Here’s who stands to benefit from – or lose to – Amazon’s new retail media offering

Through the Amazon Retail Ad Service the company is offering to provide (at a cost) its retail media ad tech stack to retail brands that lack the scale or resources to build out their own systems. 

Think regional grocers, or specialist retailers operating in niche markets like iHerb, a vitamin and health supplement retailer that’s one of the founding partners of the Amazon service. Retailers that participate would be able to run display and search ads on their own sites, available to advertisers via Amazon Ads. Fees would be based on usage levels; prices haven’t been disclosed by Amazon.

The move likely won’t mean much for Target’s Roundel, Walmart, which is shaping up to be Amazon’s biggest competitor, or other retail powerhouses that already have their own retail media infrastructure. What it could mean, however, is a better leg up for mid to long-tail players in the space who want in on the retail media network boom. And it could challenge rival retail ad-tech vendors for the loyalty of retail ad tech suppliers.

“Their infrastructure is known for scalability, precise data and seamless ad format integration, so it’ll appeal to retailers—especially those without their own ad tech–while shaking things up for providers like Criteo and CitrusAd,” said Danilo Alvares, retail media manager at Acadia, a digital agency specializing in retail media.

Tech firms haven’t always found success in retail media. Microsoft’s PromoteIQ was shuttered last year, after its largest clients began opting for in-house capabilities. Amazon’s in a better position – it accounts for the lion’s share of retail media spend in the U.S. – but as players like Walmart and Target double down, the market outside its reach is growing. The former has provided retail media tech to other retailers outside the U.S. since 2022 though its Walmart Connect platform.

Also, this week, The Trade Desk announced its plans to acquire ad data firm Sincera. To Mike Feldman, svp and global head of retail media at VaynerMedia, it points to the idea that companies are more interested than ever in the open internet – things like streaming services, online gaming platforms and other ad-supported services that operate outside of the closed ecosystems run by tech giants. 

Seemingly, it’s more advantageous, Feldman said, for companies to operate like a tech partner or media publisher than a retailer. 

With that competition in mind, bringing more retailers under its umbrella and broadening the ad inventory brands are able to buy through Amazon Ads makes sense. “This deepens the moat around that Amazon has as a leader in retail media,” said Ross Walker, director of retail media at Acadia.

For advertisers, increased supply is always welcome. To have Amazon export its way of doing things to other retail media networks would be welcome for advertisers tired of the sector’s complexity, noted Alvares. 

“Right now, one of the biggest headaches is the lack of standardization — every retailer has its own attribution models, cost structures and reporting methods, making it tough to measure performance consistently,” he said.

Certainly, few retailers would disregard the chance to open up a new revenue stream. “It can be a substantial source of incremental revenue for a small retailer and they always need it. They always need a new source of revenue,” said Walker.

“It’s going to grow the market, and it’s also going to help it mature,” said Sean Crawford, managing director for North America at SMG, an independent retail media consultancy that helped U.K. brand Boots establish its retail media network in 2021. “It’s something that we’ll be talking to [clients] about. If you are [a retailer] in that tier … if you are looking for a way to scale quickly with a proven model and if you’ve got a really good e-commerce platform, it’s probably a clincher.”

But retailers considering jumping aboard will have to take a “holistic” approach, according to Eric Tilbury, senior director of ad operations and product solution engineering at ad-tech firm Inuvo. The service isn’t free from drawbacks.

Competitors could buy ads on their own inventory, and they’d be sharing data on audiences with Amazon. Furthermore, given the service only applies to digital ad inventory, retailers with brick and mortar footprints won’t be able to take advantage of in-store advertising space — a significant chunk of some retail media networks’ income.

On top of it all, the ads would likely only provide a nominal amount of incremental revenue, “like finding money in the couch cushions,” as Elizabeth Marsten, Tinuiti’s vp of commerce strategic services, put it. She suggested the relatively small audiences retailer sites are able to pull in, plus potentially their spotty site infrastructure or search tools, means they’d be adding quantity with questionable quality to Amazon’s ad bank.

“These aren’t main or torso or even tail retailers. This is the tip of the tail,” Marsten said.

Those watching the move closest would likely be third-party retail media network vendors, such as Criteo or CitrusAd. According to industry experts, Amazon’s platform is a direct challenge to those companies and their ability to recruit more retailers into the advertising supply chain. 

“It certainly puts a massive competitor on the map for them that I’m sure they were not necessarily anticipating,” said Feldman.

Alvares noted they will need to find new opportunities. “If retailers start migrating to Amazon’s platform, these companies will need to adapt quickly to keep market share, and innovate in order to grow,” he said.

Still, Walker suspects brands aren’t afraid of putting all their RMN eggs in the Amazon basket, both in terms of spending with Amazon’s ad business and buying into its new tech offering to stand up their own networks.

The bottom line? Brands will buy what works. By the looks of Amazon’s revenue, it seems to be working.