AI has already disrupted traditional search as more users prefer chatbots, leading to a projected 25% decline in traditional search engine volume this year, according to Gartner. This shift threatens retailers’ $69. 33 billion U. S. ad market. If AI platforms like OpenAI and Google expand into sponsored ads, they could create powerful media offerings that compete directly with retailers. Rita Steinberg, VP of media at FUSE Create, views this as a significant threat to current retail media networks (RMNs), though not an existential one—they will need to adapt. For example, shoppers researching cookware might bypass Walmart, Target, or Amazon websites in favor of ChatGPT, which may also enable purchases via Instant Checkout. This reduces retailer site traffic, impacting RMNs’ monetization capabilities. Mike Feldman, SVP of commerce at Flywheel, notes that less time spent on retailer sites equates to disrupted business directly tied to traffic. eMarketer projects retail media search spending in the U. S. to near $38 billion by 2025, with search ads comprising about 60% of that spend. However, publishers are already feeling the impact: large language models (LLMs) have lowered referral web traffic and click-through rates for publishers, prompting some to implement bot-blocking and pursue content licensing deals to mitigate losses. Retail media networks have been both vital and challenging for advertisers.

Major brands like Diageo and Procter & Gamble have embraced retail media as a key channel despite frustrations over RMNs’ walled gardens and issues with measuring incremental impact. Nonetheless, advertisers have yet to shift budgets from retail media to AI chatbot ads. Ross Walker, director of retail media at Acadia, states no brands he works with have reallocated funds away from retail media to AI platforms. Brands such as Williams-Sonoma and The Knot are experimenting with ads on ChatGPT, but concerns about cost, brand safety, and transparency remain. Marketers remain cautious until AI chatbot ad solutions—like those offered by ChatGPT, Microsoft Copilot, and Google AI—demonstrate effectiveness. A major limitation is that unlike RMNs, these LLM platforms lack direct access to the final sale process. For AI chatbots to truly compete, they require access to APIs, measurement tools, and transactional data controlled by retailers. Some progress has been made: Walmart has partnered with Google Gemini and OpenAI’s ChatGPT to enable AI-enhanced shopping experiences, while Target has collaborated with OpenAI for a specialized ChatGPT shopping app experience. Preston Larson, CEO of Modifly and chief media officer at Court Avenue, highlights that Walmart’s control over its ecosystem provides it with powerful insights into ad spend and ROI, a significant advantage over external LLMs. With limited on-site digital ad space, RMNs have expanded into off-site channels like social media and streaming to retain ad revenues. Many major retailers have also launched their own generative AI chatbots—Amazon’s Rufus and Walmart’s Sparky—to enhance shopping ecosystems. Executives suggest that the closed-loop attribution and comprehensive measurement capabilities of RMNs provide added value as retailers grow their AI-powered services. Larson concludes that retailers possess substantial leverage due to their consumer data and established infrastructure, and that LLMs currently outside this environment face an uphill battle to catch up.