Retail media may provide ecommerce retailers with high-margin revenue from an audience they have paid to attract.

Merchandise sales from online and even brick-and-mortar retailers often produce gross margins near 50%, contribution margins of 25%, and net profit approaching 12%.

Retail media margins can look much higher because merchants have incurred much of the cost of attracting shoppers. Plus, the ad buyers are often a store’s suppliers.

Products vs. Ads

Here is a comparison.

Selling a $100 product might leave $25 after cost of goods sold, fulfillment, payment processing, shipping, and other variable costs — a 25% contribution margin.

A $1,000 newsletter sponsorship has no comparable cost or return risk. Ancillary expenses such as sales commissions, creative, and technology may total $250, leaving $750 before general overhead — a 75% contribution margin.

Large retail media networks have reported similarly attractive economics.…