Commerce Media Is a $100B Opportunity: Are Travel Brands Ready?

The biggest buzz and growth in advertising for the last couple of years has been retail media – retailers generating incremental revenue from advertising on their platforms. This trend is now expanding to other verticals – including travel. Retail media is now commerce media. What does this mean for the travel sector? How can brands seize opportunities and succeed in this emerging area?


What is Commerce Media?

The consulting firm McKinsey describes commerce media as “a new form of advertising that closes the loop between media impressions and commerce transactions to improve targeting, provide new audience insights, and deliver more relevant and valuable experiences for consumers.” We think of it as not just media, but also engagement at the point of commerce – where content meets commerce and trusted brands meet consumer (traveler) demand.

Commerce media is growing fast. McKinsey and BCG both value the commerce media category as a $100B+ revenue opportunity by 2026. McKinsey goes even further, projecting that media revenue will represent over $1.3 trillion of enterprise value by 2026.


Focused on the Traveler

Commerce media for travel reimagines how travelers interact with brands throughout their journey. Commerce media platforms can seamlessly integrate information, recommendations, and transactions into the travel experience by leveraging advanced data analytics, AI-driven personalization, and user-centric design. This convergence of technology and user-centric design ensures that travelers are consistently provided with relevant, engaging content and offers, from the initial inspiration phase to booking to the trip itself.

This will result in a smoother and more enjoyable travel experience for users. Travelers receive tailored recommendations and real-time information, enhancing their decision-making process. This, in turn, can lead to increased brand loyalty, higher conversion rates, and improved customer satisfaction. To augment the likelihood of success in achieving these positive outcomes, brands should invest in robust data analytics and employ strict data privacy measures to earn user trust.

Brands must proceed thoughtfully. An overreliance on technology and drive for revenue can lead to an over-automated, impersonal experience. Users may feel overwhelmed by excessive advertising or concerned about privacy breaches. To mitigate these risks, brands must carefully balance automation with human touchpoints, ensure transparent data handling practices, and offer users options to control their data and preferences.


The Core Promise

The promise of commerce media for users hinges on personalization and convenience. Advanced algorithms and machine learning can predict user preferences and behaviors, offering tailored recommendations, relevant content, and exclusive deals. Streamlined booking processes, intuitive interfaces, and real-time updates can significantly enhance the user experience. To realize this promise, it’s essential to invest in sophisticated personalization algorithms, user feedback mechanisms, and continuous usability testing.

Meeting user expectations for personalization and convenience can lead to increased user engagement and loyalty. Users are more likely to return to platforms that consistently offer them value and make their travel experiences smoother. Brands should focus on optimizing the points of user interaction and investing in robust data analysis tools to tailor recommendations effectively.

Commerce media promises brands the opportunity to build deeper, more meaningful relationships with customers. By leveraging data insights, brands can understand customer behavior and preferences granularly. With this knowledge, they can deliver precisely targeted offers and experiences, increasing the likelihood of conversions. To succeed in this aspect, brands need robust data analytics capabilities, CRM systems, and strategies for customer engagement.

Commerce media offers travel publishers a new avenue for monetization and engagement. By partnering with brands and providing valuable content, publishers can generate revenue through advertising and affiliate marketing. Leveraging data insights can help them identify trends and user preferences, optimizing their content strategies.


Not an Entirely Novel Concept

While commerce media for travel may appear as a recent development, it’s built upon the foundations of Online Travel Agencies (OTAs), metasearch engines, and dynamic inventory management. These pioneers have successfully integrated commerce and content to offer comprehensive travel solutions.

While there’s a proven foundation, replicating existing models without innovation can lead to market saturation and a lack of differentiation. To mitigate this risk, brands must strive for innovation and differentiation. They should focus on providing unique value propositions, superior user experiences, and solutions for unmet needs in the travel industry. This will ensure distinguishability and long-term value creation.

This is an area where the travel industry must learn from the retail industry. In retail, opening up ad units and reorganizing search results is becoming table-stakes from the advertiser’s point of view. This makes for a perfectly viable baseline, but to stand out, networks must have scale, performance, reach, or creative-based differentiators. Because the average traveler takes a few trips per year, only a few brands will stand out solely through the scale of their owned surfaces. The audience, however, is often highly engaged, highly committed, and their intent for specific activities and experiences is incredibly high.


Navigating the Potential Pitfall

As commerce media for travel continues to evolve, there are potential pitfalls that brands must navigate to ensure success.

One risk is in monetizing audiences at the expense of user experience, where brands might become overly aggressive in delivering ads to their customers. The wrong message at the wrong time or with the wrong frequency could erode the value of the brand. To mitigate this, brands should adopt a customer-centric approach, prioritizing satisfaction and providing valuable content and offers.

Focusing solely on transactions without adding value can lead to disengaged customers. Brands should aim to enrich the user journey with informative content, personalized recommendations, and a seamless interaction experience. To meet these objectives, brands will need a deep understanding of where and how these interactions can occur and optimize for maximum revenue with minimum disruption.

Not all travel experiences can be simplified into online transactions. Brands must recognize the value of complex bookings and in-person interactions, offering flexible solutions to cater to diverse traveler needs. Neglecting complex bookings or in-person interactions or failing to account for them will create friction in travel media networks.

In the search for relevance in the travel buying and experience lifecycle, new commerce media networks could easily miss key opportunities to provide value for users. Expanding the concept to incorporate related experiences, like dining, entertainment, or local activities, can open up new possibilities. Many brands will already have strategic partners (for example, airlines, hotels, and ride providers) that should be their first advertisers. There is also opportunity in the long tail; for example, brands might consider collaborating with the independent restaurant or tour operator. To engage with these types of partners, brands need a plan to build a depth of offering, which may not be a natural capability for them.

