Latest / Retail Media Breakfast Club / How Alliances Could Solve Retail Media's Fragmentation Problem (Part 1)
Transcript
- RMN Alliances Part 1 === [00:00:00] I've been reading Ari Papa's excellent new Yield, how Google Bought, built and Bullied its way to advertising Dominance. [00:00:08] And this book is hitting me like a ton of bricks as someone who came to advertising. Via the [00:00:15] e-commerce world. The parallels between today's retail media chaos and the mid two thousands digital advertising landscape are kind of eerie back then, hundreds of individual websites sold ads [00:00:30] directly. [00:00:30] Media buyers had to negotiate with each publisher separately managing countless insertion orders, and somehow stitched together campaign performance across incompatible reporting systems. Sounds similar. [00:00:45] Yes, today's retail media landscape is living through its own version of this nightmare, except now we're dealing with hundreds of retail media networks instead of publisher websites, [00:00:56] [00:00:57] [00:00:57] Yet, distribution of [00:01:00] opportunity among RMNs is top heavy, to say the least. According to E-marketer, Amazon commands 75% of US retail media spend. In second position, Walmart takes another 7%. That leaves [00:01:15] just 16% of retail media spending in the US for the long tail of 248 other retail media networks. [00:01:24] And when we look at actual growth within the sector, it's even more sobering. [00:01:30] E-marketer also estimates that the rest of market rends are growing at 11%. So that's everyone else whose RMN doesn't start with an A and N with an N. So they're growing at 11% and Amazon is growing at [00:01:45] 23% year over year growth. [00:01:47] So not only is Amazon capturing the lion's share of all spend, they're also growing. More than twice as fast as everyone else. Let's be honest about how we got here. Management [00:02:00] consultants swept through retail boardrooms a few years ago, promising a profit oasis in a desert of razor thin margins, launch a retail media network. [00:02:11] They said it's pure profit. They said brands [00:02:15] will line up to spend. And this rationale made sense. Amazon first started breaking out eye popping financials for its advertising business back in 2021. Surely that pie is large enough for a few [00:02:30] more. What the consultants didn't mention was the catch 22 awaiting these retailers. [00:02:36] You can't attract significant ad revenue without major investments in technology sales teams. And measurement capabilities and [00:02:45] actually, [00:02:45] You can't justify those investments without the revenue. Welcome to what I call the doom loop of retail media. [00:02:52] Meanwhile, brands, the end users of these networks are drowning in complexity. We've heard stats [00:03:00] like this before, but just citing one of them from the A NA's July, 2024 report about the biggest challenges that brands have with RMNs lack of standardization across platforms. [00:03:11] That's the top challenge. 57% of brands saying [00:03:15] that. Another point, the walled garden problem, where each network operates its own isolated kingdom. 44% of brands agree with that being a top challenge. [00:03:25] Various studies show that brands are meaningfully investing in [00:03:30] only five to seven retail media networks. [00:03:34] And I'll tell you, coming from the agency side myself, supporting retail media Network number 27 requires the same planning, buying, reporting, work as [00:03:45] the number seven, but for a fraction of the reach. The ROI math stops working pretty quickly. Sure you're crushing it. Sure. You're crushing Sure. You're crushing it on [00:04:00] Amazon and Walmart. But what about Kroger, Instacart, and the fast growing regional grocers? [00:04:06] A Costa Group builds holistic media plans on real shopper behavior across all the US retailers that your brand cares [00:04:15] about. from digital shelf to retail media to data analytics, Acosta Group offers end-to-end connected commerce all under one roof. Learn more at ACOA Group and tell them Retail Media Breakfast [00:04:30] Club sent you. [00:04:31] That's a C OS T group. [00:04:36] Now finally we get to my rhetorical question. Are retail media federations a possible solution? And this is where history to me, [00:04:45] reading this book about Google's advertising business history starts to rhyme. Just as ad networks and exchanges brought order to the fragmented display advertising market, retail media federations are emerging as the next [00:05:00] logical step. [00:05:02] Take for example, ripple, spelled R-I-P-P-L, [00:05:05] which was launched by Cardlytics. They've assembled what they call the leading national consortium of Regional Grocers and Convenience stores, [00:05:15] and they count among this consortium. Grocers like Wegmans, giant Eagle, Schnucks Lows, foods, food, city Associated Food Stores, and more together in that consortium, they're aggregating [00:05:30] 140 million [00:05:31] shopper profiles across 58,000 locations. Suddenly these regional players. Can offer national scale to advertisers through a single platform by pooling their audiences and standardizing their [00:05:45] offerings. Smaller retailers can compete for budgets that would otherwise flow exclusively to Amazon and Walmart. [00:05:51] For brands, it means accessing diverse retail audiences without the operational nightmare of managing dozens of separate campaigns. [00:06:00] I've been told of other alliances information that haven't yet been publicized as well. This movement seems to be building and it should be. The current model where every retailer operates their own isolated platform in my mind, [00:06:15] is unsustainable. [00:06:17] Brands don't have infinite bandwidth. Retailers can't build Amazon level ad tech. Something has to give. [00:06:24] The retail media industry is more dynamic than ever, but there are some cold truths to face. We [00:06:30] can continue down the current path where Amazon and Walmart hoover up ever larger shares of spending, while hundreds of smaller networks fight over scraps, or we can recognize what history has already taught us. [00:06:42] Fragmented markets naturally [00:06:45] consolidate through cooperation, but of course, building these alliances isn't as simple as shaking hands and sharing data. So in future episodes of the podcast, I will be peeling back the layers of what it really takes to make a federation [00:07:00] work. So I'm planning for now four part series. [00:07:04] In part two. We'll get into the mechanics of. How does a retailer in Chicago share audience data with one in Miami without giving away competitive secrets? What happens when six [00:07:15] grocers need to split advertising revenue from a campaign that run across all of their stores? So we'll look into real federations like Ripple to understand the tech infrastructure, governance models, and awkward compromises that make or break these [00:07:30] partnerships. [00:07:30] In part three, I'm gonna take us back to the history books and look at what types of alliances and federations have been made. In the world of advertising history and look to see what kind [00:07:45] of successes and failures follow predictable patterns that today's retailers would be wise to study. And then finally, part four, looking ahead to the wild cards. [00:07:54] What happens when AI agents start doing the shopping for consumers? How would [00:08:00] Amazon respond to federations actually start gaining ground? We'll explore why AI might actually accelerate the need for alliances. There's an old saying that says, if you wanna go fast, go alone. If you wanna go far, go [00:08:15] together. [00:08:16] Amazon went fast and got there first for everyone else. Going far might mean going together.