Latest / The CMO Podcast with Fexingo: Marketing Leadership, Budgets, and Executive Strategy / Why CMOs Are Betting on Commerce Media Networks
Transcript
- Lucas: Luna, I want to talk about something that is quietly becoming the third-largest digital advertising channel in the US, after search and social. Commerce media networks. Luna: You mean like when you search for dog food on Amazon and suddenly every banner you see is for Purina? Lucas: Exactly. But it's much bigger than just onsite search ads. Commerce media is the business of brands buying ad placements within a retailer's ecosystem — search results, product pages, even offsite display and streaming TV — all powered by the retailer's first-party transaction data. And it's growing like crazy. Luna: Give me a number that makes me sit up. Lucas: Amazon's advertising revenue hit fifty-six billion dollars in 2025. That's bigger than the entire global newspaper industry. It grew twenty-five percent year-over-year, which is faster than Amazon's core e-commerce business. And Amazon is just one player. Walmart's ad business, Walmart Connect, is on track to do over four billion this year. Instacart, Target's Roundel, Kroger's retail media network — they're all scaling fast. Luna: So essentially, every major retailer has realised they're sitting on a goldmine of purchase data. And they're monetising it the same way Google and Facebook did, but with one crucial difference: they know what you actually bought, not just what you clicked. Lucas: That's the key. Closed-loop measurement. A brand runs an ad on Amazon, and within hours it can see exactly how many units sold, at what price, and what the return on ad spend was. No modelling, no attribution window debates. It's a direct line from impression to purchase. Luna: But here's the question I hear from CMOs: Is this really incremental revenue, or is it just a rebrand of trade spending? Because brands have been paying retailers for shelf placement and in-store promotions for decades. Now they're just calling it 'commerce media' and moving dollars from the trade budget to the digital ad budget. Lucas: That's a really sharp point. And the answer is: it depends on how you set it up. If a brand just takes its existing co-op trade dollars and funnels them into Amazon search ads, that's not incremental — it's just a digitised version of the old slotting fee. But forward-thinking CMOs are treating commerce media as a separate, additive investment, with specific goals around customer acquisition and new product launches, not just protecting shelf share. Luna: So what's the right way to approach it? Let's say I'm a CMO at a mid-sized CPG company. How do I decide how much to allocate to commerce media versus traditional digital? Lucas: A good rule of thumb I've heard from several marketing leaders is to carve out ten to twenty percent of your total media budget for commerce networks, but only after you've established a clear measurement framework. You need to define what incrementality looks like for your category. For example, if you're a new brand launching a plant-based protein bar, commerce media on Amazon might be highly incremental because you're reaching shoppers who wouldn't find you in a physical store. But if you're Coca-Cola running a display ad on Instacart for Diet Coke, that's likely just cannibalising sales that would have happened anyway. Luna: Right, so the incrementality depends on the brand's penetration and the retailer's role in the purchase journey. Which means CMOs need to be much more sophisticated about experimenting with holdout groups and incrementality tests — not just looking at ROAS. Lucas: Exactly. And the retailers themselves are starting to offer better tools for that. Amazon has its 'Brand Lift' studies, Walmart has 'Incrementality Insights'. But there's a tension here: the retailer controls the data, and they have an incentive to show that their ads are highly effective. So brands need to run their own independent tests, often with a third-party measurement partner. Luna: That's one of the reasons I think commerce media is a double-edged sword. On one hand, you get this beautiful closed-loop data. On the other hand, you're handing over your customer relationship to the retailer. You don't own the shopper's email, you don't have a direct relationship — you're renting access through Amazon or Walmart. Lucas: That's the big strategic risk. And it's why we're seeing some brands try to build their own direct to consumer commerce media by launching membership programs or loyalty apps that collect purchase data. But that's expensive and hard to scale. For most brands, the pragmatic move is to invest in commerce media while simultaneously building first-party data assets through their own channels. Luna: So it's not either-or. It's both. But that requires a different organisational structure. CMOs are having to create dedicated retail media teams that sit between the e-commerce, sales, and digital marketing functions. Lucas: Absolutely. And that's one of the biggest changes I'm seeing in marketing org charts this year. Some companies are even creating a new role: Head of Commerce Media, reporting directly to the CMO. That person is responsible for managing relationships with all the retail media networks, negotiating deals, and ensuring measurement consistency across platforms. Luna: Let's talk about the impact on the open web. If more and more ad dollars flow into closed ecosystems like Amazon and Walmart, what happens to publisher ad revenue? Lucas: It's a real concern. Commerce media is pulling budget away from display advertising on news sites and other content platforms. According to a recent report from GroupM, retail media will account for about fifteen percent of global digital ad spend in 2026, up from about ten percent just two years ago. That shift hurts publishers who rely on brand advertising. But it also creates an opportunity for publishers to partner with