How Digital Media Affects Ad Spending

Ad spend today does not equal revenue today. In all but the most impulse-heavy, high-intent, commoditized industries there is a phenomenon known as "latency." Some other similar terms (not interchangeable but it happens): • Consideration window • Ad stocking • Waterfall effect Basically, when you put an ad out into the world and someone sees it, they don't immediately click and go buy. That happens incredibly rarely. In fact what USUALLY happens is that you build up a compound amount of reach and frequency (ad saturation) in a target audience, and those people then EVENTUALLY move to being "in market." Sometimes this is called the 95/5 rule, in which only 5% of customers are actually ready to buy a thing at any given time. The other 95% might eventually but not right now. I work with a lot of brands that want to manage ads like this: • Track sales daily (or worse, hourly) • Track ad spend on that SAME day (or again, hour) • Make a million micro-adjustments to try to stay "profitable" This indicates that they believe that there's just a nozzle of ad spend that directly translates to revenue in real time, like a DJ mixing bass levels. That's not: 1) How marketing works 2) How customers work 3) How the ad engines work We know this because of the thousands of models and hundreds of incrementality tests we've run this year, we see that there's usually a slow ramp up of total incremental effect, and a similarly slow ramp down (which usually takes weeks if not months). The curve looks kind of like a flattened out bell curve with a plateau in the middle. If it was just immediate spend translates to immediate revenue, then marketing would be easy. The sales you're looking at in Shopify today are accumulated over the last multiple WEEKS (if not MONTHS) of cumulative effect on that target audience. In other words -- you could turn off all ads today and you wouldn't see much of an immediate impact. Tomorrow you'd start to see it, but the effect would not be fully realized until a full consideration window (the fastest I've seen of this is about a week). So, if you're managing your media by trying to game the system up and down every hour or day hoping that you'll "get more efficient," you're wasting your time. #attribution #incrementality #measurement #ecommerce

🤔 Are you actually driving incremental sales with retail media, or just throwing money away? Here's a fascinating test I ran recently that might make you rethink your advertising strategy... The Test: I doubled ad spend on a retailer's .com during an off-peak period (to avoid promotional noise). The hypothesis was simple: more ad dollars = higher digital penetration. The Reality? 👇 Despite 2x spending, digital penetration barely moved. This led me to ask: Are we just reaching the same customers who would have bought anyway? Here's what I learned: 1/ ROAS isn't everything 📊 High ROAS might look good on paper But if digital penetration isn't growing, you might be targeting existing customers 2/ The Digital Penetration Formula 📈 Digital Penetration = Online Revenue / Total Revenue Track this monthly. If it's not growing with increased spend, red flag 🚩 3/ Why This Matters 💡 You could be wasting the budget on customers who'd convert anyway Better to reallocate the budget to times when you can actually drive incremental growth Look beyond surface-level metrics My recommendation? If you see flat digital penetration despite increased spend, consider pulling back and reinvesting during periods where you can drive true incremental growth. Coming soon: I'll share another interesting test about measuring true incrementality in retail media. Stay tuned! #RetailMedia #DigitalMarketing #eCommerce #MediaStrategy

