Gartner predicts traditional search volume drops 25% as AI chatbots reshape product discovery. Retail media's $69 billion ad business faces the same disruption.
The retailers building AI shopping chatbots are also the retailers selling search ads. They are building the disruption and trying to monetise both sides of it.
Gartner predicts traditional search engine volume will drop 25% this year as AI chatbots capture more product discovery queries. Digiday reports the same disruption is heading for retail media's $69 billion US ad business, where search ads account for $38 billion.
US retail media search ad market now facing AI chatbot disruption
Walmart has partnered with Google Gemini and OpenAI's ChatGPT for AI-powered shopping experiences. Target has built a specialised shopping experience within ChatGPT. Amazon launched Rufus. The retailers themselves are building the tools that could cannibalise their own search ad revenue.
Why it matters
Retail media has been the growth story of Australian digital advertising for the past three years. Woolworths' Cartology and Coles 360 have built substantial ad businesses on the back of in-platform search. When a shopper types "pasta sauce" into Woolworths.com.au, brands pay for placement in those results.
But what happens when that shopper asks a chatbot "What is the best pasta sauce for a family dinner under $8?" instead? The chatbot answers with a recommendation. No search results page. No sponsored placements. No retail media revenue.
The immediate risk is low. As Acadia's director of retail media Ross Walker told Digiday, "No one is taking money away from retail media to put into AI ads" right now. The economics are not there yet. AI chatbot advertising has high costs, limited data transparency and unresolved brand safety questions.
But the trajectory is clear. US AI search advertising is projected to grow from $1.1 billion in 2025 to $25.9 billion by 2029. A 90% compound annual growth rate.
What to do about it
Australian brands spending heavily on Cartology or Coles 360 search ads should not pull budget. But they should start tracking where their customers discover products. If AI-powered recommendations are growing as a discovery channel, your product data feeds and structured content need to be optimised for those systems too.
Watch what Woolworths and Coles do with conversational commerce over the next 12 months. Their moves will tell you how fast the Australian retail media landscape shifts.