How advertisers are grappling with the influx of retail media networks
The industry may very well be headed toward a retail media arms race, if it’s not there already. With Google’s crumbling cookie on the horizon next year, data becomes marketing gold and retailers from Walmart to The Home Depot, are looking to cash in on their audiences. It has created some fragmentation in the marketplace and forced agencies to figure out how best to spend client ad dollars in the growing space.
“You go to sleep. You wake up and there’s another retail media network. That’s how it feels lately,” said Jennifer Kohl, chief media officer at VMLY&R ad agency. “Every $1 we represent for a client used to go four ways. Now it can go 4,000 ways. You have to make a lot of decisions.”
Last month, Cars.com, an automotive company rebranded and created its own retail media network (RMN), dubbed the Cars Commerce Media Network, which grouped the company’s media products, including Cars Social, FUEL IMV, and its advertising — making it yet another player in the retail media space.
The automotive company is pitching advertisers the audience it’s been developing for more than 25 years, looking to become a first mover in the automotive retail media space, said Jennifer Vianello, CMO at Cars Commerce. The company is currently shopping its offering with original equipment manufacturers (OEMs) and declined to offer details on what brands have signed up. Pricing on the Cars Commerce Media Network varies based on product and channel, per the automotive company. Cars Commerce did not provide additional details.
“We work with thousands of dealers already and most OEMs already, when it comes to advertising solutions,” Vianello said. “The change here is us pulling together our solutions, making them more measurable and more syndicated across multiple channels.”
It’s also a chance to attract more ad dollars, adding another official revenue source for Cars Commerce, which made a revenue of $173 million in Q3, up 6% year-over-year, per the company’s financial reports.
Cars Commerce joins the emerging retail media network space alongside giants like Amazon Ads, Walmart Connect, Target’s retail media business (known as Roundel) and Kroger Precision Marketing. Not to mention names like Lowe’s One Roof Media Network, The Home Depot’s retail media network, Albertsons Media Collective, Dollar General’s retail media network and a slew of others. Last week, ad holding company Omnicom bought e-commerce shop Flywheel Digital, making an $835 million bet that it’ll be a bigger draw for the agency’s digital commerce and retail media offerings.
Even with the growing list, there are no signs of slowdown with U.S. retail media ad spend expected to hit $45.15 billion this year, an increase of nearly 20% over 2022, according to Insider Intelligence. By 2027, that figure is expected to more than double, reaching $106.12 billion.
Last year, an estimated 20% of clients at the independent digital ad agency PMG were using retail media networks in their marketing strategies, according to Mary O’Brien, head of programmatic at PMG. This year, that figure has doubled to an estimated 40%, taking it from eight clients interested last year to 16 this year, per the agency.
“As cookies continue to crumble, with the big change coming to Chrome in July, having access to first party-data via your own customers becomes incredibly valuable,” O’Brien said in an email.
It’s a similar story at Code3 digital agency, where clients have shifted roughly 10-12% of their overall budgets to include retail media opportunities, per Greg Wolny, chief activation officer at Code3. At the same time, spend on in-store trade marketing and traditional television has tapered off for some Code3 client ad spend, making more room in media budgets for retail media, he added.
However, per agency execs, retail media spend has yet to become its own line item in media budgets like paid social or search. Those dollars stem from experimental or test and learn budgets.
More retailers, like Cars Commerce and even agency holding companies, are throwing their hats in the retail media ring and advertisers are throwing more dollars at it. But the growth has left agency executives grappling with how to best spend client ad dollars across so many different options all while budgets are under continued scrutiny. Do agencies spread client ad dollars out across several retail networks to amortize risks and diversify or double down on bigger networks, asks VMLY&R’s Kohl.
“The onus will be on the retail media networks to have really strong sales forces,” she said. “That’s going to be hard to break through the clutter of all the other media partners, not even just RMNs, all media partners. Because there’s — whether it’s programmatic, whether it’s connected, TV streaming–there’s just so many options these days.”
As far as agency execs are concerned, the retail media gold rush is just getting started with more dust expected to kick up when (and perhaps if) Google’s cookie finally crumbles next year. That said, Code3 is having more conversations with its clients about consolidation, focusing on true profitability versus appearing and advertising everywhere customers are, per Wolny.
“When the rug finally gets pulled out, where are they going to be able to spend and actually find the customers that are going to convert,” he said. “It’s the decision that these clients have to make in terms of being spread too thin versus going where it’s tried and true.”
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