Just ahead of Shoptalk, Sarah Marzano's new report shows that while 80% of retail media ad spend goes to retailers' own websites & apps, the big growth is in off-site retail media. Indeed, in 2025, off-site ad spend will grow at almost 3x the rate of on-site as retailers look beyond their own digital properties to offer new opportunities for advertisers. Sarah writes in the intro to her report: 𝘙𝘦𝘵𝘢𝘪𝘭 𝘮𝘦𝘥𝘪𝘢 𝘩𝘢𝘴 𝘣𝘦𝘦𝘯 𝘥𝘦𝘧𝘪𝘯𝘦𝘥 𝘣𝘺 𝘢𝘴𝘵𝘳𝘰𝘯𝘰𝘮𝘪𝘤𝘢𝘭 𝘨𝘳𝘰𝘸𝘵𝘩, 𝘣𝘶𝘵 𝘴𝘶𝘣𝘥𝘶𝘦𝘥 𝘳𝘦𝘴𝘶𝘭𝘵𝘴 𝘧𝘳𝘰𝘮 𝘪𝘯𝘥𝘶𝘴𝘵𝘳𝘺 𝘩𝘦𝘢𝘷𝘺 𝘩𝘪𝘵𝘵𝘦𝘳𝘴 𝘩𝘪𝘯𝘵 𝘢𝘵 𝘵𝘩𝘦 𝘭𝘪𝘮𝘪𝘵𝘢𝘵𝘪𝘰𝘯𝘴 𝘰𝘧 𝘰𝘯-𝘴𝘪𝘵𝘦 𝘮𝘰𝘯𝘦𝘵𝘪𝘻𝘢𝘵𝘪𝘰𝘯. 𝘔𝘢𝘯𝘺 𝘳𝘦𝘵𝘢𝘪𝘭 𝘮𝘦𝘥𝘪𝘢 𝘯𝘦𝘵𝘸𝘰𝘳𝘬𝘴 (𝘙𝘔𝘕𝘴) 𝘢𝘳𝘦 𝘦𝘺𝘦𝘪𝘯𝘨 𝘵𝘩𝘦 𝘰𝘱𝘦𝘯 𝘸𝘦𝘣 𝘢𝘴 𝘢𝘯 𝘰𝘱𝘱𝘰𝘳𝘵𝘶𝘯𝘪𝘵𝘺 𝘧𝘰𝘳 𝘴𝘤𝘢𝘭𝘦𝘥 𝘨𝘳𝘰𝘸𝘵𝘩, 𝘣𝘶𝘵 𝘴𝘶𝘤𝘤𝘦𝘴𝘴𝘧𝘶𝘭𝘭𝘺 𝘪𝘯𝘵𝘦𝘨𝘳𝘢𝘵𝘪𝘯𝘨 𝘳𝘦𝘵𝘢𝘪𝘭𝘦𝘳 𝘥𝘢𝘵𝘢 𝘰𝘧𝘧-𝘱𝘭𝘢𝘵𝘧𝘰𝘳𝘮 𝘸𝘰𝘯’𝘵 𝘩𝘢𝘱𝘱𝘦𝘯 𝘰𝘷𝘦𝘳𝘯𝘪𝘨𝘩𝘵. When she writes "𝘴𝘶𝘣𝘥𝘶𝘦𝘥 𝘳𝘦𝘴𝘶𝘭𝘵𝘴 𝘧𝘳𝘰𝘮 𝘪𝘯𝘥𝘶𝘴𝘵𝘳𝘺 𝘩𝘦𝘢𝘷𝘺 𝘩𝘪𝘵𝘵𝘦𝘳𝘴," that largely means slowing growth at Amazon which takes in 3/4 of all retail media ad spend. Indeed, Amazon has seen a decline in growth in advertiser spending on the platform YoY (although to be clear, Amazon's YoY ad revenues are still growing by double-digits every quarter). Given the different growth rates of on- vs. off-site ad spending, virtually all players—from Amazon to Walmart all the way to the long tail of RMNs—are eyeing off-site opportunities including CTV, social media and third-party publishers. For more, clients can check out the report on 𝗥𝗲𝘁𝗮𝗶𝗹 𝗠𝗲𝗱𝗶𝗮’𝘀 𝗢𝗳𝗳-𝗦𝗶𝘁𝗲 𝗜𝗺𝗽𝗲𝗿𝗮𝘁𝗶𝘃𝗲: 𝘙𝘔𝘕𝘴 𝘌𝘺𝘦 𝘖𝘱𝘦𝘯 𝘞𝘦𝘣 𝘐𝘯𝘷𝘦𝘯𝘵𝘰𝘳𝘺 𝘧𝘰𝘳 𝘛𝘩𝘦𝘪𝘳 𝘕𝘦𝘹𝘵 𝘎𝘳𝘰𝘸𝘵𝘩 𝘗𝘩𝘢𝘴𝘦. Link for clients in the comments.