Latest / Retail Media Breakfast Club / AI Is Quietly Breaking Retail Media — And No One Wants to Admit It
Transcript
- Disincentives for sounding the alarm on AI-facilitated commerce === [00:00:00] Kiri Voiceover: I don't think that anyone who is running a retail media network has any incentive at all to sound the alarm on what AI-enabled commerce is actually doing to their business model. Chances are they're not in that [00:00:15] job or even at that company when the bill comes due. [00:00:19] [00:00:20] Kiri Voiceover: That was the contrarian take that I landed on at the end of a recent conversation with James Deaker on his podcast, Yield Doctor. James asked me at the very [00:00:30] end to name one belief that retail media executives currently hold that I think is wrong, and I had been chewing on that answer for the whole conversation. [00:00:38] But before I get to that, James actually set this structural vulnerability up [00:00:45] earlier in the interview even better than I could have. So let's start right there. Here's James [00:00:50] James: when I fast- first started working with retail media companies, it, it struck me that they have to pay more attention to their partners and advertisers. [00:00:59] [00:01:00] When I was at Yahoo- [00:01:01] Kiri: Mm ... [00:01:01] James: um, I, I'm ashamed to say to some extent we didn't worry if an advertiser wasn't seeing the performance, 'cause there were 100 or 1,000 others who would be next in line for that same impression. Often you see in retail [00:01:15] media that particularly the endemic partners, the ones who are already working with the retailer, as a r- the owner of the retail media network, you have to pay them special attention. [00:01:25] [00:01:26] Kiri Voiceover: James is right. At Yahoo, advertisers [00:01:30] were interchangeable. But at Home Depot, for example, where I was at their upfronts, the advertiser base is largely endemic. If a paint brand pulls back, there isn't always another paint brand [00:01:45] waiting in line to fill that exact slot. Now, that dynamic is the foundation that retail media is built on. [00:01:52] The endemic relationship is often the whole game, or at least, the majority of [00:02:00] it. But that foundation has a hidden assumption baked into it. Shoppers actually arrive at the retailer with intent that hasn't already been formed elsewhere, because if the discovery, comparison, and decision-making all [00:02:15] happen upstream in an AI answer engine before the shopper hits the retailer's surfaces, then those endemic partners are paying for ad inventory that's increasingly disconnected from where their customer actually [00:02:30] got persuaded. [00:02:31] Which brings me to the contrarian answer [00:02:34] James: If you had to pick one belief about retail media networks that executives currently have but which you believe is wrong, what would that be [00:02:45] and why? [00:02:45] Kiri: Okay, I think that AI-enabled commerce is a serious threat to retail media that is not being taken seriously because the timeline doesn't really line [00:03:00] up with the tenure of people running these media networks . [00:03:05] James: Say, say more . [00:03:06] Kiri: Okay. So if I'm the head of a retail media network, I'm thinking about my numbers this year, [00:03:15] next year, and that might be it, and this agentic- Not even agentic commerce where bots are buying things for us, but AI-facilitated commerce, AI-enabled commerce. [00:03:27] I'm doing my discovery in AI [00:03:30] answer engines now. I'm not going to a retailer to figure out what type of hairstyling tool I'm going to buy. I'm doing that in ChatGPT. So that means I'm dropping less behavioral signals at a retailer. I'm not tell- I'm, I'm not browsing, I'm not [00:03:45] searching, I'm not leaving these, you know, clues behind me about my future purchase intent. [00:03:52] Um, I might still be buying that product on the retailer website, great, but all of that data s- [00:04:00] that data stream that that retailer had access to before is starting to, to disappear. Um, and then also, like the surfaces that these ads live on are getting less traffic and less time because I'm getting to [00:04:15] the retailer later in my shopping journey. [00:04:17] Yeah. So I don't think that the retailers have any incentive to sound the alarm on this because they're gonna spook their advertisers, and advertisers might start pulling out and, God, [00:04:30] spend the money on ChatGPT instead. Like, that- ... I don't want that. Um, not recommending that, by the way. But this, so this