Reimagining Retail: The commerce media companies to watch and the emergence of the financial and travel networks

Audio by Sara Lebow, Sarah Marzano, and Arielle Feger | Nov 6, 2024

Episode Transcript:

Sara Lebow (00:02):

Hello, listeners. Today is Wednesday, November 6th. Welcome to Behind the Numbers: Reimagining Retail, an eMarketer podcast. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebow. Today's episode topic is a check-in on commerce media.

(00:25):

Before we check in, let's check in with our guests. Joining me for today's episode, we have two of our analysts. First up is Sarah Marzano. Hey, Sarah.

Sarah Marzano (00:34):

Hi, Sara. Thanks for having me.

Sara Lebow (00:35):

Thanks for being here. Also, here is Arielle Feger. Hey, Arielle.

Arielle Feger (00:40):

Hi. I'm ecstatic to be here.

Sara Lebow (00:43):

Do you use a thesaurus every time you come on to decide what you'll say next?

Arielle Feger (00:47):

No, no. That one was off the top of the head.

Sarah Marzano (00:50):

Wow. Brilliant.

Sara Lebow (00:51):

Off the dome. Okay, what's-

Sarah Marzano (00:53):

She means it.

Sara Lebow (00:54):

What else do you have to say off the dome as we jump into our topic? Okay. Topic today, commerce media, which I feel has expanded even since we last talked about it in July or maybe June. Let's start up with a recap for those of us who have forgotten. So Sarah, I want you to tell me what commerce media is and how it differs from retail media.

Sarah Marzano (01:18):

Sure. So I think if everyone, including our audience will bear with me, when we look to define commerce media, I think it can help by sort of grounding us in the definition of retail media and going from there. So, when we talk about retail media, we're describing the practice of retailers selling ad inventory that leverages that retailer's first party purchase data for ad targeting.

(01:41):

Retail media advertising can appear on retailers owned and operated digital properties. So, think their website or their app. It increasingly can appear in their physical stores, or it can appear off site. So, think advertising that appears across the open web, but again, uses that retailer's first party data to target who sees those advertisements.

(02:02):

And this is an ad channel that we watch really closely here at eMarketer, it's really taken off. We're forecasting spend on retail media advertising to come in north of 54 billion this year, and it's on its way to be nearly $130 billion as an ad channel by 2028. Now, when we talk about commerce media, we're broadly describing the practice of advertising that leverages first party purchase based data, powered by any company who owns that data and the relationship with the consumer, but whose core business is not media. So, all of retail media is commerce media, but not all of commerce media is retail media.

(02:43):

I'll stop talking in a second, but I think what's helpful for rounding this out and bringing it to life, is to name some of the specific examples over the past 12 months that we've seen in terms of commerce media network launches. So, we've seen companies from United Airlines to PayPal and JP Morgan and Chase, all among those who have announced commerce media network launches over the past 12 months. And with that we've seen some distinct cohorts emerge, financial media networks and travel media networks.

Sara Lebow (03:12):

Okay. Michael Scott explained this to me like I'm five years old of this.

Sarah Marzano (03:18):

That was it.

Sara Lebow (03:19):

That was it? Oh, very smart five-year-olds. Would be that commerce media uses first-party purchase data to target ads. We've been focused on retail media, which is retailers doing that. Now we're focusing more on the other players doing that. You mentioned airlines, other travel retailers, heard also about gyms. Planet Fitness is one of them. Are there any other industries that are also captured within commerce media?

Sarah Marzano (03:47):

Yeah, I mean I think there's other companies from other verticals that have sort of announced. You mentioned gyms, you mentioned Planet Fitness. Cars.com announced a commerce media network, I think it was late last year or early this year. The other cohort I want to mention is commerce intermediaries, companies like Uber and DoorDash and even Instacart who sort of play across verticals, and sit at this sort of appealing intersection between the consumer and the business that they're purchasing from, which is something that we're tracking quite closely as well.

Arielle Feger (04:23):

Yeah, it seems like really if you have a customer and you've access to their data and you have some kind of digital or physical property, that's pretty much all you need to start a commerce media network. So it's really exciting to see how these are all popping up, from financial, to travel, to gyms. It seems like the sky's the limit.

Sara Lebow (04:48):

I love your cookbook to starting commerce media.

Sarah Marzano (04:51):

Yes, the ingredients.

Sara Lebow (04:52):

I love that. Okay, so let's zoom in on financial and travel media. Travel and financial media are both really small. Travel comes in a little bigger than financial media. Why is that?

