Unleashing commerce media: How ad profits fuel e-commerce growth

Summary

Advertising has become essential for e-commerce growth, with Amazon and Walmart as prime examples. Amazon derives 68% of its profits from advertising, generating $46.9 billion in 2023, with high margins allowing reinvestment in lower prices, distribution, and innovation. Walmart generates 12% of profits from Walmart Connect, equating to $3.3 billion annually, which would require building 1,270 new stores to match.

Commerce media delivers high margins (70-90%) without heavy capital expenditure. Success requires balancing user relevance (increasing CTRs sixfold), advertiser results (measurable outcomes), and profit reinvestment into customer acquisition, site experience, and supply chain. Organizational commitment includes deciding between in-house or third-party ad tech, aligning internal workflows, and updating go-to-market strategies.

The potential for $20 million profit per $1 billion GMV makes commerce media transformative for any retailer.