AI Adoption Rises as Retail Media Delivers Record Efficiency Gains in Q1, Skai Data Shows

Retail media ad spend grew 27% year over year in Q1 2026 while CPCs fell across every product category for the first time on record, according to the latest Digital Marketing Quarterly Trends Report from Skai, the leading omnichannel platform for commerce media. The findings point to a new phase of commerce media growth, where stronger ad performance, lower costs, and rising AI adoption are reshaping how marketers invest.

Key findings

• Retail media CPCs fell across every single product category year over year, the first time that has occurred in at least seven years of data, as overall spend grew 27% and clicks grew 38%
• Amazon DSP CPCs fell 53% year over year to $0.86, making DSP cheaper per click than Sponsored Products for the first time in Skai's dataset; a 32% increase in DSP spend generated 156% more clicks
• Paid social delivered clicks up 42%, CPCs down 22%, and CTR up 27%, the strongest efficiency quarter for the channel in recent memory, with CPMs returning to 2019 levels
• Two-thirds of advertisers are now focused on AI-driven campaign execution, but adoption is bottlenecked by trust issues around transparency, control, and data sharing

Retail media efficiency reaches new highs as DSP pricing inverts

Retail media spend grew 27% year over year in Q1 2026, with clicks up 38% and CPCs falling 8% to below $1.00, a level not seen consistently since 2020. All three months came in above 25% year-over-year growth, with January at 30%, February at 27%, and March at 25%.

The efficiency gains weren't accidental: A 35% increase in click-through rates shows that ads are earning more engagement from roughly the same impression pool, reflecting stronger execution across creative, targeting, and product detail pages.

The bigger structural story was in DSP. For the first time in the history of this report, Amazon DSP cost less per click than Sponsored Products. DSP CPCs fell 53% year over year to $0.86 while Sponsored Products held at $0.96. A year ago DSP cost nearly twice as much. As adoption scaled and more inventory became available, costs declined, accelerating DSP’s shift from a supplementary tactic to a core component of retail media strategy. A 32% increase in DSP spend generated 156% more clicks as a result.

Paid social surges while paid search costs hit record highs

Paid social delivered the strongest efficiency numbers of any channel this quarter. Clicks grew 42% year over year while CPCs fell 22% and CTR climbed 27%, with CPMs returning to 2019 levels. TikTok spend share reached approximately 18%, the highest in five quarters.

Paid search CPCs matched their all-time high of $1.10, nearly double the level of two years ago, as impressions fell 10% and spend grew only 5%. Among Skai accounts, 45% grew search spend more than 5% year over year while 42% cut by the same margin, reflecting a channel where individual program decisions matter more than the aggregate trend. As AI-powered search reshapes how users find answers, the available click pool is contracting while the value of each remaining click goes up.

AI campaign adoption is strong in intent but held back by trust

A proprietary Skai survey of paid search clients for this report found broad belief in the potential of AI-powered campaign tools. Advertisers cite loss of manual control (67%), lack of transparency into how AI makes decisions (61%), and internal data-sharing restrictions (45%) as the primary forces holding back fuller commitment. When asked whether resolving those barriers would increase adoption, 63% said yes.

These dynamics extend across platforms as AI-driven campaign types expand, placing greater emphasis on transparency, control, and data governance.

“What stands out about Q1 is that the efficiency gains were broad, not concentrated in one format or one retailer," said Michelle Urwin, Chief Marketing Officer at Skai. "At the same time, our research shows that AI-powered campaigns have strong buy-in but real barriers. The brands and partners that solve for trust and transparency first will capture a disproportionate share of what comes next."

To access the full Q1 2026 report, visit skai.io/quarterly-trends-hub.

Methodology
Analysis is based on 900 billion impressions, 8 billion clicks, and $8.42 billion of Skai platform activity across retail media, paid search, and paid social advertising in Q1 2026 (January 1 - March 31). Data is aggregated and anonymized across Skai accounts, including many of the world’s leading consumer brands and agencies. Year-over-year comparisons reflect the same period in Q1 2025. Only advertisers active on the Skai platform for the full duration of both periods were included to ensure consistency.