Commerce Media:

The Future of Digital Advertising

Discover the revenue-generating power of commerce media.

Grow Your Incremental Revenue With Commerce Media

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Commerce media, simply put, is a new approach to native advertising wherein a marketplace or retailer sells ad space on its ecommerce marketplace, using privacy-focused data to ensure consumer satisfaction and facilitate the buyer journey – and it’s an approach that’s gaining momentum. In fact, BCG estimates “the [commerce media] market will grow by 25% per year to $100 billion over the next five years and will account for over 25% of total digital media spending by 2026.”

Commerce media requires engaged advertisers, a motivated publisher, media that performs, and solid, transparent technology. These elements must all work together in harmony, feeding each others’ successes.

For companies ready to raise the bar on high-impact commerce media strategies, there's lots to consider.

  • Empowered ownership
  • Enhanced personalization
  • Privacy first
  • Ad relevance
  • Top talent
  • Speed to launch

Elements of Commerce Media Success

Our near-decade of ad program expertise have given us precise insights on what –exactly– it takes to help clients build their own branded, revenue-generating media networks. We know what you’re up against, and we know how to do it right.

A marketplace needs four elements to succeed:

Engaged Advertisers

Advertisers’ budgets must support a wide variety of inventory across a range of categories and markets. Whether an ad budget is derived from a percentage of past/forecasted sales, or through some other means, that budget should ultimately support a number of business objectives, including brand, performance, native, endemic and non endemic placements.

Advertising budgets must be divided with a proportional emphasis on areas of high demand. Which marketplaces or digital channels have proven the highest ROI? These high-performing areas should garner more ad dollars. A precise analysis of spending and channel performance will set advertisers up for success.

A diverse product mix is key. For example, an advertiser who sells soccer balls, basketballs, and golf balls shows a higher propensity to spend, and will likely be more additive to the revenue of the holistic ad program, as opposed to one that sells just golf balls. They will benefit the ad program itself by driving revenue, because they're showing up in more places. Diversity in advertisers or products can lead to good advertiser engagement and fill rates.

For a program to be successful, it requires sufficient participation from diverse products or suppliers (advertisers) to ensure relevant ads. For example, if your ad program only has a few select advertisers participating, who only sell a few select products, then your ads will all show that product or its derivatives to your audiences — not a great experience for them. You must be able to attract enough advertisers to the program to make the consumer experience a good one.

If budgets aren’t consistently available, ad revenue will stall, and may decline at times. This will make the job of investing more into the program more difficult to justify internally; “If advertisers aren’t committing their budgets to the program, why should we?” is a valid executive question or challenge to someone proposing further investment in the ad program.

Insufficient advertiser or industry sophistication would also present a problem, likely resulting in general knowledge gaps and the failure of the ad program in question to live up to its full revenue-driving potential.

Motivated Publisher

The quality of a marketplace’s inventory is directly tied to its revenue growth. Ultimately, ads should be virtually invisible within the marketplace – especially in terms of relevance. With click-through-rate indicating the health of a marketplace, relevant ad inventory that generates clicks is a sign the marketplace is operating well. If the program itself has a low click through rate, then the inventory may be stale. With stale inventory the marketplace risks low clicks, resulting in dissatisfied advertisers.

A marketplace wants a relevant audience – an audience that’s converting, where consumers are completing the path to purchase on your site. To accomplish this, the traffic must directly align with the products being sold. For example, if a marketplace is selling frozen foods, a low-in-the-funnel consumer may come along shopping for those frozen foods. The shopper clicked on the marketplace’s frozen food section, and was then served a frozen food ad. That is high-quality ad traffic, as the shopper is a high-intent consumer who is likely to convert.

Ad slot positioning considers frequency and placement, and boils down to whether there are enough ad slots to support the inventory a marketplace has available. Does an advertiser have slot one? Slot five? Bookended slots, or the middle? Are ads spaced throughout the entirety of the search results, or only in the front end? Budget churn is another consideration – whether advertisers’ budgets are being distributed tactically across ad slots.

Beyond the standard rounds of testing in a program roll-out, the key here is a publisher’s commitment to continued testing – to new iterations and continuous program improvement. Each test of some component of the ad program should be designed to find ways to deliver improved overall performance on some dimension, as the program develops and grows.

In order to drive marketplace health, an element of technical competence is required of the publisher. Beyond the initial program implementation, a publisher’s team needs to be prepared to handle APIs, deliver eligible bidders and relevant categories in a timely way, and much more. Success is dependent on the publisher’s capability to build, maintain, and iterate at scale, while mitigating latency.

