Retail media surge: Sponsored products drive 22% growth in European market

European retail media spending has outpaced the broader advertising market by nearly four times, according to IAB Europe's newly released Guide to Sponsored Products. The comprehensive resource, published just four days ago on April 17, 2025, offers critical insights for marketers navigating this rapidly expanding channel.

The data reveals remarkable momentum in the retail media sector. While the overall advertising market grew by 6.1% in 2024, retail media surged by 22.1%, with Sponsored Products emerging as the central driver of this growth. This acceleration reflects a significant shift in marketing priorities, with 67% of brands and agencies redirecting performance advertising budgets toward retail media investments.

"Retail media in Europe has experienced exponential growth, nearly quadrupling the rate of the total ad market with a 22.1% increase compared to the ad market's 6.1% growth in 2024," according to the IAB Europe guide. "The catalyst behind this surge is Sponsored Products, a trend driven by 67% of brands and agencies reallocating their performance ad budgets towards retail media."

Understanding Sponsored Products

The guide defines Sponsored Products as "a type of paid advertisement where a brand pays to promote a singular product within a retailer, marketplace, search engine, or website." These advertisements enhance visibility and drive sales by appearing in high-traffic locations such as search results and product pages, seamlessly integrating with organic content.

What distinguishes Sponsored Products from traditional display advertising is their native format. The guide explains that "unlike traditional display ads, Sponsored Products do not require additional creative assets. Instead, they automatically pull elements from the product listing, including the product image and title."

Essentially, these advertisements function as the digital equivalent of premium shelf placement in physical retail environments. "Think of them as the digital equivalent of moving your product from the bottom shelf in a store to eye level, making it more visible to shoppers ready to buy," states the guide.

Most Sponsored Products operate on a Pay-Per-Click (PPC) model where advertisers bid on keywords or product categories. However, the market is evolving. The guide notes that "there are innovations on the market to allow other types of targeting such as Audience-based, cross-sell, up-sell or broad."

Strategic Placement Opportunities

Sponsored Products appear across multiple touchpoints in the customer journey. Search results pages remain one of the most prominent placements, with ads positioned "at the top, within the middle of organic results, or at the bottom" to target shoppers actively searching for relevant products.

Category pages represent another valuable placement, where "shoppers encounter ads matching their interests and browsing patterns." This allows brands to reach consumers who are actively exploring related product categories.

On product detail pages, Sponsored Products often appear "in a carousel under the product description" providing visibility for similar or complementary items. These advertisements are strategically positioned "near 'Add to Cart' or 'Buy Now' buttons, or near customer reviews or related item recommendations."

Some retailers extend these opportunities further into the purchase journey. The guide indicates that "in some cases, Sponsored Products also appear later in the shopping process, such as on the shopping cart or checkout pages." This creates additional discovery moments, with some retailers showing them in a "'You Might Also Like' section during checkout."

Measurement Frameworks

For marketers seeking to quantify the impact of their Sponsored Products investments, the guide emphasizes the importance of standardized measurement approaches. It references IAB Europe's Measurement Standards for On and Off-Site Retail Media, which "have been created with this in mind to provide media buyers with a framework for consistent metrics to compare retail media investment."

The guide identifies two primary performance metrics for evaluating Sponsored Products. Click-Through Rate (CTR) "measures how often shoppers click on your ad after seeing it. A strong CTR indicates your ads are appearing in relevant, high-visibility placements and resonating with the right audience."

Conversion Rate (CVR) measures "the percentage of clicks that result in a purchase. A strong CVR signals that your ads are not just attracting interest but also driving sales."

However, measurement practices can vary significantly across retail platforms. The guide advises marketers to "check how each retailer defines key metrics—differences in attribution windows, impression counting (loaded vs. viewed), and ROAS formulas can impact results."

Optimizing Campaign Performance

The guide presents a detailed case study demonstrating how strategic optimization can significantly enhance campaign effectiveness. In a competitive toys market, VTech implemented several tactical adjustments to improve their Sponsored Products performance on Bol.com.

Their approach included campaign consolidation to "streamline ad management and improve budget efficiency" while ensuring "no keyword overlap across campaigns, allowing the most relevant product to match each search query and maximise ad relevance."

Additionally, VTech segmented campaigns by placement type (search, product, category) to enable "more precise bidding based on each placement's performance." This allowed them to concentrate spending on the highest-performing placements.

The company also implemented dayparting to ensure "the highest visibility during key moments throughout the day when customers were most likely to convert." In a particularly astute move, they paused "advertising for products that already ranked highly in organic search results, ensuring the budget was used efficiently to drive incremental sales."

These optimizations yielded impressive results: an 11% increase in Return on Ad Spend (ROAS) and a 16% growth in sales.

Best Practices for Marketers

The guide outlines several recommended approaches for brands entering or expanding their Sponsored Products investments. It suggests that marketers should understand organic relevancy, noting that "retailers' ad systems often prioritise relevancy. If you know which of your products perform well organically, you can maximise returns by focusing on them and using sponsored products to amplify their visibility."

When establishing bidding strategies, the guide recommends a targeted approach: "If you need to bid on search terms, focus on identifying the most relevant ones for your products rather than casting a wide net. Targeted bidding drives higher-quality clicks and, ultimately, better conversions."

For less experienced marketers, the guide suggests leveraging automated solutions: "If you're less experienced with CPC-based advertising, consider publisher automated bidding; many offer ROAS-based systems that auto-adjust bids to hit your target."

The guide also advises marketers to carefully scrutinize how their retail media partners operate. Key questions should address auction mechanics, including "is it a first-price or second-price auction?" and "what determines the winning bid?" Marketers should also clarify "what factors beyond bids influence ad placement."

Industry Implications

The accelerated growth of retail media, particularly Sponsored Products, signals a fundamental shift in digital marketing dynamics. As e-commerce continues to expand its share of total retail, these native advertising formats are becoming increasingly central to brands' performance marketing strategies.

For the marketing community, this trend represents both an opportunity and a challenge. The opportunity lies in the ability to reach consumers with high purchase intent in contextually relevant environments. The challenge emerges from the fragmented landscape of retail media networks, each with their own interfaces, measurement methodologies, and optimization approaches.

The guide, authored by experts from IAB Europe's Retail & Commerce Media Committee, aims to address this knowledge gap. Contributors include Justin Sandee (Director Commercial Development, bol.com), Trevor Narayan (VP of Product, Koddi), Laura Annema (Product Manager Retail Media & E-Commerce, Kinesso), Sara MacKinnon (Director of Product Marketing, Pentaleap), Mark Burton (Chief Product Officer, Pentaleap), and Tanguy Le Falher (Head of Partnerships, Unlimitail).

Timeline

• April 17, 2025: IAB Europe releases the Guide to Sponsored Products
• 2024: Retail media spending in Europe increases by 22.1%, while the overall ad market grows by 6.1%
• 2024: 67% of brands and agencies shift performance ad budgets toward retail media
• Previous: IAB Europe develops Measurement Standards for On and Off-Site Retail Media