Sarah Marzano (05:05):

Yeah, I think something that is sort of worth mentioning about travel media advertising is that it's not new. We've seen a wave of innovations. We've seen a wave of new companies entering the space, but the online travel agencies and search aggregators, the Tripadvisor's, the Expedia's have been running advertising on their websites for quite some time. And if you think about it, there's an advantage there because these travel companies work a lot more like retailers than financial services.

(05:39):

So they have owned and operated digital properties that consumers see as purchase destinations. There's a fair amount of search activity that can be monetized, and there are effectively endemic advertisers that are working with these OTAs and travel aggregators, looking to drive direct sales. So think hotels, car rental companies, and even airlines who are looking to cut through the noise with paid listings, that bring them to the top of a consumer's consideration set.

(06:07):

So travel is working off of a larger base when it comes to growing travel media network activity, and that really sets them apart from financial services. There are interesting sort of profiles that are emerging as you think about airline companies and ride hailing apps entering the space. But it is just again worth mentioning that travel media advertising in general, is not new.

Sara Lebow (06:30):

Yeah. I mean, some of them even work kind of like intermediaries, which is probably one of the reasons Uber is in talks to buy Expedia.

Sarah Marzano (06:37):

Absolutely right. And I think that one is a super fascinating thing, especially when you think about the fragmentation of travel purchase journeys and the opportunity to knit those things together.

Sara Lebow (06:46):

Financial and travel media make up a really slim share of commerce media. Financial media will total $350 million in the US in ad spend this year, travel will total 2 billion. For comparison, retail media will total 55 billion. So we're looking at a lot smaller numbers with travel and financial media than we are with retail. How much potential do these smaller industries have?

Sarah Marzano (07:13):

Yeah, so I think it's hard to answer this question succinctly, which maybe is the trend of me speaking for this whole episode. But I think there is certainly quite a bit of potential, but it looks really different depending on what vertical you're talking about. Then there's a ton of variance even when you dig into those verticals. So if we think about financial media networks, which you mentioned is quite small currently, but we know is sort of set to grow at a really rapid clip. It's set to double between this year and next.

(07:42):

Financial media networks have a ton of potential because they have a really big scale of data that captures consumer purchase activity. They're able to bring information about what consumers do across merchants, which is also an advantage that financial services companies have over their retail counterparts. Retailers have really deep knowledge about consumer behavior within their four walls, that gets really granular. But financial media companies or financial services companies can tell you retailers a consumer is shopping at.

(08:17):

The key challenge I think that's facing financial services as they look to get their media networks off the ground, is the scale of traffic that they're able to bring to their owned and operated properties and also the mindset that consumers are in. So if you think about someone who's opening up their banking app, what are they there to do? It's going to look really different than someone that's opening their Amazon or their Walmart app, in terms of the purchase mindset they're going to be in and even their receptiveness to being advertised to.

Arielle Feger (08:48):

Yeah. I think networks like Klarna have an advantage here because they've been building out kind of their own shopping experience within their app for a few years now. And so they've already got this kind of ecosystem where customers are going, they're looking for things. I think they've introduced a few kind of AR things where you can take pictures of something in the real world and they'll link to it on their app. So I think that's a really good example of a financial services company starting to change the behavior of consumers.

Sara Lebow (09:25):

Yeah.

Arielle Feger (09:25):

And really start putting them in the shopping mindset as they're looking on their app.

Sara Lebow (09:32):

Yeah. And that was really intentional of Klarna. They tried to, successfully I think, transform their identity from purely a buy and now pay later player, to a shopping platform. Which I think brings me into this next thing I've been wondering, which is how consumer behaviors on the whole are going to change as commerce media becomes a thing? And we can start by looking at financial media networks. Is Chase going to try and transform its identity from a banking, financial services platform, to a platform on which I can also shop?

Arielle Feger (10:07):

I mean, I think it's probably going to be less of that, at least in the short term, and I think it's going to be more about very strategic rewards and promotion. I think it's going to be about partnerships. I think it's going to be about, again, trying to target customers with that data that they have, with very, very specific actions in mind.

Sarah Marzano (10:29):

Yeah. I think there's a delicate balance that needs to be achieved when we think about the fact that these companies core business offerings need to be sort of acknowledged. These companies need to be very careful not to alienate their consumers who are coming to them to accomplish something very specific. And I think that speaks to the challenge that we see in advertising in general. How can you introduce advertising into an experience that doesn't feel disruptive or causes friction and frustration, but instead feels additive to the experience?

(10:59):

And I think you've hit the nail on the head in terms of the challenge that is up against a company like Chase, who is going to be contending with the fact that their users aren't necessarily coming to their owned and operated properties to shop. So how do you create appeal by inserting advertisements into this experience?

