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The case against independent shopping agents replacing retail platforms

A post argues merchants may prefer ad auctions to fixed agent fees and questions agents’ reliance on retail platforms.

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2 Sources, 5h ago, first seen 5h ago

TLDR

A post argues that independent, general-purpose shopping agents may struggle to displace retail platforms. It cites research the author says shows branded search ads can bring merchants additional traffic, and asks why merchants would trade bidding for customers for a fixed transaction fee. It also argues that agents taking over customer relationships would still rely on platforms for fulfillment, returns and reviews, even as they undercut the businesses providing those services.

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2.8K

2 Sources, first seen 5h ago

28 likes2 comments27 saves5 reposts
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Combined views

2.8K

2 Sources, first seen 5h ago

28 likes2 comments27 saves5 reposts

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2 Sources

@eric_seufertThere are two fundamental misapprehensions behind the belief that independent, general-purpose agents will broadly disrupt the eCommerce landscape: 1. That merchants would prefer organic agent recommendations and transaction fees to auction-based advertising because branded search advertising is a zero-value "tax" or "toll." This isn't the case; branded search advertising has been observed to deliver incremental value. In “Competition and Crowd-Out for Brand Keywords in Sponsored Search," Simonov et al. found that own-brand ads on Bing increased traffic even without competing ads, while competitors captured 18–42% of clicks when brands facing competition did not advertise. Even in the specific advertising context of Amazon, the available research supports incrementality. In “Data-driven budget allocation of retail media by ad product, funnel metric, and brand size,” Koen Pauwels (friend of the podcast!) and coauthors estimate positive contributions from Sponsored Products to awareness, consideration, and revenue across more than 122,000 brand/category combinations. Characterizing branded search advertising as a tax doesn't really address the core economic issue, which is whether it can deliver incremental value. Obviously, like all advertising, branded search can be wasteful. But the research supports the idea that branded search can generate incremental returns. So the question is why a retailer would prefer to integrate with an agent and pay a fixed, percentage fee on each transaction rather than bid for distribution according to what reaching a particular customer is worth to its business. I don't think it would. Even if a retailer can accommodate an agent's fixed transaction fee (OpenAI's was 4% on Instant Checkout), wouldn't it sometimes prefer to pay more for the opportunity to reach a relevant customer? A bid allows a retailer to express its own derived willingness to pay. So if agents become important sources of demand, why wouldn't merchants want to compete for exposure on those surfaces, too? 2. That consumers will demand a single general-purpose agent that handles all of their needs, crowding out platform-owned agents while also retaining all of the functionality that the platforms provide. Suppose the mono-agent succeeds. Amazon loses its consumer traffic and becomes middleware that fulfills agentic purchases. Why assume that Amazon continues operating at its current scale if the agent has subsumed the customer relationship and much of the revenue opportunity ($69BN in advertising revenue in 2025)? Fulfillment, customer service, returns, fraud prevention: who manages these if the revenue opportunity from the consumer relationship is undercut? The mono-agent thesis assumes that an agent can dismantle the platform's business model yet benefit from the infrastructure upon which those businesses were built. But the more totally any agent displaces the platform, the more of the platform it needs to replicate. I think the most concrete and immediate example is reviews. If people stop buying on retail platforms, where are the reviews submitted? In the agent? That defeats the purpose. But if product reviews evaporate, how does the agent rank products? This is obviously why Amazon has been reluctant to integrate with third-party agents. And no, Walmart's cooperation with various agents isn't instructive here; the two companies operate against fundamentally different incentives. Walmart has a much smaller eCommerce footprint and advertising business: it has more demand to acquire and less existing demand to defend. And it also operates its own agent.
@MobileDevMemoRT @eric_seufert: There are two fundamental misapprehensions behind the belief that independent, general-purpose agents will broadly disrup…
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    2 Sources

    @eric_seufertThere are two fundamental misapprehensions behind the belief that independent, general-purpose agents will broadly disrupt the eCommerce landscape: 1. That merchants would prefer organic agent recommendations and transaction fees to auction-based advertising because branded search advertising is a zero-value "tax" or "toll." This isn't the case; branded search advertising has been observed to deliver incremental value. In “Competition and Crowd-Out for Brand Keywords in Sponsored Search," Simonov et al. found that own-brand ads on Bing increased traffic even without competing ads, while competitors captured 18–42% of clicks when brands facing competition did not advertise. Even in the specific advertising context of Amazon, the available research supports incrementality. In “Data-driven budget allocation of retail media by ad product, funnel metric, and brand size,” Koen Pauwels (friend of the podcast!) and coauthors estimate positive contributions from Sponsored Products to awareness, consideration, and revenue across more than 122,000 brand/category combinations. Characterizing branded search advertising as a tax doesn't really address the core economic issue, which is whether it can deliver incremental value. Obviously, like all advertising, branded search can be wasteful. But the research supports the idea that branded search can generate incremental returns. So the question is why a retailer would prefer to integrate with an agent and pay a fixed, percentage fee on each transaction rather than bid for distribution according to what reaching a particular customer is worth to its business. I don't think it would. Even if a retailer can accommodate an agent's fixed transaction fee (OpenAI's was 4% on Instant Checkout), wouldn't it sometimes prefer to pay more for the opportunity to reach a relevant customer? A bid allows a retailer to express its own derived willingness to pay. So if agents become important sources of demand, why wouldn't merchants want to compete for exposure on those surfaces, too? 2. That consumers will demand a single general-purpose agent that handles all of their needs, crowding out platform-owned agents while also retaining all of the functionality that the platforms provide. Suppose the mono-agent succeeds. Amazon loses its consumer traffic and becomes middleware that fulfills agentic purchases. Why assume that Amazon continues operating at its current scale if the agent has subsumed the customer relationship and much of the revenue opportunity ($69BN in advertising revenue in 2025)? Fulfillment, customer service, returns, fraud prevention: who manages these if the revenue opportunity from the consumer relationship is undercut? The mono-agent thesis assumes that an agent can dismantle the platform's business model yet benefit from the infrastructure upon which those businesses were built. But the more totally any agent displaces the platform, the more of the platform it needs to replicate. I think the most concrete and immediate example is reviews. If people stop buying on retail platforms, where are the reviews submitted? In the agent? That defeats the purpose. But if product reviews evaporate, how does the agent rank products? This is obviously why Amazon has been reluctant to integrate with third-party agents. And no, Walmart's cooperation with various agents isn't instructive here; the two companies operate against fundamentally different incentives. Walmart has a much smaller eCommerce footprint and advertising business: it has more demand to acquire and less existing demand to defend. And it also operates its own agent.
    @MobileDevMemoRT @eric_seufert: There are two fundamental misapprehensions behind the belief that independent, general-purpose agents will broadly disrup…
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