Growth Didn’t Vanish, It Became Harder To Monetize: The New Economics Of Retail Media And Commerce

On the surface, 2025 looked like another strong year for e-commerce. Global online sales grew nearly 7%, outpacing total retail. Yet brand sentiment told a different story. Topline growth persisted while margins, predictability and confidence lagged.

That disconnect reflects a market driven more by shifting spend than by expanding demand. The pie grew modestly, but brands fought harder for share as acquisition costs climbed and tolerance for inefficiency disappeared.

This is the core tension: Growth exists, but it’s harder and more expensive to capture.

Retail Media’s Accountability Era

Retail media keeps attracting investment, but its economics have changed. It’s more expensive, more consequential and more scrutinized. Advertising now operates inside compressed margins and must prove incremental contribution to survive.

Cost-per-click (CPC) inflation is rising, but that’s only part of the equation. Media competes with marketplace fees, fulfillment, returns and promotions, all drawing from the same unit-level margin. Despite this, brands cannot step away. U.S. retail media spending is projected to approach $70 billion this year, underscoring its central role. As dependence grows, so do expectations. By CES 2026, the industry was comparing retail media to search and social, demanding transparency, incrementality and disciplined pricing.

Retail media is no longer a growth hack at the edge of the budget. It’s the price of visibility and must be actively engineered and defended in the P&L.

The Economics Of Participation

Nowhere is that tension clearer than on Amazon, one of the marketplaces my company supports. For most brands, it’s simultaneously the highest‑ROI network and among the most expensive. Profitability lives on a knife’s edge as advertising costs rise and marketplace fees accumulate.

Amazon is expanding a unified advertising stack across sponsored ads, display and streaming formats, embedding media deeper into the shopping experience. As algorithms price demand more precisely, bidding advantages erode, closing arbitrage windows and leaving little room to win through tactical optimizations alone.

In that environment, product economics set the threshold for media spend, which declines as fees, ad costs and discounts stack up. Still, campaigns often operate as if that cap were static. Pricing changes and promotions go live while budgets remain unchanged, so dashboards may show a “profitable” campaign that no longer clears the real margin hurdle. Conversely, a campaign that appears unprofitable on last‑touch may generate “Subscribe and Save” or repeat full‑price purchases that offset the losses.

Viewed in isolation, media results tell only part of the story, and brands risk optimizing into the wrong answer. Profitability comes from aligning paid and organic performance, pricing, promotions, inventory and customer value within an integrated model that steers media accordingly.

Why Diversification Doesn’t Eliminate Margin Pressure

Walmart (a marketplace my company also supports) provides a counterweight, though not an escape. About half of surveyed brands already advertise through Walmart Connect. Strategically, it offers a different cost profile, shopper mix and competitive dynamic, backed by AI-driven planning and omnichannel signals. Its pitch is familiar: a full-funnel system linking in-store, online and streaming activity to measurable outcomes.

But expanding into streaming and AI platforms like Gemini doesn’t remove margin pressure. These integrations extend reach into CTV, search and assistants, looping demand back into Walmart’s marketplace. Brands must plug into Walmart’s media and AI ecosystem and accept fees and margin trade-offs that closely mirror Amazon’s. Diversifying platforms changes the path, but not the economics: Participation still comes at a cost, and profitability requires careful orchestration.

AI: Commerce’s Control Layer

Underneath these platforms, AI is becoming commerce’s control layer, deciding visibility, pricing and demand. What began as bid automation and creative testing now determines which products assistants recommend, which ads clear auctions and which offers appear. In effect, AI allocates visibility. As conversational interfaces converge with retail media, the lines between search, merchandising and advertising disappear.

Consumer behavior is following suit. Research shows over half of consumers now use generative AI tools for product and service recommendations. That influence over discovery is extending into monetization. Leading platforms are testing conversational ad formats, and two-thirds of surveyed brands expect AI assistant-placed ads in their media plans.

As these systems mediate product discovery, recommendations and ad visibility, economic guardrails become necessary. Without them, AI tilts toward what is cheapest or most heavily funded rather than what sustains brand economics.

The Funnel Rebalances, Measurement Becomes The Gate

Rising acquisition costs and weaker lower-funnel efficiency are pushing brands upstream. Retail media budgets are shifting toward off-site formats like CTV and streaming to reach shoppers earlier and reduce dependence on expensive last-click tactics. Streaming, now addressable and programmatic, represents more than 44% of U.S. TV viewing time.

On paper, this promises efficiency and reach but introduces complexity. Premium video and streaming inventory carry higher CPMs and softer attribution, as the path from exposure to conversion grows murkier and fragmentation and frequency risk increase noise.

Upper-funnel moves can expand demand, but too often move upstream before evidence supports it or before capturing controllable value at the point of conversion. In dense marketplaces, targeting discipline, budget management and on-site optimization still materially influence unit economics. The opportunity lies in orchestrating the funnel. Upper‑funnel expansion works best when anchored in clear metrics layered atop well‑run mid‑ and lower‑funnel programs.

Disciplined brands don’t trade proven conversion for the promise of reach; they manage reach, relevance and conversion together to compound profitable growth.

Designing Participation, Not Just Campaigns

If the economics of participation have shifted, operating models must shift too.

First, prove incrementality before scaling. Upper-funnel investment should follow evidence of true lift through geo-based holdouts, matched-market testing or clean-room validation rather than assumption.

Second, model the full cost stack. Evaluate performance against referral fees, fulfillment costs, returns, promotional funding and pricing decisions to understand incremental margin, not just media efficiency.

Third, align metrics and teams around profitability. Traditional channel metrics like ROAS often obscure the economics of growth. Widen the lens to contribution margin, lifetime value, total advertising cost of sale and new customer acquisition, with commerce, media and finance teams using shared frameworks.

Earning Growth

Growth now hinges on operational precision and disciplined system design. Its economics demand the same rigor applied to supply chain and pricing.

Meanwhile, commerce is increasingly mediated by algorithms controlling visibility and closed measurement environments, obscuring true performance. As these systems determine what shoppers see and buy, success requires media allocation, pricing strategy and AI governance to operate in lockstep.

Sustainable growth won’t come from chasing shiny channels. It comes from how effectively brands operate within the systems shaping digital demand. Growth is no longer simply bought through budget; it’s earned through discipline, coordination and economic clarity.