is something I think is, it is a serious problem. [00:04:41] It is not short-term enough for anyone to really [00:04:45] start talking about, but I'm, I'm, uh, I'm, I'm sounding, I'm sounding the alarm and I think that what it means ultimately is retail media doesn't die, sponsored product ads don't die, but the places where they live get reconfigured. [00:05:00] The where, where retailers need to invest in their inv- ad inventory needs to change. [00:05:07] They need to think about where are the durable surfaces, where can they be competitive, um, how can they have [00:05:15] a, like a, a, an honest partnership with brands to grow the category rather than this extraction tax kind of perception that there is now. So I think it is an opportunity for a, um, a reset [00:05:30] of retail media. [00:05:30] It's not necessarily the, the end of it, but we need to start talking about it now so we can plan for that future. [00:05:42] Kiri Masters: Miracle Ads is the only retail media [00:05:45] solution designed for both one P and three P Marketplace brands. Why does that matter? Marketplace sellers demand a seamless advertiser experience that still offers full funnel ad formats, and [00:06:00] retailers need a flexible solution that allows you to scale your media business. [00:06:05] Learn more@miracle.com. That's M-I-R-A-K l.com. [00:06:12] Kiri Voiceover: The piece of this that I wanna develop further [00:06:15] is the tenure misalignment, because I don't think I gave it enough air in this conversation. The average tenure of a retail media network leader is fairly short. To be fair, this is a relatively recent sort of position to [00:06:30] have, but people tend to move around quite a bit. [00:06:34] And the disruption that we're talking about here, which is meaningful shifts in where consumers do their discovery and how much behavioral [00:06:45] data retailers continue to capture, that plays out over a longer horizon than most of these leaders' KPIs, where they're focused on making their numbers this year or maybe next year. [00:06:58] So if you're running a retail [00:07:00] media network in twenty twenty-six, the rational move is to keep growing the existing surfaces, the on-site sponsored product ads, maybe exploring some new channels with off-site and [00:07:15] in-store. You wanna hit your numbers and maybe let your successor deal with the structural problem. [00:07:22] Sounding the alarm now means potentially spooking your endemic advertisers that [00:07:30] James was talking about. [00:07:31] Because as the AI ad economy develops and ChatGPT is sort of on a tear right now announcing all of these advertising features, that is-- there is a risk that there's going to be some of that budget [00:07:45] moving over to the answer engines where discovery is increasingly happening. [00:07:50] But there really isn't any incentive for retail media network leaders to concern themselves with this problem in the short term. [00:08:00] Now, that is a point of view that was also shared by Sam Khoury at Marketecture saying nearly the same thing on another podcast called ADSN. He said, "People are generally trying to hide a little bit from it [00:08:15] and hoping that it just goes away." [00:08:17] been making this argument for some time. I'll link up in the accompanying newsletter to some other thoughts that I've had on this topic But I want to be clear. I'm not predicting the death of retail [00:08:30] media. I'll-- I've said it before, and I'll say it again, again. Sponsored product ads don't die. [00:08:35] Off-site media doesn't die. The endemic partner relationship doesn't disappear. But the surfaces over time [00:08:45] will get reconfigured. The places where ad inventory lives right now needs to shift towards whatever p-proves to be durable in an AI-mediated journey. And there are durable surfaces, and there are durable assets that retailers [00:09:00] have. [00:09:00] In-store networks, post-purchase touchpoints, loyalty programs, the moment when the shopper is really present in the retailer's ecosystem rather than just passing through. So the retailers who work on those [00:09:15] durable assets and surfaces and the real shopper context that can't be disintermediated, those networks are really building for the future. [00:09:25] But that is the alarm, and I'm sounding it. [00:09:30] Now, this is just one part of a really great conversation that I had with James on his Yield Doctor podcast. If you wanna check it out, I'll link up to it in the show notes. Thank you for listening, and I'll catch you tomorrow. [00:09:42]