By Kimeko McCoy • September 19, 2024 •
Ivy Liu
With more than 200 retail media networks (and counting) and finite media dollars, agency executives say a retail media reckoning may be on the horizon. Retail media networks (RMNs) have been touted as the industry’s latest silver bullet. But given that glut of competition, agency execs say they’re advising clients to be more calculated with their RMN spend.
In conjunction, retailers are asking for more ad dollars, gobbling up advertiser’s trade/shopper marketing budgets and turning their attention to budgets dedicated to national brand marketing efforts to ultimately make more money. Retailers hope off-site ad opportunities will reposition them from performance marketing channels to one-stop-ad shops.
Retailers are increasingly asking for bigger media spend commitments, agency execs say, and advertisers are grappling with how to keep pace.
Given the range of competitors, CPMs have a wide range, too, and are anywhere from $25 to $65, depending on the media type and the network, according to an agency exec who shared figures on the condition of anonymity. CPMs go for $15 for on-site display, $8 to $9 for off-site display, $12 for social and $33 for CTV, according to an agency executive who oversees digital commerce. (This second executive also spoke with Digiday on the condition of anonymity).
But before forking over more money, advertisers are questioning whether the juice is worth the squeeze.
“Increased share of voice within a retailer continuing to invest in sponsored products does not always translate to incremental outcomes,” said a third agency executive who spoke on the condition of anonymity. Meaning, bigger budgets and more ad opportunities don’t necessarily translate to booming sales and brand awareness. “There’s a point of diminishing returns — there’s a point of diminishing returns with all media.”
In the wake of behemoths like Walmart Connect, Amazon Advertising and Target’s Roundel, smaller retailers will find it difficult to compete for more ad dollars. Two things can happen, experts say: Consolidate to beef up offerings or lower ad costs.
“Retail media networks are going to have to right-size the pricing and be on par with where a brand would be able to direct buy or they’re going to have to prove that their media performs significantly better than this stuff over here that is cheaper,” according to the second anonymous agency exec.
At least one shop, indie agency Left Off Madison, is recommending against over-investing in retail media networks, discouraging “blind faith” investments until marketers are able to read the tea leaves on the efficacy of retail media networks, said CEO Rob Douglas.
“Instead we are putting in the hard work on behalf of our clients to shop around — to audit and assess all of the options from RMNs to other options including [ad tech companies like] Xandr, Evidnt, and others,” Douglas said in an email. Meanwhile, the second exec who spoke anonymously said it’s hard to make a case for investing brand dollars in smaller retail media networks unless they have a unique, differentiated audience.
That’s not to say agency execs are taking smaller networks off the table completely. There’s a case to be made for smaller retail media networks, from department stores, regional grocers and convenience stores, per the execs.
For example, Wpromote, a digital marketing agency, is telling clients to continue to invest where it makes sense for their distribution, product availability and sales goals, according to Sammy Rubin, vp of integrated media at digital marketing agency Wpromote. “With finite budgets, we advise brands on how to prioritize all RMNs into core, secondary and the longer-tail,” she said in an email to Digiday. “But the retailers within a given brand’s RMN program as well as the priority of those retailers can be fundamentally different from brand to brand.”
Increasing cost conundrum
The case is getting harder to make with a seemingly never-ending supply of RMNs, premium costs and lagging standardization across these walled gardens, muddying performance measurement. Soon enough, it’ll be a matter of siphoning dollars from one retail media network to support increased spend with another, said Mike Feldman, svp and global head of retail media at Vayner Media.
“I don’t see the bottom falling out, but I do see business models changing,” he said. “If that continues at every retailer and every organization, that’s where you’re going to see the consolidation [of retail media networks] because not everyone can get their 10-20% increase.”
Google’s change of heart in keeping third-party cookies in Chrome isn’t expected to knock the wind out of RMNs. (The cookies will still crumble. It’s just consumers doing the crumbling.) But with them back on the table amongst other data brokers, and sometimes for cheaper, marketers may need to rethink going all in on RMNs, said Boris Litvinov, president at ad agency Left Off Madison.
“Those [audience] segments don’t necessarily only have to be created by these retail media networks because there are other data providers that capture data that is either similar or has as high propensity as that data,” he said.
He added, “My constant struggle is: who is proving out that this first-party data coming from retail media networks off-site is more valuable, credible, whatever you want to position it than some of these third-party data providers.”
Retail media networks are the industry’s latest shiny object as marketers were on the hunt for data and retailers had it close to the point of sale. But the tides might be changing. As the second agency exec who spoke anonymously put it, “Honestly, unless there’s a really unique audience that you’re trying to reach, unless there is some aggregation that happens with those long tail retail media networks, I don’t even see there being a case for a brand to invest brand media dollars in the long tail.”
https://digiday.com/?p=555734
