Unpacking The Shift To Commerce Media In Digital Advertising

Oct 18, 2024

Commerce Media

Yet another big shift is happening in digital advertising - a few years into retail media’s rise, and experts now expect “commerce media” to supersede retail media in conversations moving forward. Experts also predict that the commerce media industry will be one of the most important playgrounds for AI in advertising.

To date, “commerce media” has often been used interchangeably with “retail media.” In order to determine whether the two terms actually are interchangeable, I connected with experts at Koddi, a leader in retail and commerce media technology that builds infrastructure for several top commerce media networks. They have an inside understanding of the intricacies that make these ad channels tick, and how networks can differ from one another based on verticals.

The short answer: commerce media is not interchangeable with retail media. Furthermore, according to Koddi, moving forward commerce media will become the top ad channel everyone refers to as an umbrella including verticals like retail, travel, hospitality, and finance.

Read on for more about what this means for digital advertising.

“Retail media evolved naturally from trade marketing; a practice rooted in decades of experience. While it initially centered on optimizing product visibility within ecommerce, that scope has expanded rapidly in recent years. Commerce media now captures how this model applies beyond retail—whether in travel, finance, or automotive. It’s about seeing the bigger picture of how these different sectors converge. As we move forward, commerce media will be the framework for creating a more integrated and personalized ad experience, improving how consumers engage across industries every day, “ said Koddi President and Co-founder Nicholas Ward.

From Koddi’s perch, commerce media encompasses individual sectors like retail or finance, optimizing and bridging media touch points more holistically across the consumer experience. This tracks with what we’ve seen over the past year or so, with a bevy of drastically different companies entering the space. New commerce media players include not only retailers, but also banks, airlines, payment processors, and hospitality and travel networks.

The single biggest shift driving the rise of commerce media is this widening of focus beyond ecommerce retailers. Other companies are recognizing that the same person who buys milk at Kroger is also shopping on Amazon, as well as traveling, purchasing cars, using PayPal and banking online. Commerce media looks at all of these touchpoints, rather than zeroing in on a single moment in a consumer’s experience.

The expansion beyond retail is also spurred by technological advancement. While retail media may have its roots in the decades-old practice of trade marketing, the modern digital landscape has opened up new spaces to apply this model in other industries.

"Delivery apps didn’t just streamline delivery—they redefined customer acquisition. Restaurants can now engage high-intent customers exactly when they’re ready to order, turning what used to be passive discovery into immediate action," said Koddi VP of Product Trevor Narayan.

Nowadays, with membership programs like Amazon Prime, companies can amass a huge repository of signals to track consumer interest, which advertisers can leverage to deliver extremely timely, targeted messaging on-site and elsewhere. According to a recent Prosper Insights & Analytics survey, over 50% of Gen-Z (the generation that shops online the most, according to Capital One) have an Amazon Prime membership. Technological advancements, in combination with the increasing prevalence of tech-native generations, opens the door for more companies to succeed using Amazon’s model.

Prosper - Amazon Prime Membership

As a result of digital evolution, companies from a variety of backgrounds can now activate data better than ever. This is a major part of why experts predict that retail media will quickly come to be viewed as a subset of commerce media - with commerce media being the overall category for this type of advertising engagement where companies leverage first-party data to enable brands to connect with customers in ways that enhance the consumer experience.

A great non-retail example of this expansion is PayPal, which recently announced plans for its own commerce media ad platform. The Prosper Insights & Analytics survey also found that 56.2% of Millennials, 48.8% of Gen-Z and 48.7% of Americans age 18+ use PayPal. As a result, PayPal sits on a wealth of commerce signals that are invaluable for optimizing all manner of marketing and advertising efforts. As payment options are increasingly woven directly into various consumer touchpoints on the shopping journey​, this positions PayPal to create value for advertisers and (hopefully) an enhanced experience for consumers who frequent the payment platform.

Prosper - PayPal Mobile Payment App Users

AI is perhaps the most exciting piece of the commerce media tech story. Commerce media offers a virtually limitless proving ground for all kinds of AI models - during a time when investors are hungry to see AI working profitably.

“Commerce media is an amazing stage for AI, particularly because you can observe different AI models creating value in many different ways, on all sides of the performance advertising business,” said Nanda Lella, Koddi’s Chief Technology Officer.

It’s still early, but Koddi’s team pointed out three types of AI already showing outsized impact across commerce media:

● Deep Learning in Trend Prediction

The predictive nature of AI takes center stage in commerce media because data is truly king in commerce media. With strong zero and first-party data, AI can help buyers analyze historical customer interactions, purchasing behavior, and contextual signals in real time. Deep learning models can also anticipate user needs, show relevant content, and predict future trends.

● Machine Learning in Campaign Optimization

Insight-driven campaigns are the new normal. Until now, the bulk of marketing and ad campaigns have been largely reactive. AI shines here because it encourages marketers into a much more proactive approach to planning budgets and initiatives.

● Generative AI in Advertising Creative

Generative AI greatly reduces the cost to scale creative, requiring a much smaller initial investment of resources. Koddi predicts that this kind of AI will make static ads a distant memory, based on its ability to automate the timely creation of personalized, custom creative that is informed by contextual data like geographical location, local pricing or even weather conditions.

The industry is leaning into AI applications because by and large they enhance workflows, as well as enrich interactions between publishers, brands, and consumers. As such, it makes sense that AI would be a key tool for enhancing the customer experience and creating a sustainable ecosystem, if commerce media is to become a top advertising channel, as it seems to be moving toward.

As digital advertising expands, commerce media seems poised to reshape the landscape in profound ways. The driving force behind this paradigm shift is its ability to leverage consumer signals from more than just retail to seamlessly bridge every stage of the consumer journey. And extremely close to the heart of this trend is AI. As AI models become more and more integrated into commerce media strategies, experts expect that advertisers will hone their ability to deliver more timely and targeted ads that better cater to each consumers’ needs and preferences. This fusion of technology and data is what makes commerce media not only the next frontier of digital advertising but also a crucial proving ground for AI innovation, driving value for both businesses and consumers alike.

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