard formula. It will depend on the relationships a retailer or brand has with their customers and the nature and frequency of purchases. For example, online grocers enjoy high purchase frequency relationships versus brands like Spotify or Duolingo where usage intent is not “purchase-oriented.”
Related Article: Why Ecommerce Needs to Evolve for Gen Z
Commerce Media Holds Unlimited Possibilities for Innovative Collaboration
With commerce media, advertisers have a wide spectrum to create a full-funnel, integrated yet customer-centric advertising strategy. But going all-in has its challenges. For advertisers, no doubt the ultimate goal is to reach consumers across all avenues and platforms with an integrated advertising effort, says Friedland.
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However, media budgets for merchants and retailers have typically fallen under shopper and trade marketing buckets. Consolidating and operating under one strategy across not just channels and profit and loss statements (P&Ls), but also different agencies that handle them, is a logistical challenge to overcome for the true potential of commerce media to be realized.
Commerce media is expanding to include everything from social shopping, such as Instagram and Pinterest shopping that allows users to directly purchase tagged items, influencer marketing collaborations with direct purchase links, native and sponsored ads on mobile food delivery and travel apps, and much in-between.
The wide array of what’s possible with commerce media warrants immediate testing and experimentation, Weinheimer argues. Brands will need to make real data-driven arguments for increased investment, especially in the upper funnel.
Oh, and remember I mentioned at the start that commerce media even has the potential to rejuvenate traditional publishers’ media revenues?
Seven in 10 consumers still read “objective content” such as product reviews, comparisons and “10 Best” style product compilations before making a purchase decision. This is especially true for important purchases or first-time buys, be it coffee makers or private schools.
Just as commerce media is turning merchants into media companies, we are likely to see traditional media companies behave more like merchants, leveraging their own first-party data to sell directly on their properties.
New tech is making it easier for digital publications to incorporate shoppable content and integrate more tools and widgets — from mobile coupons to QR codes — for seamless shopping directly from their pages.
Aside from competing for the same ad budgets, there is an equally strong case for merchants and publishers to collaborate and expand the addressable market by pooling first-party data. Innovations can include curated product selections, pop-up exhibits, co-branded merchandise, sponsored listings and in-article shoppable links.
In the meantime, shoppers and readers alike will hope that media owners — be they traditional publishers or retail merchants — find the UX sweet spot between commerce and content, and make it easier to complete transactions from wherever they are — on a blog, at a store or even in the metaverse.
