Retail Media's Share in Search Ad Spend Will Continue to Grow

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How did retail media start?

For most industry observers, the birth of retail media was the 2012 release of Amazon’s programmatic advertising solution, Amazon Ads Platform (AAP).

From about $600 million that first year to $45 billion in 2023, the rise of Amazon’s ad business has been meteoric—even before the launch of its ad-supported Prime Video tier in early 2024. Over time, its success has drawn hundreds of other retailers into the media business. Walmart, Target, Kroger, Albertsons, Instacart, The Home Depot, Best Buy, and others are fueling a sector that’s growing at twice the pace of social media (16.3% vs. 8.7% in 2023, according to the IAB) and is expected to overtake linear TV over the next couple of years.

Where are we headed?

When you treat retail media as an advertising channel, naturally, brands allocate more towards retail media; as a result, some retailers express concerns over the possible stagnation or reduction of trade marketing budgets.

Retailers must attract new retail media investments while maintaining the value of traditional trade marketing. A successful retail media strategy could rejuvenate trade marketing instead.

I predict that retail media will transition from merely an advertising channel to an integral infrastructure within the advertising ecosystem. Why? Because the future growth trajectory for retailers hinges on data utilization. Business success will be less about internal innovation and more about strategic partnerships, especially with category-leading #CPG brands.

How is retail media going to impact digital commerce and advertising for CPG brands?

Retail media has already revolutionized digital commerce and advertising for CPG brands by transforming how they reach and engage consumers. Here are the key impacts:

1. Enhanced Targeting and Personalization: Retail media platforms utilize first-party shopper data to deliver highly targeted and personalized ads. This allows CPG brands to reach consumers at the exact moment of purchase intent, significantly increasing conversion rates. The ability to serve ads to consumers when they are most likely to buy, such as during a search for a specific product on Amazon, enhances the effectiveness of ad campaigns.
2. Unified Marketing and Attribution: Retail Marketing Platforms (RMPs) integrate media and incentives, driving marketing efforts with shopper data. This unification enables CPG brands to consolidate consumer segmentation, marketing, and attribution across all touchpoints. The result is a more cohesive marketing strategy that drives greater loyalty, revenue, and profitability.
3. Shift in Budget Allocation: The shift from non-retail to retail media reflects its growing importance. As retail media gains a larger share of search ad spending, CPG brands are reallocating their budgets to capitalize on the higher ROI offered by these platforms.
4. Improved Shopper Insights and Attribution: Retail media platforms provide sharper shopper insights and more straightforward attribution, enabling brands to understand and anticipate consumer needs precisely. This leads to more effective marketing campaigns and better measurement of their impact, facilitating continuous optimization and higher returns on ad spend.
5. Strategic Partnerships: The evolution of retail media from an advertising channel to an integral infrastructure emphasizes the importance of strategic partnerships between CPG brands and retailers. These partnerships are crucial for leveraging data and maximizing the impact of advertising efforts. The collaboration between retailers and CPG brands will drive innovation and growth in digital commerce.

Brands need consistent, transparent, outcome-minded metrics across all their media partners to get a full picture and build confidence in their overall media spend. - Nielsen

Retail Media's Share in Search Ad Spend Will Continue to Grow

From 45% up to 68% in 4 years! ?? This is the growth trajectory of retail media's share in search ad spending in the U.S.

It's been three years now, and we've been witnessing the retail media boom and Shoptalk Europe and Cannes Lions International Festival of Creativity cemented that retail media is still one of the hottest topic in the advertising ecosystem, alongside #AI .

I'm not alone in saying this, #data also supports me, there's a rapid shift from non-retail to retail media. The share of non-retail media in search ad spending is decreasing, indicating a shift in budget allocation towards retail media networks. This shift underscores the effectiveness and growing preference for retail media platforms due to their proximity to the point of sale and better targeting capabilities.

The data shows a significant and increasing share of #retailmedia in incremental search ad spending over the years. By 2027, #retail #media is projected to account for nearly 68% of the total search ad spend growth, highlighting its growing importance in the #advertising landscape.

#Amazon and other retail media networks are directly challenging traditional search giants like Google and Meta. As retail media search functionalities improve, they are capturing a larger portion of the search ad market, potentially disrupting the dominance of established search advertising platforms.

?Watch out Linear TV, retail media is coming for you.

Search remains the largest share of US retail media ad spend, emphasizing its critical role in driving consumer purchases. The ability to serve ads to consumers at the point of purchase makes retail media search ads highly effective. But I repeat, there is the strategic importance of search in retail media. I'll publish some research results about artificial intelligence-powered search (AIP Search) products and features in the coming weeks, we'll talk a lot about this topic. Coming soon here. ??

?? Looking Ahead

• Increase investment in retail media networks such as Amazon, Walmart, Kroger, Target, Albertsons, and Instacart to capitalize on their growing share of search ad spend. These platforms offer better targeting capabilities and higher conversion rates due to their proximity to the point of sale.
• Develop robust search ad strategies tailored for RMNs. Focus on optimizing keywords, utilizing first-party data for better targeting, and leveraging these platforms' improved search functionalities to drive higher engagement and conversion rates.
• Integrate retail media search ads with broader omnichannel marketing campaigns to create cohesive and comprehensive consumer experiences.
• I insist on fostering strong partnerships with key retail media networks to gain deeper insights and access to exclusive advertising opportunities. With your increased collaboration, you can unlock additional APIs and data layers. Push for better-negotiated terms and early access to new features.

Take care, and smile...

Mert Damlapinar

#digitalshelf #retailmedia #cpg #brands #ecommerce #growth #strategy #ecommert

Sources: Amazon, Nielsen, eMarketer, Omnitail, Statista, eCommert.

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About Mert Damlapinar

Mert Damlapinar is the Top Voice on LinkedIn, a multi-award-winning eCommerce executive with over 15 years of hands-on global experience. He held director and VP roles in eCommerce, digital marketing, and sales at companies like Sabra/PepsiCo, Mondelez, and L’Oreal. He talks to digital leaders of global CPGs worldwide and shares his research and insights with eCommert.

He holds a master’s degree in applied business analytics from Boston University, executive management degrees in integrated digital marketing from Cornell University, and applied data science and digital transformation degrees from Massachusetts Institute of Technology.

He published his second book, Agile Analytics for Startups, in October 2022 and is currently working on his third book.