Sara Lebow (11:18):

Yeah, and I think that's something where travel media has an advantage in terms of seamlessness. First of all, when you travel, you're, I don't know, not expecting it to be a great experience all the time during the actual traveling. So ads aren't going to be really new to that experience. But something I have been noticing more of, that's changing my behavior, is Wi-Fi has been free more and more on flights. United has a deal with Starlink to deliver this.

(11:45):

And I think the reason behind this is airlines have realized that they can boost revenues more off of you, a consumer seeing ads while on their flight through their media network, than you paying a la carte for Wi-Fi.

Sarah Marzano (11:59):

Yeah, I think the United and Starlink deal is something that I found to be very exciting. I think everyone who's ever flown on a plane can relate to the fact that while Wi-Fi is often available, it's certainly not guaranteed. I always feel like it's such a sort of shot in the dark in terms of whether or not my Wi-Fi is going to work.

(12:16):

And if an airline can effectively sort of transform that experience to where you can take that time that you have where you're sort of stuck in that seat and know that you're going to have Wi-Fi, that opens up a ton of doors for relevant advertising that can take advantage of this captive audience.

Arielle Feger (12:33):

Yeah. And as a consumer, I'm more than willing to sit through 30, 60 seconds of ads to get free Wi-Fi. I think it's just consumers are not going to really think twice about it so I think it's just a great opportunity.

Sara Lebow (12:48):

I mean, on that flight, you're already sitting, so you might as well sit through some ads.

Arielle Feger (12:53):

Exactly.

Sara Lebow (12:53):

I think that this is going to change flying a little. I don't know if it's for the better. In my opinion, it is. I think we will see more content deals on which airlines can serve ads. I think that we'll see more screens in Ubers and just more integration between ads and travel.

Arielle Feger (13:13):

Agreed.

Sara Lebow (13:14):

United is definitely the company that I'm watching right now. I was at New York City advertising Week last month, I think, and they were all over the place. They were certainly trying to get their name and their product out there as a very new ad network, and I think they were succeeding. I mean, they really went from zero to a hundred in very little time in building that ad network.

Arielle Feger (13:39):

Yeah, I agree. I feel like it went from, "Oh, United's introducing a media network." To, "Oh, they're everywhere now and they're partnering with everyone." So I agree that they're definitely one to watch out for. For me, I'm definitely keeping an eye on the intermediary space. I just saw DoorDash has started a partnership with Lyft, which I think is really interesting. DoorDash giving Lyft customers the discounts on delivery, and Lyft giving DoorDash customers discounts on rides.

(14:14):

I think that's just a wonderful partnership and great data sharing opportunity. DoorDash doesn't have the location data that Lyft does, and Lyft needs the kind of more restaurant, grocery delivery data that DoorDash has. So I think that's just going to really strengthen both of their ad networks.

Sarah Marzano (14:35):

Yeah, I completely agree with you. I think one of the things that I come back to often when I think about the travel media opportunity, is just how fragmented travel purchase journeys are in general, and all of the opportunity that will be opened up with creative and innovative partnerships. If you think about the fact that DoorDash has access to these really hyper-localized markets, and then Lyft has information on where customers are going to be. If you think about knitting all of those pieces together, there's a lot of opportunity.

Sara Lebow (15:04):

DoorDash, Lyft feels to me like the Venu Sports of intermediaries. And if that reference is too in the weeds of the advertising world, what I mean by that is Venu Sports, Venu Sports. I don't know if we have a pronunciation agreement on it, is that sports network that a bunch of non-Amazon companies are trying to get off the ground as a package between them to watch sports on, to stay competitive against Amazon as they enter sports.

[NEW_PARAGRAPH]DoorDash and Lyft, I think you might see as competitors. They are both intermediaries, but Uber is the big player in this space, so is Instacart. And so it makes sense that these two businesses with different but similar models would be partnering.

Arielle Feger (15:55):

Agreed.

Sara Lebow (15:55):

Sarah, do you have a company that you are watching right now?

Sarah Marzano (15:59):

Yeah, I am going to be watching PayPal quite closely. So in May, PayPal brought in Mark Grether to run its ads business. He was previously the VP of Uber advertising, and he gets a ton of credit for the way he built and really rapidly accelerated Uber's ad business. So PayPal announced the launch of their media network several months ago, but we've just started to see some announcements start trickling out that sort of outline what Mark's vision is going to be.