Personalization is crucial, but it must be balanced with stringent privacy practices. To mitigate privacy risks, brands should adopt transparent data handling practices and empower users to control their data. Brands must also plan to meet industry standards and posture to be able to navigate increasingly fragmented privacy and advertising stands.


A Vision for the Future

Despite these potential pitfalls, a promising future awaits commerce media for travel. To ensure success, stakeholders must keep the customer at the center of their strategies. This involves continually collecting and analyzing interaction data and feedback, conducting usability testing, and refining personalization algorithms to better serve customer needs and preferences in addition to solely maximizing revenue.

Brands should aim to enhance the travel experience before, during, and after the trip by offering relevant content, recommendations, and services at each stage. The best-performing travel commerce networks will extend value throughout every part of the travel journey, even if the offering is not exclusive to the trip. At the beginning of the travel experience, this might involve providing pre-trip recommendations and in-destination experiences. On the trip, brands might endorse experiences, services, destinations, or stores. After the trip, customers may be particularly open to relevant brand recommendations, such as for a luxury skincare line following a stay at a resort and spa.

Commerce media should align seamlessly with brand goals and values, reinforcing brand identity and delivering consistent messaging. The best-executed networks will expand on the brand’s value proposition. A table-stakes network will aim to do no harm to the customer’s experience. The best of the best will improve the experiences of customers and even differentiate the brand from competitors.

In a competitive landscape, brands must find innovative ways to increase profitability while providing exceptional value to users. In travel, many parts of the value chain will often face thin margins with limited abilities to reinvest. Similar to how Amazon’s infrastructure and advertising businesses actually extend its core competitive position, forward-looking brands will have the opportunity to reinvest margin for further growth and expansion.

At its very best – and what we get the most excited about – there is a flywheel that a great travel commerce media network can create. The travel flywheel might look something like this: a customer books a hotel, ad experiences are delivered to them that enrich their pre-stay experience, data is generated that can be used to personalize the stay, a great stay leads to higher engagement with the brand and property, and then, relevant surfaces drive user and advertiser value. The ideal path would go on and on, but at this point, that revenue could be taken as profit, or perhaps more interestingly, reinvested in customer acquisition to drive more growth.


The Winning Network

What does it take to win here, and how can you move forward and plan for success? It begins with mapping the customer journey and interaction points. Brands and publishers must thoroughly understand the stages of the consumer journey to effectively engage with users. This involves analyzing user touchpoints, identifying pain points, and tailoring content and services to address specific needs at each stage.

Travel experiences are rarely linear, and to win in commerce, media travel brands must adapt to provide relevant information and services at any and every point in the journey. To achieve this, brands must develop partnerships that allow them to consume and act on this nonlinear data and to iterate quickly on new insights.

It will be tempting to chase the easy dollars when getting started. Leaders responsible for new commerce media networks must remember that intrusive advertising or irrelevant content can harm the user experience and lead to user churn. To mitigate this risk, brands should employ rigorous quality control measures and consider user feedback when making content decisions. Creating a clear bar around value can be helpful here; the best offerings provide clear value to customers in addition to economic value to partners.


The Journey Ahead

As commerce media for travel continues to evolve, we can anticipate several developments. As brands experiment with new strategies and technologies, there may be initial challenges and learning curves. To increase the likelihood of success, brands should adopt a culture of experimentation, rapid iteration, and continuous learning.

Early adoption of commerce media in travel may be slow, with only a few pioneering brands and publishers fully embracing the concept. Early networks may also be limited, especially if due consideration is given to the needed balance between monetization and customer experiences. To mitigate this, brands should communicate the benefits of commerce media and collaborate with industry peers to create a broader ecosystem.

Experiments will then begin to pay off, and brands that effectively integrate commerce media into their strategies will experience early successes, setting the stage for broader adoption. To maximize these early wins, brands should celebrate successes, share best practices, and invest in employee training and development to ensure consistency for customers. Great commerce media execution must extend the value proposition of the brand to drive long-term value.

As commerce media gains traction, market pressure and the need for differentiation will drive innovation and creativity in this space. To maintain momentum, successful brands will continuously innovate, adapt to changing market conditions, and stay ahead of evolving user preferences. This requires an exceptional ability to test, learn, optimize, refactor, and continue to expand functionality at scale. The most successful brands will have teams that are technically adept and able to navigate the complexities of engaging in new ways with customers in large organizations where the majority of revenue comes from a different interaction.


Opportunity for Early Movers

For early movers on both the brand and publisher sides, the risk will be greater, but the potential is vast. The growth of commerce media for travel depends on how effectively it aligns with user needs, enhances travel experiences, and drives conversions.

In 2022 and 2023 we developed several ways to determine the revenue potential of brands entering into the commerce media space. One observation from our team: at-scale commerce media networks – those that have been operating for many years as a focused effort – tend to comfortably achieve between one and six percent of the organization’s total revenue, depending on reach, customer engagement frequency, and level of digitization. This indicates that very large travel brands can build this line to hundreds of millions of dollars in revenue, and given the high-margin nature of the business, this can make a significant impact on net income and EBITDA.

We have high conviction that commerce media will revolutionize the way brands engage with partners and consumers in the travel industry. While challenges exist, embracing this concept with a user-centric approach can lead to meaningful growth and enhanced travel experiences for all.

By proactively addressing potential pitfalls, prioritizing user satisfaction, and constantly adapting to changing market dynamics, brands, publishers, and stakeholders, savvy brands can maximize the positive impact of commerce media for travel and shape a brighter future for the industry.

The experts at Koddi would love to talk through any questions or considerations you might have. Contact our team today!

Commerce Media , Featured , Travel