Latest / Retail Media Breakfast Club / Why AI Search Advertising Could Reach $25 Billion By 2029
Transcript
- AI search ads projections emarketer === [00:00:00] E-marketer now projects that US advertisers will pour over $25 billion, which is about 14% of all.~ of all. Add of ~of all search advertising budgets into AI powered search results by 2029. That's a leap from just $1.04 billion in projected spend this year and. I don't think it's wishful thinking. [00:00:26] Behind the scenes platforms are wiring. Live structured product feeds straight into LLM interfaces. [00:00:35] In this episode today, I'm gonna rehash a post that I wrote for Forbes on May 31st and share [00:00:42] some of the recent infrastructure developments ~that support this thesis from e-marketer.~ [00:00:45] That support this thesis from E-Marketer. Let's go.~ Let's go. ~ [00:00:48] Good morning and welcome to the Retail Media Breakfast Club. I'm your host, Kerry Masters, and every weekday at 6:00 AM Eastern, I bring you candid and real discussions in the [00:01:00] world of retail, media and marketplaces in just 10 minutes. So bring your own cup of coffee and we'll get smarter about retail media together. [00:01:09] [00:01:09] Shopify announced a new catalog, a PIA couple of weeks ago, which now lets agents like perplexity read product catalog information, things like titles, prices, and inventory for every Shopify skew~ skew ~in real time. And that means. AI agents don't need to go scraping the web. They can hook directly into. Product catalogs on all Shopify websites. [00:01:38] Meanwhile, we're seeing early AI shopping experiences from chat GBT to Amazon's buy for me, and also recently Google as well to gather all of these infrastructure developments show how conversational shopping is going to turn into shoppable ad [00:02:00] inventory. [00:02:00] [00:02:00] [00:02:03] The new hockey stick of media growth, the trajectory that e-marketer is projecting from a billion dollars today to $25 billion in five years follows a familiar pattern in digital advertising evolutions. Let's compare this to retail media. Retail media took approximately five years to reach a similar scale, going from a billion dollars to $30 billion in ad revenue. [00:02:30] While search and social advertising each required longer timeframes. AI search advertising appears positioned to match retail media's rapid adoption curve, an Adobe survey of 5,000 US consumers. Reveals that 39% have already used generative AI for online shopping with 53% planning to do so this year. The shopping tasks that consumers are using for AI include [00:03:00] conducting research. [00:03:01] 55% of respondents receiving product recommendations, 47% seeking deals, 43% generating present ideas, 35%. Finding unique products, 35% and creating shopping lists, 33% retail media exploded once merchants simply flipped on sponsored listings on their own walled gardens. There's immediate inventory, immediate return on ad spend. [00:03:32] The sector started that sprint nine-ish years ago, depending on who you're asking, and is already a 60 billion plus dollar line item today just in the us. AI search obviously is really just entering year one. [00:03:49] [00:03:52] Let's start with this question of feed hygiene. [00:03:56] ~So unlike traditional search ads that appear alongside Blue Links, unlike traditional short, ~I just mentioned a Shopify catalog, [00:04:00] API. [00:04:00] Which creates an entirely new optimization challenge for brands. Success requires treating Shopify metadata fields, product descriptions, structured data, not as it chores, but as performance media inputs. [00:04:18] Scott wingo retail marketplaces expert and author of a new newsletter called Retail Gentech, says that a credible agentic commerce flow must let customers see a product and buy it inside the chat. What that requires is real-time product feeds as the foundation plus either secure payment processing within the AI platform, or seamless integration that redirects to a retailer checkout ~with Either ~Either way, in that transaction situation, accurate product data is foundational. [00:04:51] [00:04:53] Retailers choose different AI paths. The emergence of AI shopping agents is forcing [00:05:00] retailers to make strategic choices about how they want to participate in conversational commerce. Two distinct approaches are emerging with implications for brands who are planning their AI search advertising strategies. [00:05:14] I recently shared how Walmart is pursuing a dual path, both building their own shopping agents ~while exploring technology that enables. While also exploring technology that enables cust, ~while also exploring technology that enables customers to shop Walmart's assortment using their preferred personal shopping assistance. [00:05:31] This contrast with Amazon's walled garden approach where their developing proprietary AI tools like Rufuss Alexa and Bifo Me, while at the same time blocking external agents from accessing their platform. Meanwhile, multi merchant platforms like Shopify's partnership with Perplexity represents a third model unified cross retailer shopping experiences. [00:05:58] . For brands, these [00:06:00] diverging retailer strategies create a complex decision matrix about platform prioritization and budget allocation Across these different AI shopping environments, [00:06:10] [00:06:13] ~I~ [00:06:13] media attribution gets even more blurry. AI powered shopping experiences are going to create new measurement challenges that will compound the existing retail media attribution problems that we have today when transactions begin in conversational interfaces and complete through various checkout systems. [00:06:34] Traditional budget categorization breaks down. Let's take this example. If a shopper uses perplexity to research wireless headphones under $200, they're going to see some AI powered recommendations and then perhaps make a purchase through perplexity using shop pay, which is Shopify's payment ecosystem. [00:06:59] ~So does thater d. ~[00:07:00] So does that sale belong to search retail media or affiliate budgets? Traditional attribution models are not yet capable of handling transactions that begin in chat and complete in merchant wallets. [00:07:16] This challenge extends beyond budget classification. Entire marketing teams are going to need new frameworks to track and optimize spending across conversational interfaces, especially as these platforms ~develop ~begin to develop their own ad inventory. This complexity increases when considering that a single AI agent. [00:07:36] Might source product information from multiple retailers, comparing prices across different platforms and complete transactions through entirely different systems. [00:07:47] [00:07:49] Getting ready for AI search advertising. The convergence of product data feeds and AI search advertising creates first mover advantages for [00:08:00] brands that are willing to treat these systems as integrated rather than separate challenges. Success requires alignment between traditionally siloed teams, managing product information, media buying and technology infrastructure. [00:08:15] ~I.~ [00:08:15] Even at its projected $25 billion scale by 2029, AI search advertising will remain smaller than retail media in absolute dollars. But the incremental advertising growth from 2027 onward will increasingly tilt toward AI powered search ~as conversational in ~as conversational interfaces become primary discovery channels. [00:08:40] ~I,~ [00:08:40] Jason Goldberg, chief Commerce Strategy Officer at Publicist Commerce emphasizes the organizational challenge in a new white paper. ~That I'll link up to in the CO in the, that I'll link ~that I'll link up to in the show notes. He says, the companies that thrive in the new AI search landscape will not be the loudest, they'll be the most adaptable. [00:08:58] He suggests that brands [00:09:00] should optimize products and content for LLMs while simultaneously piloting AI commerce partnerships with emerging platforms. ~Okay. ~Brands that treat product data and media strategy as connected priorities will be better positioned as AI search advertising scales. Those who continue managing AI initiatives separately from their core commerce operations may find themselves at a disadvantage as conversational search becomes more prevalent.