The Wall Street Journal has a story about how retail media networks are making a play for the big time, attempting to show that that they can compete with legacy television networks in terms of return-on-investment.
They will do so by participating in what in the ad biz is called “the upfronts” – a series of presentations, usually hosted by network programming executives and stars, for ad executives. The goal is to sell as much as their commercial inventory as possible by explaining how their shows will attract desired viewers.
According to the Journal, “After media companies like NBCUniversal, Disney and Paramount conclude their annual upfront sales spectacles this spring, companies including Albertsons, Home Depot, DoorDash and JPMorgan Chase will promote their own ad products in a take on the upfronts this September.”
Some context from the Journal story:
“The media investment group WPP Media forecast in December that global retail media ad revenue would increase 11.3% last year to $174.2 billion, surpassing TV ad revenue.
“In the U.S., ad spending on retail media networks this year will rise 19% to $72 billion, according to a separate forecast by the research firm Emarketer.
“But the burgeoning category has its challenges. Even major retailers struggle to compete against Amazon’s retail media business, which Emarketer predicts will command a U.S. market share approaching 80% this year. Walmart’s retail media business is expected to comprise 9% of the U.S. market, by comparison, while the networks of Target, eBay and Kroger will garner around 1.5% each.
“Marketers are looking to simplify where they are spending, meaning it isn’t easy to convince them to spend with one more retail media network. The industry is due for a ‘rationalization’ where only the biggest, most technologically sophisticated networks are likely to win out, according to WPP Media’s forecast. The pressure on smaller players that don’t have differentiated media inventory or data assets will be ‘existential,’ WPP Media wrote.”
Amplifying the notion that the biggest are going to have the greatest advantages:
“In the future, smaller retail media networks’ data could increasingly get aggregated through partnerships or networks. That would enable marketers to work with multiple businesses without having to maintain individual relationships with each, he predicted.
“The industry’s growth is set to continue, but slow down, with a major advantage to the players who are already the largest. To keep drawing new revenue, networks will need to move from serving so-called lower-funnel, sales-driven objectives to proving they can help marketers build brands at a higher level, industry observers said.”
KC’s View:
There’s little question that retail media networks can offer advertisers a more targeted and quantifiable audience than legacy media, but I remain concerned that retailers – looking for the infusion of capital that a percentage of ad dollars can provide – are going to throttle the golden egg-laying goose by overdoing the advertising. The problem comes when retailers focus too much on adding one or two SKUs to a shopping basket, as opposed to pursuing lifetime customer value by not abusing the relationship.
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