Retail media search in 2025: Balancing sponsored ads with the customer experience

In 2025, there will be a stronger focus on performance marketing as advertisers seek to prove their efforts are worth the investment.

• Over half (54%) of US advertisers plan to increase their investment in performance advertising in 2025, according to the Interactive Advertising Bureau’s 2025 Outlook Study.
• Among those, 60% cite pressure to demonstrate ROI as the top reason for the increase.

Retail media search is a highly effective performance marketing tool because it targets shopping environments where customers are considering a purchase.

• Advertisers will spend $39.64 billion on retail media search in the US this year, 63.6% of total retail media ad spend, according to our November 2024 forecast.
• Though that share will decline over the next few years, ad spend will continue to pour into the format.

The key to a successful retail media search strategy is relevancy, according to Andreas Reiffen, co-founder and CEO of retail media platform Pentaleap.

“The question [for retail media networks] is how relevant can you actually make a sponsored product listing?” he said. “Is it a distracting, intrusive ad? Or is it something equally as relevant to an organic search result?”

Consider Amazon. Over two-thirds (67%) of Amazon’s US ad revenues come from search ads, according to our November 2024 forecast.

• 99% of Amazon searches show sponsored products, according to Pentaleap’s H2 2024 Sponsored Products Benchmark Report.
• The ecommerce giant displays an average of 20 sponsored products per page load in various locations across the page.
• Amazon also offers a robust inventory of sponsored ad formats, including in-grid ads, product carousels, brand carousels, and videos.

Despite facing some criticism over its increasing number of sponsored ads, Amazon remains the top ecommerce retailer (and retail media network) in the US, and likely will for years.

But not every network has Amazon’s clout, so they may need to be cautious with their sponsored product ad load.

• Staples increased its sponsored listings coverage 17.2% in H2 2024, the highest increase across the retailers tracked by Pentaleap.
• Still, only 68% of Staples’ searches showed sponsored products.

To provide users with more relevant search results and increase sponsored product ad effectiveness, Staples uses a dynamic approach, integrating sponsored listings directly within organic listings, optimizing placement based on user behavior and contextual data.

Reiffen believes that in a few years, there will no longer be a split between sponsored and organic results.

“It will morph into one feed where sponsored products can rank better than non-sponsored products, and a retailer can control how much weight they give the bids coming from the advertisers,” he said.

However, not everyone is optimistic about the future of sponsored search on retail sites.

“Retail media makes product [searches] worse,” Brian Morrissey, founder of The Rebooting and former president and editor-in-chief of Digiday, said on a recent episode of the "People vs Algorithms" podcast. “It introduces all of the bad incentives that have defined digital media in the commerce experience. Amazon’s gone from an intense customer focus to—if you wade through Amazon these days—it’s a disaster. Everything is sponsored.”

Morrissey doubled down on his theory in an interview, saying retail media search is going wrong in the same way that traditional search did.

• “The search advertising system went haywire because it ceased becoming additive, and it became an extractive ad product,” he said. “And now it’s being brought into a commerce experience.”
• Morrissey’s primary concern is the conflict between commerce and media interests in sponsored search ads.
• “Commerce used to be about putting the product in front of the consumer and getting them to buy it,” he said, but now, retailers are pressured to keep growing their ad revenues, sometimes to the detriment of the customer experience.

The bottom line: While there’s no one-size-fits-all solution, retail media networks that can expand their ad business while maintaining a strong focus on customer experience are more likely to earn the trust and loyalty of both advertisers and consumers.

This was originally featured in the Retail Media Weekly newsletter. For more marketing insights, statistics, and trends, subscribe here.