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10 minutes of expert insights every weekday. Your morning ritual for staying ahead in retail media.
Only 1% of retailer traffic is coming from AI, So What's the big deal?
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[00:00:00] Kiri: I've been ringing the bell about AI disrupting retail media for a while now, and the pushback that I often hear is. Show me the traffic numbers. Show me the amount of traffic going from chat GBT to a retailer [00:00:15] website. And in fact, yes, it's tiny. Less than 1% of website traffic comes from chat GBT.
[00:00:22] So what is the big deal? Well, this is the big deal. That number just measures clicks, and [00:00:30] AI mostly doesn't send clicks. It's informing our decision making industry analyst, Joe Kaus, and malt land wear from Peak ai have been writing about this on LinkedIn [00:00:45] recently, and multi calls it Dark Search.
[00:00:48] AI recommends your brand. The user goes and finds you on Google or even goes to your URL directly. Your analytics call it direct traffic. The [00:01:00] actual source being an LLM gets zero credit.
[00:01:04] So the true effect of AI informed searches and purchases is being completely buried. I recently [00:01:15] joined Destiny Wish on on the Better Advertising Podcast, and we talked about examples of this happening in our own lives, and I think this is gonna resonate with a lot of you today.
[00:01:26] We first start with a little bit of optimism about what [00:01:30] ads in AI could look like and what the advertiser experience could be like. Let's get into it.
[00:01:36] Destaney: I think the part that I am actually really intrigued in, the part that I think maybe people are potentially missing is if OpenAI does things well, they have so much more [00:01:45] context and relevancy than I would even consider Amazon having. Right? And that's what's made Amazon so successful is their relevancy is incredible.
[00:01:52] So conversion rates are inflated. My chat knows everything about me from my blood work to how [00:02:00] I feel about cats to my thoughts on retail media. So like when I ask the question, it gives me a really aligned response. And if we consider the aspect, you know, putting age agent aside how much my [00:02:15] chat, 'cause I use chat, GPT knows about me.
[00:02:17] I would assume I'd be willing to pay those CPMs if I had really incredible conversion rates. Hmm.
[00:02:23] Kiri: Um, fellow Cat ladies of LinkedIn Unite. Yes, yes. I'm here for that. Um, [00:02:30] absolutely, and I think that this is the, the, the question, um, just a quick, just to quickly address the format and the fact that CPMs as of right now, um, I don't think that we take what OpenAI has.[00:02:45]
[00:02:45] Uh, confirmed or announced or started out with, as any That's true. Real indication that that's what ads in Yeah. A in LLMs are gonna look like going forward. I have a wildly [00:03:00] optimistic view, perhaps, that these ad units inside LLMs don't necessarily have to look like what we've become accustomed to with sponsored products and the blue links.
[00:03:11] There is an opportunity. With this [00:03:15] surface too. Uh, provide ad units that are immersive, that are multi-modal, that are much more relevant to the contact to, to our context, as you mentioned. So I think when done in the right way, [00:03:30] ads don't have to be. Disruptive. They don't have to take away from the experience. I don't see an ad on Insta Instagram and think, oh, they're trying to influence me and like get into my mind and like I'm like, it's an [00:03:45] ad and is it something that's relevant to me and interesting?
[00:03:49] Yes or no? And, and I don't really sort of judge the platform for it. It is a free service. Mm-hmm. So I think, um. There's, there's two arguments there. [00:04:00] One is, um, maybe this is a chance for some really great new advertising experiences where we can do virtual try ons with avatars and we can hear about new product drops from [00:04:15] our favorite brands proactively.
[00:04:16] And like, there's so many interesting things that could be done, um, and. And secondly, because of the context, like you mentioned about just how much they know about this, algorithms know [00:04:30] about us, there's also a chance for these ads to be much more relevant to us as well. Miracle Ads is the Ad Tech solution trusted by Rakuten and over [00:04:45] 50 global enterprise retailers. That's because Miracle Ads was built with both three P Marketplace sellers and one P suppliers in mind. Both advertiser audiences demand a seamless advertising journey from [00:05:00] onboarding to reporting.