From sales executives to account managers, and anyone else who touches a marketplace ads program, the team must be prepared to position marketplace opportunities (display, ad slots, etc.) in accordance with advertiser budget and make strategic account recommendations appropriately. Then, once the campaign has concluded spending, the team must be ready to deliver reporting on performance and provide strategic recommendations based on performance.

Tied to technical and sales aptitude, good communications within the publisher’s team allows the marketplace to pull the appropriate levers to meet the program’s ever-evolving needs and goals. From the initial sales side, targeting enterprise-level media budgets for net new opportunities, all the way to the publisher team who is analyzing data and managing performance marketing – communication and shared knowledge is the foundation for a solid integration.

Media That Performs

Ads should be targeted and clear, persuasive and promotional, creative and aligned with the overarching marketing strategy in order to drive relevant impressions. If they’re done correctly, these ads could generate billions. “Revenue from the expanded group of industries that we call ‘commerce media’ could add $10 billion on top of the baseline $100 billion net revenue estimate for retail media in the US over the next five years,” estimates BCG.

These metrics measure the inherent power and effectiveness of a marketplace’s media. High impression volume will contribute to an increased CTR. An increased CTR indicates strong media effectiveness; the ad itself is achieving its desired effect on consumers.

ROAS (return on ad spend) is perhaps one of the clearest indicators of successful media. To determine your ROAS, simply divide your campaign’s revenue by its cost. A good ad program will strategically position relevant ads in front of people who are likely to convert, measured via CVR.

There are lots of ways to measure ad performance: volume, ROAS, CTR, CVR, etc. However it’s measured, the ultimate intent is to track and ascertain whether ads perform consistently and predictably. Each metric brings its own benchmark average to determine strong (or not) performance, which you can then refine to align with your unique campaign goals.

Solid, Transparent Technology

If your demand-side platforms — the places where your buyers flight their ads — are unstable or suffer from regular integration issues with your ad program stack, it will affect your program’s growth. Either reporting data will be missing or wrong, or campaigns, budgets, or bids will fail to update. Because ads are a real-time business, any errors or delays cost advertisers money; therefore, they’ll move that money elsewhere, to a marketplace that has demand-side integration running seamlessly.

One of the main functionality challenges teams encounter is the ability to maintain real-time, low-latency ad calls on a global 24/7 basis. Ad programs rely heavily on the publisher’s technical ability to turn ads around with eye-popping speed. The adtech platform must be able to analyze search results and make a recommendation on which result should be an ad within milliseconds.

Quality scoring is critical to data collection and transmission for real-time ad calls. Here’s what that requires: a data science team member creates a system to calculate an appropriate score based upon any number of factors (propensity to click, revenue per user, etc.) in real time, for each individual ad opportunity. If a given user is more likely to click one ad over another, that score must be able to be determined in real time and used to deliver a relevant ad and a superior shopper experience.

One of the reasons commerce media, and retail media, have gained traction so quickly is the growing need for secure, privacy-safe ecommerce marketplaces. As the third-party cookie depreciates, data is burdened with increasing demands for secure generation tactics. Best-in-class marketplace data is now generated and optimized in a privacy-first way and also contains enough volume to derive actionable insights.

While definite leaders have already emerged (among them Amazon & Walmart), driving massive scale and setting the bar for businesses, the commerce media industry is still nascent. There’s plenty of room remaining for additional strategic players. Businesses with a winning technology stack manage to balance cutting-edge functionality and features with streamlined UI, seamless ad serving, battle-tested measurement and tracking – while remaining ever agile in sourcing the next big improvement.

Estimate Your Potential Program Revenue

In the past decade, Koddi-run ad programs have delivered billions of dollars in enterprise value. We excel in launching, optimizing, and acting as a trusted partner for our clients.

Use our potential revenue calculator for a preview estimation of your program’s ad opportunity. Explore the difference a commerce media program could make for your bottom line today.

Discover what building your commerce media program with Koddi can do for your business.

Calculate Your Revenue

Smarter Ad Tech, Better Results

Take a look at what sets Koddi apart from other commerce media partners:

    • Empowered ownership – through a private network approach
    • Enhanced personalization – industry-leading dynamic targeting
    • Privacy first – target based on first-party data
    • Ad relevance – highly-relevant ads drive more sales
    • Top talent – 200+ employees with 60+ engineers and tech experts
    • Speed to launch – get to market as quickly as 60 days

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