There will be no religious talk in this article, but I will pose a challenging question. Is the shiny new toy of retail media everything the market has made it out to be, or is there a second wave of transformation needed for marketers to make the most of their investments?
From a simple point of view, retail media has exactly what advertisers want: a direct connection to the consumers who are on a site to, hopefully, shop for a product or category of products. Whether it’s influencing them with a homepage banner (think about a sign right as you walk into your local grocery store) or getting to a sponsored search ad (a placement you only pay for when a consumer actually clicks), there are a lot of onsite opportunities for manufacturers to leverage. And, amazingly so, the return on ad spend (ROAS) is almost always strong.
So, what’s not to love – right?
While retail media might appear as a particularly fruitful medium to invest in, here’s what marketers need to consider to ensure the juice is worth the squeeze.
Onsite Media: There are Only so Many Eyeballs
Onsite media, while leveraged due to its high margin and guaranteed shopper-mindset consumer interactions, typically has a lower revenue cap. And it makes sense when you think about it – there are only so many eyeballs to reach. In fact, CPG brand marketers often question the attribution and incrementality of onsite media.
This issue of incrementality can come in a variety of forms, but a big one has been when considering the value of an onsite sponsored promotion for a classic product (think a package of Oreos) that would likely appear at the top of the search anyway. How important was it to be in position two versus four for that product sale? And while onsite media darlings like Amazon have the lion’s share of revenue (along with audience), marketers will be wise to not put all their fruit in one basket.
Off-Site Media: An Unassuming Path to Wallet Share
Offsite media – such as other digital channels like TV, social and out-of-home – drives engagement at a time when consumers might not be shopping. And in the multi-device, multitasking world we live in, offsite media can drive brand recognition and engagement. It allows for the ability to change the consideration set, drive incremental trips to the store and change category penetration, and for the retailer to continue to keep their store top of mind since the advertising is more co-branded.
There’s an opportunity here for offsite media. It’s more effective when retailers empower CPG brands with technology partners that are more transparent. For example, what if at the end of the campaign a CPG brand was able to get log-level data at the impression and user ID level to fully understand a multi-attribution model? What if that model could be tracked through social, search and display so that both the CPG brand and retailer had a clean view across the entire campaign? This would provide the needed reassurance that the spend is worth it and continue to teach the marketer how to improve their entire path to purchase.
Controlling Reach and Frequency in All Environments
Another opportunity is that a majority of offsite programmatic buying is still done in cookie-based environments. Technology partners will tell you otherwise, but when you track where the impressions were delivered, you will see a majority of campaigns executed in Chrome, where cookies still exist.
To top that off, there is an unknown issue most marketers are unaware of, and that is called Reach Rate. Almost everyone understands that there is a match rate between the retailer and onboarding partners. Then there is a match rate between the onboarding partners and the DSP or tech partner of choice.
So what does Reach Rate mean? If, for instance, ID provider X only has its IDs showing up in 35% of the Open Web, then its reach rate is dramatically less than what the marketer is expecting. Worse yet, most onboarding partners are only getting 5% to 15% of the Open Web impressions tied to their specific ID, which means the overall reach rate is tiny.
Why is this important? When the marketplace talks about retail media being the solution with high fidelity CRM audiences (first-party targeting), the missing link is the idea I just mentioned. A 10 million-person audience that a DSP can only find 5% of is still just 500,000 people. When this happens, CPGs over-invest in media for a smaller audience instead of properly frequency capping across a wider audience, which would drive more efficiency.
There are solutions out there that can help expand the reach rate and control frequency to drive better ROI, ROAS and incrementality. Not only is this good for CPG brands investing these dollars, but for the retailers. Retailers want and need to show continued growth and value – reaching consumers throughout the entire journey, from engagement to conversion. By targeting a larger audience pool with better marketing reach and frequency controls, the promise of Offsite Media reaching its projected $20 billion growth by 2027 will be realized.
If we don’t improve on the old tried and true methods that the largest players are bringing to the table, don’t enhance the creative capabilities from simple formulaic white backgrounds with a product shot and a logo, and don’t start looking at lifetime value (LTV) versus ROAS and other incrementality measurements, we will be leaving retail media in a position of plateauing versus seeing it grow in the manner we all expect it to.
Measurement Will Tell the Real Story
Now, like any other valuable advertising medium, what is worthwhile can (and should) be measured. But as we’ve seen in other facets of our industry, how and by whom are critical questions. Take walled gardens, for example – for years, they have graded their own homework. And despite the myriad of industry articles annotating how they are flawed, marketers continue to feel bound to them and the audience they provide. We have an opportunity as an industry to not let retail media become another walled garden.
If you are a retailer, ask your technology partner for more. More reporting, more insights and a better understanding of where all of the dollars are being spent. If you are a CPG brand, demand what you demand from all of your major media investment sources: transparency, measurement and performance. Make sure you are getting everything you need to drive a profitable business, because you always want to invest more where you are seeing the long-term returns that drive growth.
Joseph Dressler is VP of Sales, Americas at Adform. With more than 20 years of experience in adtech and martech, Dressler is a seasoned sales leader with extensive knowledge of both buy and sell side technology platforms. Prior to Adform, Dressler was Regional VP of Retail at Quotient Technology, where he drove the adoption of innovative tools for Quotient’s retail media partners while maximizing investments from advertisers. Dressler has also served as SVP of Advertising Sales at LiveIntent, and VP of Sales, Integrated Media and Sponsorship at Competitor Group. He’s a proud father and University of Michigan Wolverine.