[00:05:01] Kiri Masters: You can offer everything from sponsored products to video ads all in one solution. Learn more@miracle.com. That's M-I-R-A-K l.com.
[00:05:13]
[00:05:14] Destaney: I [00:05:15] couldn't agree more. And you know, l leaning in on your point of they don't have to be disruptive.
[00:05:21] The word I've been using is I can see an avenue where they start taking up a lot more discovery. If.
[00:05:29] You know, chat [00:05:30] or all of these AI models, uh, start leaning into the advertising experience from a discovery perspective
[00:05:38] in that I am asking chat about my cold and flu, and it just happens to work in the perfect [00:05:45] medication based on my symptoms. And X, Y, ZI will discover new products that way because I'm not going to a platform and typing a very high intent search.
[00:05:56] And I think that could really change how all of the retailers play together, especially when [00:06:00] you have things like the open AI and Walmart partnership where if chat starts driving discovery a little bit like TikTok has and then driving that traffic to Walmart, I think that could be very powerful. What are your thoughts on that?
[00:06:14] Kiri: I. [00:06:15] Yeah, I, I kind of see an opportunity for collaborative bidding model as well between the retailers and brands such that, um, let's talk about like, you know, big, big CPG brands that don't typically have. [00:06:30] Much, um, of a focus on D two C. They're primarily selling through retailers and, and they're happy with that model because it's expensive to ship bags of cat food.
[00:06:40] Um, so to that end, it would be [00:06:45] interesting for. Cat food brand to be co collaboratively bidding with Walmart, with Petco, et cetera, within an LLM, um, for, for a, for a purchase to be made e even if it takes [00:07:00] place sort of over on their, their retailer's app or on their website. I think also what we're, you know, there's, there's a lot of debate and discussion about like.
[00:07:09] A truly a gentech shopping experience within an LLM. And are we gonna be [00:07:15] checking out in, within Chatt BT in Gemini? Yeah. Um, I think eventually we will. Right now the experience is pretty suboptimal compared to using a, a Apple website. But, um, I don't think that we need to get to that point. [00:07:30] Before we start to see some big disruption to how retailer dot coms operate and the um, the data that they're able to collect on search and browse behavior and research [00:07:45] stages, that's actually where a lot of the data comes from to enable.
[00:07:50] Great targeting and interest groups and things like that. So if there's less, um, upfront discovery behavior happening on a retailer.com, [00:08:00] then that takes away the onsite ad inventory and it takes away some of the data signals that they're getting, that they're using to, um, create these audiences for brands to activate against.
[00:08:12] Destaney: I couldn't agree more. Everyone's leaning too [00:08:15] heavily on ag Agentic isn't a great experience, but I don't think that's the disruptive part for right now because mm-hmm. It takes 30 seconds to click the link from my chat, GBT and buy on the retailer site. The part that's been disruptive for me. Is posting a photo [00:08:30] of my cat and saying what food is best for my 50 pound main coon, not actually 50 pounds, but being able to have that high alignment.
[00:08:38] The, the other day I was designing part of the podcast studio and I took a photo of the space and said, can you gimme a recommendations on the [00:08:45] chairs and table that will look best in the space? It gave me 10 links. I'm not going to use it less for discovery because I cannot check out immediately because in my opinion, from all the platforms I've used so far, the [00:09:00] discovery and the context to my design and aesthetic style is so aligned through one app.
[00:09:04] I can then go Apple Pay anywhere else. So yes, agent. It may not be amazing right now, but to your point, it's not. It's a disruptor. It's going to cause it to be a little bit more [00:09:15] seamless and frictionless in the future, but it's really not that high friction to swipe over on my app and push double tap on the side of my iPhone.
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[00:09:23] Kiri: Here's what I keep coming back to. Retail media wasn't just built on the end transaction. It [00:09:30] was built on the whole journey. The browse behavior, the search queries, the research patterns. That's the data that makes offsite retail media valuable and enables onsite audiences to be built if that [00:09:45] activity, that research activity.
[00:09:47] Moves to LLMs. The data advantage erodes for retail media. That 1% traffic figure is a lagging indicator. The influence is already here. We [00:10:00] just haven't built the measurement to see it yet.
[00:10:02]