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Rahul Chadha (00:00):

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(00:29):

Hello everyone. It's July 25th, 2025. Sarah, Max and listeners, welcome to Behind the Numbers, an e-marketer video podcast made possible by Quad. I'm Rahul Chadha, director of reports editing, guest hosting for Marcus, who is probably touring boulangeries on the Champs-Élysées as we speak. Full disclosure, I don't actually know where Marcus is. I just like saying the word boulangerie. Joining me for today's conversation, we have principal analyst covering retail and commerce media based in New York City, it's Sarah Marzano. Welcome Sarah.

Sarah Marzano (00:58):

Hi Rahul. I'm excited to be here.

Rahul Chadha (01:00):

We also have our senior analyst covering advertising and media out of Philly. It's Max Willens. Thanks for being here, Max.

Max Willens (01:07):

Yo.

Rahul Chadha (01:08):

All right, let's get to today's fact. Hawaii is America's favorite state. I don't think that's a huge surprise. That's according to a YouGov survey from June, which found that the Aloha State had a net favorability of 53%, just narrowly edging out Alaska's 47. Okay, so maybe this says something about me, but I was like, when I heard this, I was like, okay, what's the least favorable state?

Sarah Marzano (01:30):

Yeah, I want to know.

Rahul Chadha (01:31):

So it wasn't actually a state at all. It's Washington D.C. which is a federal district, I believe. So that clocked in at a somewhat embarrassing one percent. And so the lowest favorability rate for an actual state was Mississippi at two percent. So I don't know what this says about people's feelings about D.C. Do you guys have any hot takes on, I guess either Hawaii or D.C.?

Sarah Marzano (01:49):

Wait, Rahul, I like

Rahul Chadha (01:49):

I love D.C.

Sarah Marzano (01:49):

Aren't you in D.C. or you're in Maryland?

Rahul Chadha (01:53):

I'm very close to D.C. I grew up in Maryland. I spent a lot of time going to the Air and Space Museum and marveling at spaceships and airplanes and dinosaur bones for free. So I was kind of surprised.

Sarah Marzano (02:09):

I'm a D.C. fan. I'm pretty shocked.

Max Willens (02:12):

As a native New Yorker, I have nothing but contempt for Washington D.C. but it deserves better than one percent.

Rahul Chadha (02:18):

Oh, really? That's coming in with the New York City D.C. rivalry. I thought that was more like a Boston New York City thing.

Max Willens (02:24):

It's just like it's a company town and the company is the most loathsome horrible thing ever. Anyway, let's move on.

Sarah Marzano (02:36):

But have you seen the cute little houses?

Max Willens (02:38):

W-A-S-H-I-N-G-T-O-N, baby. D.C.

Sarah Marzano (02:42):

So charming.

Max Willens (02:42):

All that stuff is true, but-

Rahul Chadha (02:44):

I hadn't considered the connotation that people have with politicians in Washington D.C. when I was looking at this data. So that makes sense.

Max Willens (02:51):

Oh, that was my first thing that I was thinking of. Just imagining the fake DJ from the Simpsons talking about those clowns in Congress have done it again.

Rahul Chadha (03:02):

How does this stay on top of the news like that?

Max Willens (03:05):

That's right.

Rahul Chadha (03:06):

Well, I could defend D.C. all day, but let's get to today's real topic, which is how retail, media and social are changing search marketing. So retail media search advertising has been a major driving force behind the rise of retail media. We at Emarketer estimate that retail media search spending will top 38 billion this year. Now that still pales in comparison to the roughly 100 billion we expect to be spent on non-retail media search ads. But we still expect the share of all search ad spending that's going to retail media to grow through 2029. That's all based on our forecasting figures. So the question I have for you folks, is retail media replacing traditional search marketing or complementing it?

Max Willens (03:49):

So I think that on a number of different levels, it's complementing it. The simplest way to sort of answer this question is to look at the share of search ad spending overall and right now searches of about 26%. The share is rising. It will be 30% by the end of our forecast period, but we're still talking about something that's considerably smaller than the pie that goes to spending on places like Google. And what's interesting though is what we've seen happen over the last couple of years is retailers, when they were building their RMNs up, definitely hoped that they could kind of turn themselves into the fulcrum of ad spending for their clients by adding offsite search capabilities to their RMNs.

(04:39):

But so far that hasn't really taken off the way that maybe they'd hoped to just under half of the top RMNs in the US offer this is a capability. But the thing is that at the end of the day, as central as a lot of retailers can be to a brand's prospects, the brands are going to do what they can to keep themselves from being completely dependent on the retailers. So I think that even if things get close to 50/50, which I think is probably unrealistic, at least in the near to medium term, there's always going to be an equal if not larger share concentrated on traditional side I think.