retailers — for example, Amazon already lets brands run offsite display ads on third-party sites, but the targeting is still powered by Amazon's data. Luna: So the retail media flywheel keeps spinning. More brands spend, more data is collected, better targeting, more sales, more spend. The question is whether this is a virtuous cycle or a zero-sum game where the retailer captures all the value. Lucas: I think for now, it's mostly virtuous for the retailers and the biggest brands. For smaller brands, the risk is that they get priced out as bidding becomes more competitive. We're already seeing cost per clicks on Amazon rising faster than on Google. But as long as the returns hold up, brands will keep investing. Luna: And what about the privacy landscape? Commerce media runs on first-party data, which is supposed to be privacy-safe. But there are still concerns about how retailers collect and share that data, especially with regulators watching closely. Lucas: Yeah, that's an evolving story. In Europe, regulators have already started looking at whether retailers are using their market power to force brands into their ad ecosystems. And in the US, there's growing scrutiny around data sharing between retailers and ad platforms. But for now, commerce media is seen as more compliant than third-party cookies, because the data is collected with explicit consent at the point of purchase. Luna: So what's your prediction? In three years, do we all just live inside the Amazon and Walmart ad ecosystems? Lucas: I don't think it'll be that extreme, but I do think we'll see further consolidation. The winners will be retailers with the richest data and the best ad tech. I'm watching what Shopify is doing — they're building a retail media network for their merchants, which could democratise access for small and medium brands. If that takes off, it could change the game. Luna: That's a fascinating angle. So instead of just Amazon and Walmart, we could see hundreds of smaller retail media networks powered by a common platform. That would make it easier for brands to manage campaigns across many retailers. Lucas: Exactly. And it would force the big players to compete harder on measurement and service, not just data scale. That's good for marketers. Because ultimately, what CMOs want is transparency, incrementality, and control — not just a black box that says 'spend more here'. Luna: Speaking of transparency and value — this is a good moment to mention that conversations like this, where we can dive deep into a topic without any ad breaks, are only possible because of our listeners. We deliberately keep this show ad-free. If these marketing conversations have sparked something you've actually used or shared, and you want to support that choice, the link is buy me a coffee dot com slash fexingo. No pressure, just a way to keep the conversation going. Lucas: Yeah, and we really appreciate everyone who has chipped in. It helps us stay independent and focus on the topics that matter to marketing leaders, not to advertisers. So thank you. Now, back to commerce media — one thing I wanted to touch on is how this is changing the relationship between brand and performance marketing within companies. Luna: Go ahead. Lucas: Traditionally, brand building and performance marketing were separate tracks, often managed by different teams. But commerce media blurs that line. A sponsored product ad on Amazon is performance — you pay per click and measure sales. But a display ad on Amazon's homepage or a sponsored brand video on Instacart is more like brand advertising, even though it's within a commerce environment. So CMOs are having to integrate their brand and performance strategies in ways they haven't before. Luna: That makes sense. If your brand ad runs on Amazon, you can still measure the sales lift, so it becomes a brand investment with a performance feedback loop. That's the holy grail for many CMOs — brand advertising that can be justified with a short-term ROI number. Lucas: Right. But there's a risk that brands become overly reliant on that short-term signal and underinvest in long-term brand building that happens outside retail ecosystems. The CMO's job is to balance the two. Commerce media is a powerful tool, but it shouldn't be the entire toolbox. Luna: Let's bring this back to practical advice. If a CMO is listening and wants to start or scale their commerce media program, what should they do first? Lucas: Three things. One: audit your existing trade spending and understand how much is really going to in-store versus digital. Two: build a measurement framework that includes incrementality testing, not just ROAS. Three: create a dedicated team or at least a cross-functional task force that includes e-commerce, sales, and marketing. Don't just hand it off to your media agency without oversight. Luna: Solid advice. And I'd add one more: start small with one retailer and one product category, prove the model, then scale. Too many brands try to do everything at once and end up wasting money across multiple networks without understanding which one actually drives incremental sales. Lucas: That's a great point. And the good news is that commerce media is still relatively young. There's still time for brands to figure out their strategy before the costs become prohibitive. But the window is closing. Luna: So what's the one thing you want listeners to walk away with from this episode? Lucas: Commerce media is not just a new ad channel — it's a fundamental shift in the balance of power between brands and retailers. CMOs who understand how to use it strategically, while maintaining their own customer relationships, will have a competitive advantage. Those who treat it as just another line item in the media plan risk losing control of their most valuable asset: the direct connection with their customers. Luna: Well said. And on that note, we'll be back next week with another deep dive. Until then, keep thinking strategically.