Byron Sharp makes a good case in this article here that search is more like shelf-space than it is like advertising and applies it beyond the typical discussions around paid search to the growing domain of retail media. He is right that we see a growing sense among our clients that retail media is becoming something you have to do and no longer optional. Retail media budgets being protected by the sales division; they are becoming sacrosanct. That seems very much like slotting fees – like “rent” which means all downside if you don’t have it and not a whole lot of upside if you do.
Let’s remind ourselves what it means for something to be operating like shelf-space or distribution. We expect distribution elasticities to be near 1, i.e., a 1% increase in distribution results in a 1% increase in volume. This article suggests that, in the not-too-distant future, we should expect the same from retail media. In fact, the article suggests a kind of parallel e-commerce universe where search functions like physical distribution and retail media displays function like physical in-store displays. Both operate within the fairly narrow confines of people who have either already decided to buy your product or category and just need a little nudge over the finish line (search), or those who already have your brand in their consideration set and just need a little reminder that you still exist and are relevant (display). This would argue that retail media is on its way to becoming a promotion variable like traditional trade and should be treated like trade in an MMM model.
Could online search and display ever function as something more? It seems certainly true that retail media is operating at the bottom of the funnel. But just like the world of in-store promotions, there are a lot of ways that the marketer might be influencing and changing behavior even at that last point. A key factor here is “has the decision already been made to buy in the category for the occasion or motive?” At one extreme, if we look at data from the restaurant/QSR category, the decision has already been made prior to the search, and the consumer is using search to find out where the nearest store is or to check the menu listings or prices. In this case, when we look at modeling search, we see high correlations between search and sales, but we can’t say that search caused those sales. It’s more likely that the search happened as a consequence of already making the decision to buy. In order for this variable not to have too much spurious power in the MMM model, we have to transform search to a metric like “YoY change in search” to attempt to remove the endogeneity.
In CPG, with its relatively low risk and large variety, a lot of fine-tuning behaviors are possible prior to the purchase which opens up a wider range of possibilities for the role of search. You may have decided to buy in the category, but not yet chosen the brand; you may have a strong preference for the brand but do not think of it for this occasion. Or you may be totally unaware of the product – like a new product – and encounter it for the first time on the shelf or on the site. This means that there may be a spectrum where search operates beyond simple distribution by nudging you in a direction you might not have gone. It is part of a final information-gathering or choice-confirming step prior to purchase. From a marketing point of view, it is helping you sort out the connection between what is available in the market and the fit of that to the motive in the purchase occasion. In that admittedly narrow spectrum, there is still room for some creativity and influence.
Incidentally, the belief in even a small spectrum of ambiguity in search is why we prefer to use impressions rather than clicks when we model. Many agencies want us to use clicks rather than impressions because that is “what the client pays for.” However, we prefer impressions precisely because it takes a step back from the point of purchase to the position where you might be “nudged.” The lift in a model then captures the tactic of nudging rather than treating it purely like distribution.
Search is not the only tactic that is claiming to be synonymous with distribution and that needs to be “always on.” There are a number of third-party channels and services emerging who are carving out their own specific routes to unique distribution (think Cardlytics, Connexity, DoorDash, or even Instacart); some of them don’t track impressions at all and claim to have isolated their own impact perfectly for purposes of ROAS. But there is always an awareness or behavior that comes before using an app, and a surprising amount of wiggle room to suddenly buy something different even the lowest part of the funnel.