Rahul Chadha (05:18):

Yeah, I think just to call out some numbers, I think our forecast says that a retail media's share of search ad spending is going to top out at 30%. It's going to go up from around 26% this year to 30%, but still comparatively small. Sarah, what's your take?

Sarah Marzano (05:35):

Yeah, no, when I was thinking about this, I think we've talked about the fact that retail media's share of search ad spending is growing, but I think it's worth pointing out that the total pie is still getting larger. Traditional search, we're still forecasting to grow every year, so it's not a zero-sum game. But when I was thinking about your question around whether retail media search is replacing or threatening traditional search or complimenting it, I think you could look at this from several different perspectives.

(06:01):

I think for brands and retailers and advertisers in general, this increasing fragmentation within the search landscape can feel quite frustrating and challenging. But I think it's really important to point out for consumers, it doesn't feel like fragmentation. It feels like ease. It feels like convenience. We're able to conduct product searches sort of wherever we're spending time and sort of go on a journey that's tailored to the mindset that we're in. So if I'm on amazon.com doing a very product specific search, I'm able to get to those products very quickly and very close to the point of purchase. Whereas if I'm on TikTok and I'm searching for lip gloss, maybe I'm getting a little bit more of an inspirational upper funnel sort of search result, and then I have the option to check out. So there's a lot of ease for consumers that comes with being able to sort of conduct this behavior wherever they might be. But certainly a lot of considerations for advertisers.

Max Willens (06:59):

I think that that's a really important piece of perspective and it's why you see the search functionality, or I should say the search ad functionality on social platforms growing, too. albeit from a much more rudimentary position because, as Sarah points out, there's kind of information and opportunities to sort of move along a purchase journey basically on every corner of the internet. And so the various platforms are kind of acting accordingly.

Rahul Chadha (07:32):

Yeah. I think I don't know if you guys would agree with this, but is it fair to say that for so long search marketing really meant, even before the rise of retail media, meant just directing a bunch of money to Google and then just kind of going from there? And it seems like now, as I think Sarah validly pointed out, there's an environment now where consumers are doing things that make sense to them, but it just might make it harder for marketers because the nature of search marketing is getting splintered across a lot of different marketing surfaces.

Max Willens (08:01):

Yeah. But for right now, what's interesting is the question of if or how that splintering affects the spending. So at the moment, a lot of the spending on search within retail media is still kind of handled by the parts of a brand's organization that handles either a retail media specific budget or shopper marketing dollars, in some cases national media, but they're not sort of going to the folks that handle their search budgets by and large and saying, "Here's one more thing you have to worry about."

(08:39):

Same thing on the social side. The brands that are investing on TikTok or Instagram or Reddit, they just see the search functionality as another kind of tool in the toolbox or another way to reach that audience. It's not burdening or complicating the jobs of those either in-house teams or agency teams that were handling search. It's still kind of siloed as far as who's responsible for the dollars and the allocations thereof.

Rahul Chadha (09:13):

And so just to take this idea of splintering maybe a step further, in your recent retail media search ad spending report, Max, you note that Amazon will hoover up at least 80% of U.S. retail media search ad spending each year until at least 2027 according to our forecast. But its share of ad spending will actually shrink over that period of time, largely as a result of gains made by Walmart and our "other RMN" category, which is kind just a umbrella term we have for everybody else in the field really besides Amazon and Walmart. So at the same time, you noted in your report that more RMNs are offering ad buyers similar features like keyword targeting and competitive conquesting. So as these competing RMN search offerings mature and closing on parity, does it make sense for marketers to salt more of their search ad buys across a growing number of them?

Max Willens (10:02):

I think it's a very case by case thing. I mean, one of the main reasons that Amazon claims such a gargantuan share is because their on-site scale dwarfs basically everybody else. I mean, I don't have the numbers in front of me, but just imagine the on-site scale that Amazon has and then imagine the on-site scale that Dollar General's websites do, and you can quickly kind of think through like, oh, that's why Amazon is crushing or dominating this market. It's because they're just so much bigger and so much more shopping happens on their O&Os than their competitors do.

(10:36):

But if you're a CPG brand and you have broad distribution, you are probably a little bit heartened that the sort of high-level feature set on the search side is starting to get more uniform across the RMNs because it makes it a little bit easier to compare the efficacy. There's not as much of a learning curve. But when you ask the question of should they be pouring or rebalancing their budgets, I think that they're going to have to see the RMNs or rather the retailers attached to those RMNs grow their on-site scale first. There's only so much on-site grid inventory to buy out on the retail media torso and tail. And so I think that it will take a rebalancing or an adjustment there for the budgets to follow.

