Advertising has been a driving force behind investment and growth in technology in the past two decades. It drives hundreds of billions in tech revenues. Advertising is the business model of Google  (*), Meta, YouTube, Twitter.

All these relatively new incumbents are being seriously challenged by online retailers. This is the topic of a fascinating article written by Alistair Gray and published by the Financial Times on November the 23rd: “How retailers are reshaping the advertising industry”.

Amazon (*) generated $9.5bn from advertising in the 3rd quarter of 2022. This huge number in advertising has not gone unnoticed and Amazon is being emulated by other online retailers such as Walmart and Tesco. More and more consumers are searching directly on retailer platforms for products. Search Engine like Google* and Social Platform like Facebook are leveraging artificial intelligence and mining users’ data to guess what consumers want. Walmart does not need to guess; they know what their clients are buying and looking for and, importantly, they know when.

According to the Financial Times, online retailers advertising revenues are already twice as large as radio and print combined. Business implications are huge. A new wave of consolidation in retail is on the cards: only big brick-and-mortar retailers have the resource to build an online retail platform. Razor thin margins from retail will be boosted (or not) by higher margin revenues from advertising. The legacy brick-and-mortar retailers with no online exposure are bound to suffer. At the same time, TV networks, Social and Content platforms and search engines fat margins are under threat. 

Once again, technology is reshaping advertising and vice versa.

(*) Deshima Smart Data owns Google and Amazon