Lead With AI
"40% of Your Ad Budget Goes to Products Nobody Buys": The AI Solution Retailers Can't Ignore
Tue, 27 May 2025
In this episode of Lead with AI, Dr. Tamara Nall uncovers a shocking truth with Nathan Werst, founder of Shoptimized AI: major retailers waste millions advertising products that never drive purchases. Werst reveals the shocking moment when clients first see their wasted ad spend, sometimes discovering 40% of their budget goes to products that generate zero sales. Using neural networks that can predict with 92.3% accuracy which products will sell in specific timeframes, Shoptimized is transforming retail marketing by analyzing patterns humans could never detect - like why blue items sell better on Sundays at 3pm while red items fail. A former data scientist for DICK's Sporting Goods and Farfetch, Werst challenges listeners to search Google for their own out-of-season products to witness firsthand how much money they're wasting right now. Looking ahead to 2030, Werst envisions not just revolutionizing retailers' ROI but creating truly seamless shopping experiences where customers never waste time clicking ads that don't match what they actually want to buy.
Chapter 1: What is the shocking truth about ad spending?
I'm doing great. Thanks. How about yourself?
I'm amazing. And thank you so much for being an Illuminarian guest on our podcast today.
Chapter 2: How does Shoptimized AI help retailers?
Thank you for having me.
Absolutely. So let's start off. Just tell us a little bit about you. Who are you at your core? You know, I believe that every great AI product starts with a deeper vision. So talk to us about that.
Yeah, I think, you know, in my core, really, I'm a problem solver. I always have been, you know, I like solving all kinds of problems, whether it's, you know, puzzles or crosswords or, you know, business cases with AI. You know, I really just like that little moment where you see all the dots connect and where you get a solution to this thing that's been bothering you for a while.
Got it, got it. So tell us about Shoptimized.
Yeah, so Shoptimized really started... a little over a year and a half ago at this point. I've been doing this since October of 2023. And prior to that, I was working as a data scientist in a marketing agency. And I knew I kind of wanted to start my own company. I wasn't exactly sure the direction I wanted to go.
But I've been working with some pretty big retailers, Dick's Sporting Goods, Farfetch. And I'd found that there were some room for improvement in their product marketing. And as I went off and founded Shop Demise and started doing my own thing, I saw that this was kind of a pattern that was repeating across a bunch of different retailers.
And that pattern was that they were wasting tons and tons of money advertising products that weren't driving any purchases.
Wow. And you know what? I love that because as an entrepreneur myself, people come and they say, oh, I want to start a business. I don't know how. And it's about gaps and pain points. And a lot of great ideas come when you go and work for other companies and you can kind of see where those gaps are and then create your own. That's amazing. So what about the holy smokes moment?
What's the jaw-dropping moment when people first experience Shop Demise and realize that it changes everything for them?
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Chapter 3: What was the jaw-dropping moment for clients?
Wow. Wow. So you're saying that you will show customers, okay, you spent this money and there'll be, you know, I don't know, 40% of their spend to products that never even moved.
Exactly. Yeah. And not even, not even products that never even moved products that never drove a purchase on the website. So, so that includes products where like, you know, someone might see an ad for a product, they'll click on it and then they'll click on a different product on the website. They'll see something else in that, like you may also like section and they'll buy that.
So it's not, it's 40% on products that didn't even drive those sort of purchases. So it's, it's really, it's an even, an even bigger problem than people think initially.
Yeah. Can you imagine if you can decrease, and it sounds like y'all are, the number of clicks? I don't have to click two or three times to get to what I want. I can click one time and it's right there.
Yeah. It's something that we've been working on in the background. Keep it doing for Q3 2025.
Yep, yep, no, I understand that. So let's break it up. It's the brain of Shoptimized. So if I were to actually go up under the hood, what's going on? What's working there?
Yeah, I think it's, you know, on the most simple level, it's about pattern recognition. So if you were to, like, become Shoptimized all of a sudden, you would be able to have the most amazing pattern recognition experience
for retail products and the most in-depth knowledge about their how that the patterns that you see impact marketing behavior so we look at hundreds of thousands if not millions of variables you know all the like descriptions the the keywords the metadata of these products and how the the you know time that they're advertised impacts whether or not they drive purchases and so as shoptimized you would be able to see
wow like you know blue stuff on sundays at 3 p.m is like a much better at driving purchases but like you know red is you know out the window and so you'd be able to draw these these conclusions and these patterns that you know a human can never make on their own
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Chapter 4: What is the accuracy of product purchase predictions?
Right. And it's very, very important to be very clear about who your target audience is. And so that's important for our listeners to know from Shop2Mize. And we have a number, we have thousands of listeners and many of them work in marketing departments of these larger companies. They work in project management for larger companies. And so this would be ideal for them.
So make sure you definitely find your way to Shop2Mize and we'll get to how to do that a little bit later. So awesome. Thank you for that. Now talk to us about a phenomenal result that you got from a customer in terms of numbers or in terms of impact that was so unreal that it even amazed you.
Yeah, I think, you know, we've delivered some pretty, pretty great returns for customers along the way.
And it's going to sound a little silly, but I always kind of knew that that was like within the realm of possibility, you know, like, you know, that like you, you see the room for improvement and you know, like, oh, you know, we've improved return on ad spend by like as much as 32% in some cases. And, you know, you see that and you're like, great. You know, that's pretty cool.
What really blew my mind was actually like the first iteration of the the neural network that we built for Shoptimized, where we were looking at all this historical data and we were just doing, it was just a test, right? We were just doing a breakdown of, you know, the like training and testing data.
And when we got to the point where we were working with the testing data, we could predict, I think it was 92.3% accuracy, whether or not a product will be purchased in a given time period. So we had our confusion matrix, our false positives, false negatives, true positives, true negatives. And you watch the... It's really cool. You can see it in your terminal on your screen.
You can see it go through with the testing and the count of all these things go up and down. And you start to see the accuracy go up and up and up over time. And you go... oh my God, like we're, we're actually doing this, you know? And so you get to the end of that test and it says, you know, 92.3% accuracy, you've predicted whether or not a product is going to get purchased in this time period.
And that was just the most mind blowing thing to me. Cause I can't imagine being able to do that in my life at all. Like if you gave me, you know, I like, I couldn't predict like the weather tomorrow, you know, like to predict whether some random product is going to get purchased based on marketing is just absolutely insane to me.
That is. And I could definitely hear the data scientist in you. Because I, too, am a data scientist. And I'm in school at George Washington, learning about random forests and neural networks, et cetera. So it's really exciting. We're geeking out over here. So that's amazing. Congratulations on that. Thank you.
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Chapter 5: How does ethics play a role in AI marketing?
Right, a little compact.
Yeah, exactly. We've got a ways to go for sure, but fingers crossed we'll get that one in the next five or ten years.
All your chores for you. That's amazing. Well, yeah, stay tuned. I'm actually working on a couple of projects related to that. Okay.
Amazing.
Yes. Thank you. Thank you. Thank you. Thank you. Okay. Awesome. Well, make us believers. I love the CTA of this. So what's the one thing that any of our listeners can try, build, or explore with Shoptomize today to get a taste of it this week? Talk to that
marketing manager, talk to that product manager and your customer base and tell them what they can do this week to see the type of results that ShopDemise provides.
For sure. I think the easiest way to see the impact that ShopDemise can have for a marketing manager either at an agency or a retail company is right now Go and Google one of the products that you sell that's not in season. And you will see, you know, keep it, keep it generic, right?
Just use the, just use like tank top or boots or shirt or whatever, you know, don't use your brand name, but use, you know, describe that product, put it in Google and watch how many results come up from your company and from other companies that are all selling this product out of season and likely not driving purchases with that ad.
Right, right. No, that's amazing.
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Chapter 6: What does the future of shopping look like with AI?
Oh, this is going to be controversial, but LLMs in general, I think, you know, they have amazing capability. I, you know, I work with LLMs. I think they're great. I think there are, you know, it is super cool tech and I think it is going to be revolutionary.
I think that all these people making companies that are just like, you know, open AI wrapper, like trying to do something new because it has an LLM in it is vastly overrated. And I think that that's something that is not going to last.
All right. Okay. Next, the most underhyped AI breakthrough.
Yeah, I think this has received a decent amount of hype in the bio community, but I think it's not being talked about enough in general, is AI ability to recognize proteins and the way that they fold. This is stuff that previously took ages and ages for humans to do. People got their PhDs analyzing a singular protein, and now we have a technology,
that has done that for hundreds of thousands of proteins, like even ones that we haven't found in nature. So it's absolutely incredible, absolutely a monumental breakthrough for biology, for medicine, and it's going to have absolutely huge impacts on health and research and everything in the next, you know, who knows how many years.
And it's really not being talked about outside of, you know, these spheres at all.
Okay. Well, it's on here now. So now it's going to blow up. One book everyone should read about the future.
Again, a little, uh, I feel like it's a decently well-known book. And it's actually kind of about the past, but I think it tells us really how to think about the future. And that is Surely You're Joking, Mr. Feynman by Richard Feynman of the Manhattan Project fame and MIT and all that. It's just one of my favorite books. It's super clever.
It really gets in the mind of how you should think as a scientist and puts you in the brain of someone who's just way, way smarter than myself, which is why I like it. I won't speak for everyone, but Feynman's a pretty genius guy.
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