Sarah Marzano (11:30):

Yeah, I think one way to look at this is through the lens of the broader question that gets asked within the retail media landscape a lot, which is that there is a reason for being for some of these long tail, mid and small RMNs? And the way I like to counter that is to ask whether or not it makes sense for brands to distribute their goods across hundreds of retailer banners. So I would argue that it does make sense for advertisers to scale their spend further, but that the reason that they're not is not because it's not effective, but because it's not efficient. RMNs are still struggling to make it really easy for advertisers to buy across a broad swath of networks. And the feature parity that you point out in your report, Max, is a crucial sort of component to getting to a level that makes it easier to scale their spend.

(12:20):

Amazon makes up 80% of search ad spending in retail media, but it's only about 40% share of e-commerce. So while I expect it to continue dominating retail media spending in general, I think there's plenty of room for the long tail to catch up a bit, but that's going to be all about just easing the burden that's currently on advertisers who are really struggling to keep up with all the media networks they could be spending across.

Max Willens (12:46):

So to me, one of the things that's really interesting when I think about the world of retail media with and without Amazon and as it pertains to search is one of the reasons that Amazon is so enormous is because it operates a marketplace. And so you have, I think it's maybe upwards of a million sellers on there, and that is also contributing to this quite substantially. And I think if you were to hack into Amazon's headquarters and carve out all of the Amazon specific sellers that really only exist on there and then compare the spending, I think that all the factors we talked about before with respect to their dominant onsite scale, the primacy of Prime and stuff like that, that all certainly plays a role. But I think that the balance might look a little bit different if you carved off all of the eensy weensy Amazon sellers and examined it from that angle as well.

Sarah Marzano (13:51):

Yeah, I think you're absolutely right.

Rahul Chadha (13:55):

I think one of the other parts as we talk about this theme of search splintering is that we've seen a rise in the idea that people are going to social networks too to start their searches or maybe continue them. Sarah mentioned them sometimes more thinking of the upper funnel kind of destination where maybe the purchase intent isn't quite there yet, but people are trying to maybe start their discovery or research process.

(14:21):

In our April survey of Bizrate, we found that about two thirds of people had actually used social search already. Social is making particularly strong gains among younger searchers as well. Our survey found that YouTube, TikTok and Instagram had been used by at least 50% of Gen Z respondents, which was significantly higher, I think, than the other age cohorts we looked at. But I think at the same time, social searches ad offerings do remain comparatively underbaked when you're looking at even retail media. And so I think as social networks try to get caught up, do you expect that substantial search ad dollars will move to these platforms as they try to build out their ad search ad features?

Max Willens (14:59):

I think that for certain verticals, I think Sarah's lip gloss example is great. If you're a beauty brand or a fashion brand, I think there's a strong case for that provided they get closer to feature parity. But the key is, as you noted in the question, is when they build them out, because right now most of these offerings are too rudimentary to be considered peers with a search engine or a retail media network, but that's where we are today. I could see them easily scaling that stuff up over the next couple of years if they think the juice is worth the squeeze.

Sarah Marzano (15:36):

Yeah, I think what was the most surprising to me, I believe from that Bizrate survey when we looked at the top 10 platforms where consumers were conducting product searches, four out of those top 10 were social platforms. That's not new behavior. So I think what's the most surprising to me is sort of how slowly social platforms have moved to capitalize on that. Most of the paid formats available from social platforms are still based on this feed-based browsing behavior and have kind of shied away from showing up to some of those more high-intent search behaviors. And I can see really compelling reasons actually for cross-vertical activations there, sort of depending on what your goal is. I think something like a lip gloss or a beauty category, you have a good bet that if you're able to show up in a product-focused search that you're going to maybe be able to push someone through checkout, especially for the lower cost, lower consideration products. But I think there's plenty of reason even for higher consideration products, think through how they're showing up there.

(16:34):

And I think the onus is really on social platforms to make sure they're providing those tools for advertisers. And it's such an interesting contrast when we talk about how retail media networks are reaching this level of parity with the search ad formats and tools they offer advertisers, but it still feels like really early stages for social.

Max Willens (16:53):

I think that it's just so interesting because a big reason that historically maybe this has happened is that for Google, their whole thing for years and years was just kind of volume rather than depth. So Google is content if you pop open a new tab, run a search for something, find something and click out in 15 seconds. That, to them, is a successful session. The social platforms want the exact opposite. They want you in there looking and looking and looking. And if you turn the search bar, which should be the initial jump off of the diving board into a long session, if you turn that into an off-ramp, it's potentially quite dangerous. But now that so many more of these platforms have turned themselves into, if not e-commerce destinations sort of e-commerce gateways, I think a big reason why they've sort of begun to re-examine this a little bit. And I think that the way that this evolves over the next couple of years is going to be really fascinating.

