Latest / Retail Media Breakfast Club / Why Retailers Must Start Advertising in LLMs Now (Retail Media Meets AI Ads)
Transcript
- Why Retailers Should Start Advertising In LLMs === [00:00:00] Kiri Masters: Good morning. Today I'm gonna do something a little bit different that I have never done before, and that is I'm going to share some content that I myself didn't actually write. [00:00:12] I am really excited to share a [00:00:15] guest post from Deborah Ajo Williamson, one of the most widely trusted analyst voices in digital advertising and platform strategy. Deborah spent nearly two decades. At eMarketer producing [00:00:30] research that helped advertisers and agencies make sense of major shifts across social platforms in particular, and now she's applying that same rigor to the biggest shift yet consumer AI and specifically ads [00:00:45] in ai. [00:00:46] She has a brilliant substack called the AI ad Economy, I'll link up to it in the show notes and you can also subscribe to it on LinkedIn. And I am a power user of Debbie's [00:01:00] um, content. It's very smart, and I'm very excited to share one of her recent posts with you today. [00:01:07] It is titled, should Your Industry Advertise in AI Media in 2026, [00:01:15] every industry category should have a plan for testing ads in AI media, but not every industry needs to pull the trigger. Now, Debbie's exclusive analysis of search ad spending data and consumer AI behavior [00:01:30] reveals why four categories. [00:01:33] Travel, retail health and electronics advertisers should really be testing today. So I'm only going to read out the portion of the article, [00:01:45] um, that relates to retail because we just have 10 minutes today. If you wanna read what Debbie has to say about the size of the prize in travel, health and electronics, you can, um, check out her full post. [00:01:59] So [00:02:00] Debbie conducted an analysis of search ad spending across nine industry categories using data provided by e-marketer, alongside third party survey data that examines how consumers use AI platforms for research and purchase [00:02:15] decisions. [00:02:16] So in this piece she explains why travel, retail, healthcare, pharma, and technology electronics, advertisers in those categories should invest in AI media. Now, which consumer AI behaviors in these categories [00:02:30] stand out? How the typical ad strategies and objectives that these categories use to map to AI media. [00:02:38] And why marketers in some of these categories can take a slower but not too slow approach. So [00:02:45] let's dive in. [00:02:45] [00:02:47] Kiri Masters: After the big news last week that chat, GBT was going to start selling ads. Many advertisers are now wondering, should I test ads in AI media? The short answer is yes, but how [00:03:00] quickly you move depends on your industry category. [00:03:03] Three factors help determine an industry category's readiness for AI media. Number one, what percentage of consumers are using AI platforms to research [00:03:15] information or purchases related to an industry category? The more your audience is gravitating towards ai, the more likely it is that you need to be there. [00:03:24] Factor number two, how much does the category spend on search advertising on [00:03:30] an annual basis? Many advertisers use search as a proxy for understanding ai, so they are most likely to pull from search budgets first to fund paid AI media. And factor number three, what share of a category's [00:03:45] digital ad spending goes towards search versus other formats such as display. [00:03:49] Because most current AI ad formats are lower funnel, and that means a heavier weighting towards search advertising indicates greater category readiness. [00:03:59] And [00:04:00] so using all of these data points that Debbie has assembled, it shows that four categories stand out from the others, and one of those is retail. So let's dive into retail specifically why AI media should be on the front [00:04:15] burner for the retail industry. [00:04:17] First of all, there is high search ad spending and significant consumer AI usage. Retailers will spend 45 and a half billion dollars on search [00:04:30] advertising in 2026. By far most of any industry category, according to eMarketers forecast. 43% of total retail category, digital ad spending will go towards search. [00:04:42] The third highest share among all [00:04:45] industry categories, Miracle Ads is the Ad Tech solution trusted by Rakuten and over 50 global enterprise retailers. That's [00:05:00] because Miracle Ads was built with both three P Marketplace sellers and one P suppliers in mind. Both advertiser audiences demand a seamless advertising journey from onboarding to reporting. [00:05:13] You can offer everything from sponsored [00:05:15] products to video ads all in one solution. Learn more@miracle.com. That's M-I-R-A-K l.com. [00:05:24] [00:05:26] Kiri Masters: Now let's look at the key consumer behaviors in retail. [00:05:30] 49% of US adults have used AI to make retail and CPG purchasing decisions according to data from first page Sage. Consumers who visit retail sites after using generative AI sources show [00:05:45] 8% higher engagement compared to consumers who come from non-AI sources [00:05:49] according to Adobe, they also browse 12% more pages per visit and have a 23% lower bounce rate. just a note from me. That [00:06:00] actually surprised me because I've also heard anecdotally that consumers are browsing less 'cause they come to a retailer.com site already knowing what they bought. So that is counterintuitive to me. [00:06:12] Now let's talk about typical ad objectives and [00:06:15] strategies. Retail advertisers heavily rely on lower funnel performance based advertising aimed at driving immediate conversions and capturing high intent demand. Messaging is typically price led with clear calls to [00:06:30] action. How does this align with AI media? [00:06:33] By deploying AI media ad units, retailers can experiment with new methods to drive traffic to retail destinations. Maybe delivering discounts or other offers and sparking [00:06:45] interests and demand from consumers. [00:06:47] Their objectives align well with AI environments that feature comparisons, deals and product recommendations, and AI ad formats, such as Google's Direct offers a retail focused product. [00:06:59] [00:07:00] Debbie then profiles the travel, healthcare, and farmer and technology and electronics categories, but I'm not going to read those out. I am gonna skip ahead to the key takeaways. So one, paid AI [00:07:15] media isn't just another platform to test. It reflects a shift in how consumers express and act on intent. [00:07:23] Advertisers in those four categories should start investing in paid AI media today. These four [00:07:30] industry categories have the strongest blend of existing consumer AI behavior and search advertising usage. [00:07:37] Advertisers in other industry categories such as CPG and automotive can take a slightly slower [00:07:45] approach. As upper funnel ad approaches emerge, they should be prepared to start experimenting. And so that's an important note the way. Debbie has described retail. She's talking about retailers as opposed to CPG [00:08:00] companies, which she assessed to not really meet the criteria that she laid out at the start of her research, which was based around consumer usage, but also how the ad spend is allocated across different types of [00:08:15] media. [00:08:15] And Debbie's recommendation here is that marketing organizations need to have the right mindsets, tools, and talent to execute AI media experiments. [00:08:24] And a little side note from me, ads in chat, GBT are the latest [00:08:30] format in LLMs, but my personal recommendation is to look at an ad product that has been live in an LLM for over two years now, which is Microsoft Co-pilot. [00:08:45] Microsoft launched ads in what was formally known as Bing Chat more than two years ago, and in my opinion. [00:08:52] It is the fastest and lowest friction way for advertisers to start experimenting with [00:09:00] LLM advertising because chat GT's initial advertising offering has been very selective based on CPMs. Not really suitable for anyone except those very early movers with [00:09:15] huge ad budgets. So that is out of reach for most. [00:09:18] Brands and retailers right now. but you can get your feet wet with some of these LLMs today. [00:09:26] Thanks to Debbie for contributing this article to [00:09:30] Retail Media Breakfast Club. [00:09:31] Let me I hope you enjoyed this, and I'll link up to Debbie's newsletter in the show notes. Thanks for listening, and I'll catch you next week. [00:09:40]