I'm cynical when it comes to Retail Media
I’m the least ‘first-mover’ person you’re likely to meet, well, apart from my Grandma. I really dislike bandwagons. I usually tend to wait and see if there’s much behind the hype and then make my own opinions (to be honest, this isn’t a great trait in consulting where lots of consultants sell the ‘next big thing’!). The current Retail Media trend is an example of this. Technology companies & service providers, have all been jumping on the Retail Media bandwagon.
· Group M say it’ll reach $101bn in revenue this year (up 15% from last year)
· BCG say it’s a $100bn opportunity with 80% margins
· The Trade Desk think Retail Media is set to boom
Is there anything behind this hyperbole?
Honestly, when I first became aware of Retail Media (the digital media side as retail media has existed for yonks offline) I sighed. Ad Network 2.0 – they buy, sell & measure the ads for you, with limited transparency and limited controls. Some of the rationale for that has been purely smoke and mirrors, primarily around privacy - people who think you can’t be privacy compliant with Open RTB are simply not motivated to think more than 5 minutes about that.
I also don’t think many of these Retail Media properties can really scale. I can see the Mckinsey pitch decks now ‘become the next Amazon Ads’. It’s highly unlikely.
The ingredients for scaling a significant ad proposition are pretty simple (but difficult to execute);
Large user base
Creating high amounts of non-annoying supply
Which meets high amounts of happy demand
Scaling a retail media prop is going to fall down in at least 1, or more than likely, all 3 of those areas, therefore limiting the opportunity for most of the companies jumping aboard the bandwagon.
But Ads have high margins, it’s like free money! Yes, sort of. It’s easy to get buy in at a board level if you have $10m of overheads and $50m of income. What’s interesting is where that income comes from, the reality is that it will likely be derived from endemic advertisers (i.e. brands that sell through Walgreens will want to promote their products with the Walgreens ad platform).
But it starts tapping out pretty quickly. Moving from endemic to broad demand is difficult, particularly if as a seller you don’t want to trade off quality. I.e you’re happy having Rolex on your properties but pissed if you have Online Gambling.
Retail media is an exciting prospect to reach high converting consumers, but as a buyer this fragmentation isn’t going to be your friend, and for most sellers you’re going to competing for lots of small pieces of budget. There’s no standardisation of formats, independent measurement is limited (Nielsen somewhat leading the way) and pricing models are all over the place. Remind you of anything in particular? (Hint – early digital advertising)
I really hope the Retail Media industry finds ways to collaborate around standards, aggregate around access and think beyond their own four virtual walls – particularly in how they partner alongside AdTech as opposed to needlessly creating their own self-serving propositions - especially for the mid-tail.
Ultimately, I think right now it’s an opportunity a handful of buyers and sellers should be piling into, but for the many it’s worth being like me and my Grandma and waiting.
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