Rahul Chadha (17:59):

Yeah. So do you guys think, I mean, it sounds like you think that there is probably advertiser demand, but the ad offerings aren't quite there yet.

Max Willens (18:08):

I just think, yeah, and also too, I mean the core offerings of these platforms are just fine. I mean a couple of them have problems or shortcomings here and there, but all the major social platforms ad businesses continue to grow quite healthily with their core offerings. And so I'm sure most of the people that are in charge of monetization there are thinking, what we have is not broken. I don't think we need to really endeavor to fix it. And so any kind of progress on this front I think is going to be quite leisurely.

Rahul Chadha (18:43):

I think you may also make a great point about how important stickiness is for these social platforms. And it does kind of go against their probably business goals to provide an easy off-ramp for a shopper to go convert somewhere else. Although I think with products like TikTok Shop, obviously platforms are trying to capture some of those purchases as well.

Sarah Marzano (19:02):

Yeah, it will be interesting to see how the ad offerings develop in tandem with the social commerce offerings. Social commerce right now, again, like I said, lends itself really well to lower consideration products, things you can buy really impulsively. And as a consumer, I think one of the things that's really messing missing is the level of detail you get with a product detail page on a retailer's website, information about shipping, information about returns. And I think as social platforms hopefully evolve to sort of ease some of those friction points and we see social commerce adoption maybe improve, then we'll maybe see those ad dollars follow.

Max Willens (19:35):

Or AI agents swamp in and gobble up all of this intent consideration and maybe even conversion.

Rahul Chadha (19:45):

Yeah. Well, you got a little bit ahead of me, Max, but you teed me up for my next question, which it is hard to talk about anything in marketing today and leave out the potential disruption that AI presents. We project that only about one billion will be spent on AI search ad spending in the U.S. this year. And I looked up our definition, that actually includes spending on AI services that are offered by Google as well, Google Gemini. But we do expect that figure to skyrocket actually from one billion this year to 26 billion by 2029. So that's pretty stupendous growth rate we're going to see over the next couple of years. But you could argue, as Max mentions, that the more immediate threat posed by AI will come in the form of AI agents that will shop on behalf of consumers, and that could just create a dynamic where they're completely sidestepping search ads. Do you think the rise of these AI agents will do things like shop on behalf of consumers will make paid search advertising obsolete?

Max Willens (20:39):

So there's a couple of ways of looking at this. The first is that AI shopping or consumers are already really drawn to the idea of using AI to help them shop. It's a top 10 most common activity in terms of people and how they use gen AI. But it's also still, I mean, even though as you point out, Rahul, this is something that comes up every time any set of people in media and advertising get together and start talking to each other. But the reality is that gen AI is still kind of a nascent thing. The share of the U.S. population that uses gen AI is going to remain in the minority through 2029.

(21:24):

So certainly over the next several years, this is not a clear and present danger, but I think specifically in the context of retailers, there is a version of events where AI agents kind of kill this golden goose. I mean, even if the retailer specific offerings like Sparky or Rufus start including sponsored listings in their replies to users, it's never going to be at the same density or scale that you see in a SERP. And so even if you can really, really raise the CPCs on those units that appear in those conversations, it is potentially something that could really damage this income stream for a lot of retailers.

Sarah Marzano (22:11):

Yeah, definitely. No, I look at it as yet sort of another surface that retailers and advertisers have to sort of contend with when it comes to how consumers are conducting the research and consideration phases of their purchase journeys and it being maybe even something that evolves into something akin to another off-site channel that retail media networks are trying to sort of work with the way that they're increasingly offering advertisers Google search ad formats that they buy through the retailer, and then you have all kinds of margin implications that follow through.

Rahul Chadha (22:44):

Yeah, I think the running through line of this story for me when I was even just researching this podcast is just how complicated search advertising is getting, how many different spaces advertisers need to consider and their strategies, which I think were comparatively simple in the past, are just going to keep getting increasingly complicated. That's all we have time for today. I just want to say thanks to Sarah for being here.

Sarah Marzano (23:05):

Thanks for having me.

Rahul Chadha (23:06):

And thanks also to Max for joining us.

Max Willens (23:08):

It was a pleasure, Rahul. Thank you.

Rahul Chadha (23:10):

And thank you to the editing crew and everyone for listening in to Behind the Numbers, an e-marketer video podcast made possible by Quad. Subscribe and follow us to hear about new episodes and give us a rating and review if you have time. Tune in on a Monday as Marcus returns, thank god, and addresses the question, what is the missing link in omnichannel marketing? Happy weekend, everyone.