Retail media was clearly one of the biggest advertising trends of 2022 and it’s showing no signs of slowing down. A recent forecast from the ANA projected the sector will hit $52 billion in 2023 — and $61 billion in 2024.
In January, Kiri Masters, head of retail marketplace strategy at digital agency Acadia, predicted a continued shift of media budgets from channels like paid social, paid search and display in the year to come.
Three months later, other macro-changes are well underway that will also impact the players in this ecosystem — and digital marketing as a whole.
One of the biggest trends so far this year is online retailers’ courting of non-endemic advertisers, or brands who do not sell products on their site.
This includes categories such as auto and insurance, which generally have budgets large enough to accommodate multiple media networks, Masters noted.
The trend was, of course, started by Amazon, which continues to dominate the space with 37% market share as of 2022.
The ecommerce giant saw an opportunity to steal market share from traditional TV advertising. It’s in a unique position thanks in part to its streaming business, which provides what Brad Jashinsky, director analyst at research firm Gartner, described as “a lot of inventory and touch points that are really attractive to non-endemic advertisers.”
He added, “Not only do they have the content to be able to play those ads in a fairly brand-safe way, they also have a lot of data that they're able to target with.”
Nevertheless, the majority of retail media will remain focused on endemic advertising — and the simple fact is because “there’s so much money there,” added Elizabeth Marsten, group director of marketplace strategic services at performance marketing firm Tinuiti.
Indeed, data platform LiveRamp found CPG brands, i.e., endemic advertisers, spend about 20% of their ad budgets on retail media as of July 2022. More than half — 64% — plan to spend more in 2023.
Offsite ad placements
While retailers generally start by selling on-site advertising like search ads, more mature retail media networks are using their data to expand further into off-site opportunities, such as CTV and OTT.
That includes Amazon’s demand-side platform (DSP), which displays ads tied to onsite searches on third-party sites. That means even when someone is not on Amazon, brands selling on the platform can target potential shoppers off-site with online display, video and even CTV ads, Jahinsky said.
“It really opens up the number of ad units and impressions that are out there because … you're not limited to only advertising when that consumer or prospect is on the retail site,” he said.
But, Marsten warned, attribution and UX remain challenges.
“One of the first things I get question-wise on that kind of stuff is, ‘How do I know I wasn't going to get that customer anyway?’ Or, ‘How do I know my ad isn't directing the consumer to go to Target on Roku and then Disney+ is telling them to go to Walmart?’” she noted.
Another big off-site opportunity for brands are in-store display ads at self-checkout kiosks or on other digital signage.
Noting many retailers have “way, way more impressions in-store than online,” Jashinsky called these placements a “huge opportunity” — especially for retailers with a smaller e-commerce presence.
“It's been interesting to see retailers start to expand some of these partnerships to be able to get in front of these in-market shoppers at that point of purchase,” he added.
That being said, in-store displays are a costly endeavor, which includes both hardware and network infrastructure.
“But once it's up and running, it provides a lot more impressions and flexibility than the old-fashioned in-store printed ads or end caps,” Jashinsky said.
Masters agreed 2023 will be a big year for in-store activations, pointing to Amazon, which showed off its in-store displays for Amazon Fresh at its Unboxed event in October 2022.
“That's a pilot just in Fresh stores, but when I spoke with the product manager at that event, they said, ‘Well, of course this is going to roll out to Whole Foods as soon as we can prove the pilot here,’” she added.
Marsten pointed to digital out-of-home networks like Grocery TV and Cooler Screens, which are also invested in expanding in-store displays.
“But the rate in which physical retail can actually realize that is going to be slower than any of us ever wants,” she added.
Vendor partnerships — self-service options
Following deals like Walmart’s partnership with media-buying platform The Trade Desk in January 2021 — as well as Microsoft’s deal with e-commerce platform BigCommerce and Albertsons’ tie-up with Omnicom Media Group two years later — expect to see additional partnerships that will help bust retail media network silos in which advertisers are only able to purchase placements directly.
“I think we'll continue to see more partnerships on that side to make it easier for brands to buy across retailers,” Jashinsky said. “And I also expect to see more partnerships, and maybe even some acquisitions, between vendors that are powering a lot of this technology.”
While retail giants offer self-service options, smaller retail networks still require direct buys through their own sales teams.
Self-service options, however, make media buying much easier for all advertisers — but especially smaller brands, because they don’t include a sales commission — or require operations teams to make media placements.
According to market research firm NielsenIQ, brands and agencies are already familiar with self-service methods in programmatic digital advertising, where they spent roughly $167 billion in the U.S. alone in 2021. It will inevitably become the preferred method for media buyers on retail media networks as well, the report said.
Marsten, too, said self-service options for sponsored products “should be a gimme” because there are so many sell-side media platforms out there, like Criteo and PromoteIQ.
That means advertisers don’t have to learn how to use each retailer’s individual platform — opening up the space to more potential advertisers.
“The self-service piece unlocks so much faster and it gives marketers the ability to control that pricing,” she added.
By opening up self-service through a third-party partner, advertisers can also use the supply-side platform’s third-party audiences instead of the retailer’s, which come with a fee “for the privilege to rent that list.”
“We actually did this with a beauty client in Q4 — they had a whole bunch of fragrance kits … sitting in the middle of all these stores, and so we used the Trade Desk via Walmart off-site and we got a better CPM than we do with managed service.”
That’s in part because they were able to move faster to make adjustments independently of the retailer network.
Attribution and incrementality
It’s likely we’ll see new metrics roll out throughout 2023 as retailers provide more access to their data.
Jashinsky noted a “huge opportunity” in connecting digital ads to in-store sales.
“Some of this is limited by the retailer system, some of it is limited by vendor systems and it can be a complicated attribution cycle,” he said. “There’s a huge opportunity to be able to say, ‘This ad was shown either onsite or off-site to a customer and then we know they've purchased in-store and so this ad drove that in-store purchase.”
Incrementality is another.
“I think that's the frustration we've seen with some brands in particular that are doing branded search ads,” Jashinsky added.
For example, if a consumer is searching for a specific brand of dog food, it’s not clear whether a related search ad is driving incremental sales — or if the consumer knew the name of the brand and simply clicked on a paid result instead of an organic result. (The latter does not incrementally grow sales.)
“[Advertisers] want to get a better idea of what's the actual incremental uplift in sales coming from retail media?” he said.
There’s also potential for generative AI in this space.
According to Masters, some media buyers have started to use ChatGPT to identify keywords to target in retail media. She noted the AI tool has helped them come up with better keyword strings, as well as potential headlines for sponsored ads — and they could perhaps even create monthly budgets.
“We're just scratching the surface on how to use that technology to be more efficient [and] to come up with better advertising approaches,” Masters added.