Commerce media is hitting its stride from a growth and momentum standpoint, but there’s a flipside to that: As a part of this rapid growth, commerce media is also entering its awkward teenage years — years that, if not navigated responsibly, could set the stage for an ugly transition into maturity. In our industry, we’ve seen this before — most notably in the early, rapid rise of programmatic media.
But commerce media isn’t doomed to repeat the sins of programmatic’s past. With a thoughtful and informed approach, our industry has an opportunity to leapfrog commerce media’s turbulent teen years by stealing the programmatic best practices of today’s media businesses. Let’s take a look at what this means from both a business model and customer experience standpoint.
Avoiding the Pitfalls of the Network Model
In the U.S., ad spend with retail media networks is expected to hit $100 billion by 2026. But commerce media is about so much more than retail. Any business with a direct line to rich first-party data — from travel brands and telcos to rideshare and delivery services — has an opportunity to deliver highly relevant ad experiences in the context of consumer touch points. Some will develop these capabilities internally, while most will do so via partnerships of various shapes. Looking across the entire landscape — retailers, advertisers, publishers, agencies and tech providers — McKinsey expects commerce media to deliver more than $1.3 trillion in enterprise value in the U.S. by 2026.
Much of this value is currently being built around a network model, which poses a number of pitfalls that must be navigated. The word itself — “network” — harkens back to 2004 when digital advertising was exploding in size and scope. Today, that model has evolved into the mature programmatic space we see today, but the path to today’s premium programmatic offerings wasn’t an easy one. If commerce media wants to save itself a lot of growing pains, it should start by avoiding these pitfalls:
- Lack of transparency: Tapping into the network model at play during the early days of programmatic meant giving up a lot of control and visibility in terms of where ads were running and how each ad dollar was being divvied up. For commerce media sellers and buyers today, such opacity should be unacceptable out of the gate.
- Restricted revenue: In the early days of programmatic, ad tech represented a high-margin business — at the expense of publisher margins. Today, the balance has rightfully shifted back, with tech margins coming down as the programmatic channels have scaled. But we’re already seeing this pattern repeat within the commerce media space, with certain partners demanding the lion’s share of each dollar spent. That’s a pattern that needs to be circumvented before it takes root.
- Single points of failure: In the early boom days of programmatic, there were a lot of busts as well. When programmatic players folded, the clients who had put all of their eggs in a single basket found themselves in precarious (and sometimes unrecoverable) positions. Commerce media players can avoid a similar fate by focusing on reputable, scaled partners and ensuring they work with several, not just one. This also encourages marketplace competition.
- Preventing data leakage: First-party data is extremely valuable to commerce companies, and they must ensure their data is secure within the supply chain in order to maintain their competitive advantage. Loss of data security is not an acceptable price to pay to play within the commerce media space.
Avoiding Customer Experience Pitfalls
In the quest to avoid the business model pitfalls of programmatic’s early days, let us not forget the other side of the coin: consumer experience. We should remember that, unlike with many content publishers, advertising is not the primary revenue driver for commerce companies; selling goods or services is. It is therefore even more important to preserve the experience of the customer.
Here are a few sins of the past that we still have the opportunity to avoid in the commerce media space:
- Clutter: As the quick wins of the early programmatic space waned, publishers and providers sought to make up for it in volume — volume in the form of web pages and experiences cluttered with far too many and far too intrusive ads. Commerce media players best not follow suit.
- Native ad confusion: Native advertising represented a new wave of growth in the programmatic space, but it took a while for the industry to collectively adopt standards for clear disclosure of native ad experiences. That’s something commerce media players need to lock down out of the gate.
- Infrastructure failures: Finally, let us not forget the disruption and lag that can come alongside dramatic shifts in tech infrastructure. Broken pages, slow or incomplete page loads — these issues plagued publishers in their race to adopt new programmatic platforms, and there’s even more at stake for commerce companies in this onboarding process. Moving deliberately at the right pace, and testing thoroughly with reputable partners, can help commerce media players avoid such disruptions.
- Respecting consumer privacy preferences: Commerce media companies can’t afford to layer on privacy protections for their customers as an afterthought. Particularly given new privacy regulations, they must work with partners who have shown expertise in this area.
As commerce media navigates this period of growth, there’s a lot that could go wrong if immediate volume is prioritized over sustainable business practices and quality consumer experiences. Fortunately, the trials, tribulations and outright sins of programmatic’s early days provide the roadmap for a more seamless journey to sustainable value. By working with trusted partners, moving deliberately and prioritizing transparency, stability and compliance above all else, commerce media players can save themselves — and their advertisers — a whole host of missteps on their path to maturity.
Peter Barry, VP of Addressability at PubMatic, has nearly 20 years of experience in digital advertising, He is responsible for PubMatic’s global addressability solutions business as well as its commerce media offering. Barry has a successful track record in revenue growth, managing large accounts across enterprise verticals and building partnerships. He joined PubMatic in 2016 and spent several years leading PubMatic’s Australia and New Zealand business to be one of the top SSP providers in the region; working with all major publishers, broadcasters and buyers.