TV, merchant media and the unbundling of advertising — Benedict Evans

In 1995, if you had said “should we open stores in that state or just run TV ads there?” that would not have been a meaningful question, but now all of those budgets are merging into one TAM. Do you get a better ROI on Instagram ads or faster shipping? If you open a store in that city, do your returns go down? 

Disney is building a complete cross-platform ad platform, while smart TVs have suddenly changed from ‘dumb glass’ to gatekeepers. Your TV, after all, knows what you watch, if nothing else, and so the TV platform can insert ads into live or streaming TV, based on the viewer rather than the context. Just as with Apple’s advertising products, such a s... See more

Stepping back, though we should probably ask where all these ad budgets are coming from, and, more importantly, where the growth for internet advertising will come from next. The obvious answer is television: print is mostly already gone, but ‘TV’ viewing is now finally unlocking, with US pay TV subscriptions now down by over a third 

Shopify’s big strategic question is how it can build network effects. It wants to sell higher-margin products to merchants for the money, but it might be more important in the long term that those products build a network, pull more merchants and users into the system, and make the core business more sticky. Shop Pay is one building block, but an a... See more

And, of course, the margin differential means that ad revenue that’s a small percentage of the top line might have much larger impact on the bottom line. At least, until everyone else tries the same…

But even if they don't (eg Uber) they still have all sorts of first party data that comes with some form of privacy consent, which makes it valuable in itself, but much more valuable as we go through the ‘cookie apocalypse’ and remake how online targeting is going to work.

Many of these brands (eg Instacart) sit far down the purchasing funnel and so can sell very specific ads directly to brands…

Digital store fronts and apps can be ad inventory. There’s no a priori reason why you can only show ads next to ‘content’ - an ad in a physical store is not the same as an ad in magazine, but apps are apps.

The difference in margin between e-commerce and advertising has become a much bigger story than Amazon: everyone from Uber to Walmart to Instacart is pushing into ‘merchant media’, and hiring at scale: