It ain’t hype anymore—retail media is real, and it is spectacular. eMarketer calls retail media the “third wave of digital advertising,” with U.S. ad spend expected to hit $41 billion in 2022. Boston Consulting Group predicts retail media will account for 25% of digital media spending by 2026.
The channel has arguably revived Criteo’s fortunes as the third-party cookie dwindles into irrelevance. Walmart, Target, Kroger, Best Buy, Home Depot, Gap, CVS—it seems like every other week another major retailer carts out a brand-spanking-new retail media network.
All that ad spend sure sounds great for retailers. But what about publishers? Are retailers siphoning spend away from the already beleaguered publisher set?
Quite the opposite, in fact. The retail media revolution is helping line the pockets of premium publishers.
Cautious journey to digital advertising
In a nutshell, retail media is when retailers offer advertising access to their customers on-property (or off-property). It’s not a new concept by any means, but it’s been mainly relegated to advertiser campaigns in actual brick and mortar stores. (Think about specialty brand displays at department stores or supermarkets.)
While retailers’ online traffic grew with the rise of ecommerce, many were reluctant to plunge into digital advertising because of their hyper focus on user experience. A 2006 Amazon study famously found that every 100ms in extra load time cost 1% in sales; a 2017 Akamai followup suggested that every 100ms of latency cut conversions by 7%.
Unfortunately, digital advertising has a bad reputation for latency, as well as other factors that ruin user experience: gauche creative, code that breaks a page, open doors to device-infecting malware, etc. All those issues can arise before programmatic enters the picture. With bad user experience being detrimental to online sales, digital advertising simply wasn’t worth the risk for most retailers.
Yet they no doubt had their eye on Amazon’s flourishing ad business. There should be an asterisk by eMarketer’s $41 billion in 2022 US ad spend figure: about 78% of that goes to Amazon. However, the $9 billion left over is nothing to sneeze at, and you may have noticed Amazon does a fair deal of third-party media buying.
U.S. retail mainstays like Walmart, Target, and Kroger have been ramping up their digital retail media operations for the last five years. And then came the Covid pandemic: Suddenly consumers weren’t in stores; they were flooding websites and apps and racking up online orders. The opportunity to monetize this traffic was just too good to pass up, especially as major retail brands had proven that integrating ads wouldn’t necessarily harm user experience.
Retailers have the kind of high-quality audience data that make advertisers swoon. Through tools like loyalty programs, many retailers boast comprehensive customer profiles that can be used for precise targeting. Retailers are stocking up on data scientists to drive customer insights and behavioral trends, and for many advertisers measurement goes all the way to point of sale.
In addition, retail sites and apps are a data oasis in the increasingly untargetable mobile ecosystem. The presence of emails and other deterministic identifiers make retailers ideal partners for identity solutions like LiveRamp and LiveIntent in finding audiences on third-party properties.
On-property advertising is really only the jump-off point. The huge gains are in audience extension, or when retailers start finding their customers on third-party sites and apps.
That’s where premium publishers come in. When asked at the IAB Annual Leadership Meeting in January if she felt that retail media networks were a threat to revenue, BET EVP and CMO Kimberly Evans Paige replied, no—we’re partnering with them.
Advertising revenue is incremental for retailers. Therefore, advertising must be accretive to the core revenue business. On-property, this means high-quality, brand-safe ads that don’t cause latency. Landing pages can’t send customers to competitor sites and only authorized vendors can be allowed through the pipes, lest data leakage become a concern.
Going off-property is not just extending the audience, but also the retailer brand. During an AdMonsters Ops session in June, Christine Foster, Vice President, Media Operations at Kroger mentioned that a great deal of their offsite ads are actually co-branded. So, retailers with big advertiser budgets in tow may be reticent about appearing adjacent low-quality ads, scam ads, or ads with questionable content, which could range from gambling to marijuana to even crypto.
When retailers buy off property, they need high-quality inventory in well-lit spaces. To ensure brand safety—both their own and advertisers’—retailers are pursuing guaranteed direct deals with premium publishers as well as private marketplace arrangements. Certainly, major publisher brands with massive traffic are already benefiting. But there’s definitely room out there for niche publishers with ties to specialized retailers.
Lifting all boats
The excitement around retail media stems from the fact it’s beneficial for just about every party in the digital media ecosystem: Advertisers reach key audiences with confidence; ad tech companies like Criteo and CitrusAds develop new business; publishers gain revenue; and of course retailers are able to further monetize their customer data.
Publishers of all sizes need to investigate retail media opportunities. However, they also need to understand that their ability to rake in revenue here greatly depends on the quality of their environments.