Why retail media is the ad industry’s sleeping giant

A quick glance at the top 100 most visited U.S. websites reveals the sort of names most would come to expect — Reddit, YouTube and yes, even PornHub. But sitting at No. 16 — ahead of publishers such as Fox News, ESPN, The New York Times and LinkedIn — is Walmart. Other retailers on the list include Home Depot (No. 28), Target (No. 45) and Best Buy (No. 46). 

Their popularity is among several reasons why retail media — or the practice of spending ad dollars on retailers' websites — is the ad industry’s sleeping giant. “This explosion of growth that’s happened in ecommerce — because of Covid — has made the retail media space too big to fail,” Alex Johnson, VP of data and technology solutions at MediaLink, said. “It’s no longer a secondary focus for the retailers or brands. And it’s going to be one of the biggest areas of growth over the next several years.” 

Johnson made his remarks during a recent panel on programmatic retail media during Adweek’s NextTech conference. He was joined by executives from Target, Omnicom and The Trade Desk.

Retailers have increasingly bolstered their data-driven capabilities in an effort to attract ad dollars from Madison Avenue.  And although retail media has been around for years, recent technological advances have made the channel more appealing for marketers, said Ben Sylvan, GM for retail data partnerships at The Trade Desk. “One of the areas that’s really changed in the past 18 months is closing the loop with measurement,” Sylvan said. “Marketers can now tie online exposure to offline sales to make sure their media investment is paying for itself.” 

Looking ahead

Also increasing retail media’s appeal is the looming expiration date of third-party cookies. Loyalty reward programs such as Target’s Circle or Sephora’s Beauty Insider equip retailers with rich first-party shopper data, as well as large audiences that can rival some of the biggest media publishers. Other factors include a shift in user behavior as a result of the pandemic, which encouraged U.S. consumers to spend a record-breaking $710 billion shopping online last year, an 18 percent increase year-over-year. And as Amazon has clearly showcased, the opportunity is huge: In its first-quarter earnings, Amazon’s “other” unit, which is mostly related to its ad business, grew a staggering 77 percent year-over-year to $7 billion. 

Retail media is about a $20 billion industry today, but that figure will more than double to $50 billion in the next five years, according to Johnson, the MediaLink exec. “My bold prediction is that the majority of that growth is going to come from an outside share of non-Amazon media,” he said. “The growth will come from open web retailers and that’s what’s going to really accelerate and drive this industry forward.” 

Others believe that retailers will work with brands that they previously didn’t work with. An auto manufacturer like Ford, for instance, could work with Target to find expectant parents who may be in the market for a new vehicle. “If you’re an auto manufacturer, wouldn’t you want to reach expectant parents who are researching cribs or strollers to deliver a message that focuses on safety,” said Sylvan. “That’s a tremendous contextual moment that taps into the emotions of what the parents are feeling in that moment. I believe that’s going to be a huge component in the growth of retail media moving forward.” 

Jason Colon, managing director of integrated media planning at Omnicom, echoed those thoughts but added that retail media won’t be viewed as a channel just for performance marketing. “Retail media is going to come through programmatic offerings and it’s not just going to be about driving retail outcomes,” he said. “Retail data is going to have a significant role in terms of building brands and helping brands win.” 

Greg Koerner, who moderated the panel and serves as head of partnerships and agency relations at Target’s Roundel, said the words “closed-loop measurement” get thrown around a lot in the ad industry, but added that “I firmly believe we finally have control of that.”

“To have the ability to come back and say, ‘we actually helped the customer find their way to these products or this lifestyle' is really fulfilling,” said Koerner.