How AI could disrupt retail media's $38 billion search ad market

"I think it's a threat, but I don't think it's a threat to extinction. It's a threat to how retail media networks operate as they are. They're going to have to evolve. Instead of searching on Walmart, Target or Amazon's owned sites, they turn to ChatGPT to research and maybe purchase with ChatGPT's Instant Checkout. A decline in retailer site traffic directly impacts the RMNs' ability to monetize its site."

"That's a huge business that gets disrupted directly in correlation to traffic to retail sites. The more time [shoppers are] spending elsewhere they're spending less time [on retail sites]. Traditional search engine volume is expected to drop 25% this year as search marketing loses market share to AI chatbots, according to Gartner predictions."

"Retail media search spend in the U.S. was expected to reach nearly $38 billion in 2025, according to eMarketer. Search ads make up about 60% of retail media spend. LLMs have upended referral publisher web traffic and reduced click-through rates, prompting some publishers to enact bot-blocking measures."

OpenAI and Google are integrating shopping capabilities and advertising into their AI chatbots, positioning them as alternatives to traditional retail sites and search engines. As users increasingly turn to chatbots for research and purchases, traffic to retailer websites declines, directly impacting retail media networks' ability to monetize. Search volume is expected to drop 25% this year as AI chatbots capture market share from traditional search. With retail media search spend projected at $38 billion in 2025—where search ads comprise 60% of spending—the shift threatens retailers' advertising revenue. Industry experts acknowledge this as a significant disruption requiring retail media networks to evolve their operational models rather than face extinction.

Read at Digiday