(16:32):

So some of the things that stood out to me from their recent announcements, or specifically one of the things that stood out to me is that starting next year, PayPal is going to sell ads on the websites of merchants who leverage their payments' technology. And their announcement outlined two examples of how this could work. First is as an iteration of non-endemic advertisements. So think an ad for an advertiser who is promoting a product that's not for sale at that retailer that might appear on a post-purchase confirmation page somewhere "safe" where it's not going to interrupt the purchase journey. And for me, this really emulates some of the offerings that we see from RockED and Fluent within the non-endemic digital advertising space.

(17:14):

But the second is going to be selling ads directly to brands who are sold at multiple retailers as a lever for increasing that brand's share of sales at a particular retailer. And in this case, I imagine the brand gets the benefit of PayPal's visibility and across merchant purchase behavior. While I presume the retailer will get a cut of the ad revenue. And for me, this is really fascinating because it sort of directly addresses some of the limitations that we were discussing earlier in the episode, that financial services companies are facing.

(17:46):

So thinking through the limitations of advertising solely on owned and operated channels, where you might not have the traffic or if you do have the traffic, it's not as purchase oriented as it would be on a retailer's website. While making great use of the distinct advantage that a financial services company has, which is that cross-merchant data.

Sara Lebow (18:05):

So does this look like Skechers, for example, that wants to advertise at a Foot Locker and a DSW, buying ads from PayPal directly so they can place ads on both of those sites without going through another party?

Sarah Marzano (18:21):

Yeah, absolutely. And I think it's going to be a matter of whether they want to. I think there's some interesting inventory implications, depending on where they want to increase their visibility or some location-specific implications as well. Just being able to get really strategic about where they're boosting sales, at which retailer and when. And again, being able to leverage the data that PayPal is able to bring about a particular consumer who's going to see that ad, and how sales are looking from a cross-retailer perspective.

Sara Lebow (18:51):

PayPal owns Venmo. Venmo has so much data. I wonder if in the future we're going to see PayPal do anything with Venmo, serving ads on Venmo, serving ads through data on Venmo, finding ways to codify the different emojis people put in their Venmo payments as descriptions of what they are buying to get actual insights from it. I feel like that's maybe more of a five years down the road thing, but I think it's possible.

Arielle Feger (19:23):

I think it's possible too.

Sara Lebow (19:24):

Ads on Venmo. Is that my hot take? Does Venmo have ads already?

Arielle Feger (19:28):

I don't know. I don't think so.

Sarah Marzano (19:29):

I don't think so either. I think PayPal is absolutely going to be considering what they can do to activate on the data that they have thanks to their visibility into Venmo.

Arielle Feger (19:40):

Kind of a top line thought tying this all together.

Sara Lebow (19:44):

Love that.

Sarah Marzano (19:46):

Please, thank you.

Sara Lebow (19:46):

Give it to me.

Arielle Feger (19:49):

We've talked a little bit about the different strengths and weaknesses of the different networks. Financial networks really don't have the consumer behavior part locked down. Retail media networks don't necessarily have the... They're really stuck within their four walls. I think... This is my very loose prediction.

Sara Lebow (20:12):

Yes.

Arielle Feger (20:12):

That these are all going to start to kind of form a patchwork of ad strategy, right? We're going to see brands kind of dipping their toes in here, dipping their toes in there to really, like Sarah said, be able to maximize the effectiveness of each of those networks. So I'm really excited to see how this all starts to pan out.

Sara Lebow (20:32):

I think you're definitely right, and I think that what we'll see more of also is more and more CTV integration, which is a whole conversation that we don't have time for right now. But when we're talking about Planet Fitness, when we're talking about United, when we're talking about places that people are watching TVs, even at gas stations, you're going to see companies like Netflix wanting to make deals so that their content can be exclusively available in certain places.

(20:57):

Those will also be deals that have to do with ads and data. You're going to see companies like TikTok, finding ways to serve their content at gas stations, we're going to see everything sort of merge together.

Arielle Feger (21:11):

It's all becoming one.

Sara Lebow (21:13):

Okay. That is all we have time for today, so thank you so much for being here. Thank you, Sarah.

Sarah Marzano (21:19):

Thanks so much for having me.

Sara Lebow (21:20):

Thank you, Arielle.

Arielle Feger (21:23):

Thank you.

Sara Lebow (21:23):

Thank you to Victoria who edits the podcast and travels all the way from New Jersey to do it. Does that make sense, 'cause like travel?

Arielle Feger (21:31):

Sure, yeah.

Sara Lebow (21:32):

We'll be back next Wednesday with another episode of Reimagining Retail, an eMarketer podcast. And tomorrow, join Marcus for another episode of the Behind the Numbers Daily.