Latest / Retail Media Breakfast Club / Why Are Display Ads In Retail Media Still So Bad?
Transcript
- Retail Display Ads suck === [00:00:00] When Melanie Zimmerman launched onsite display for Macy's Media Network, she quickly discovered a frustrating reality. The fragrance category had more advertising demand than available traffic could support. While the apparel category experienced the opposite problem fixed CPM pricing where advertisers pay a set rate per thousand impressions. Couldn't adapt to these competitive dynamics. Any attempt to create more granular category specific media pricing would mean updating their already agreed upon pricing with advertisers, and created other operational complications. ~This experience, which Zimmer, this experience, which Melanie detailed in a recent essay on the CRI blog, highlights a much larger this experience.~ ~This experience with ~this experience, which Melanie detailed in a recent essay on the Criteo blog where she now works, highlights a much larger issue plaguing retail media today. ~Traditional display Adver. ~Traditional display advertising technology simply wasn't built for retail environments, and yet most retailers are still trying to [00:01:00] force a square peg into a round hole. Let's jump in. Good morning and welcome to the Retail Media Breakfast Club. I'm your host, Kerry Masters, and every weekday at 6:00 AM Eastern, I bring you candid and real discussions in the world of retail, media and marketplaces in just 10 minutes. So bring your own cup of coffee and we'll get smarter about retail media together. In this episode, I'm gonna talk about a brief history of display advertising, why that model and technology falls short in retail, why retail media needs different ad tech, and what Melanie proposes modern retail display media should look like. A brief history of display advertising to understand why retail media display is broken. It helps to first know what display advertising actually is. So display ads are the banner ads, the video ads, and rich media placements that you see on websites. These are [00:02:00] different from sponsored product ads, which are the product listings that appear in search results. Now display advertising has been around for a long time in the traditional publishing world where companies like newspapers and magazines needed to monetize their content online. The technology stack that emerged was designed for these publishers whose primary goal was really just to sell that ad space to generate revenue. That was it. The mismatch between. The traditional publishing world in retail becomes clear when you consider how this technology operates in retail environments. Brian Gleason, CRO, and President of Retail Media at Criteo noted in a January interview that most retailers are still running display on Google Ad Manager, and there was no way to connect this type of ad to their sponsored product campaigns. ~Andreas Reen, CEO, and co-founder of Ad Tech Company, Penta Leap, just to ~Andreas Reen, CEO, and co-founder of Ad Tech Company. Penta Leap puts it even more [00:03:00] bluntly. He says Google Ad Manager wasn't built for retail media. It's a general display tool for companies that don't sell products. There's no auction by design. They sell impression packages, like X million impressions for this price. And just as a side note, pen leap is a client of mine. So that's a brief history of display advertising, but it's important to note that display advertising is a substantial portion of retail media today. it is set to grow. According to E-marketer, display advertising will jump 130% from $23 billion today to $41 billion by 2028 with the share of total retail media spending rising to over 40% by 2027. So it is a big chunk of retail media today, but still falling short while Legacy display falls short in retail. The fundamental problem lies in a basic misalignment of objectives. [00:04:00] Traditional ad tech platforms were designed for these publishers whose primary goal, as I said, is driving ad revenue. But retailers have dual objectives. They need to generate advertising dollars while also selling the products in their catalog. There might even be additional nuances. Mark Williamson, who leads Costco's retail media network says that it's actually member value that comes before advertising metrics and potentially even that top plan revenue dollar as well. At Macy's, Melanie Zimmerman experienced this tension firsthand. The team eventually moved to bundled packages, selling groups of ad placements together, which was great for Macy's. Gave them a lot of operational flexibility, but it made it harder to optimize revenue, and it's because brands and agencies hate that model. It feels like a black box because you don't have any control over things like campaign pacing, optimization, keyword strategies, and knowing what [00:05:00] actually performed within that bundle of impressions. Why retail media needs different ad tech. The core issue here is relevance. And Andreas from Penta Leap offered a really great analogy. He says it's like a store window. Whatever you put out into the window has to be relevant. Otherwise it's just an ad. But people are also there to shop. That's the core of the business model. So ~this. ~This is why we have these sometimes jarring shopping experiences. ~You don't want to see a lap, uh, ~you don't want to show a tablet when someone searches for a laptop, but if you're optimizing just for CPMs as a retailer, you're going to just accept the highest bid rather than the product or the advertis that is most relevant to what the consumer search for. So what should modern retail display actually look like? In Melanie's article, she offers three core principles ~of how to modernize re ~of how to [00:06:00] modernize retail display ads. Number one is dynamic retail specific auctions. Amazon and Walmart have already validated auction based models for all types of retail media, ~but many retailer.~ But many retailers remain stuck with fixed price approaches that suits the legacy publishing model, but not the specifics of the retail business. What retailers need is a retail optimized auction solution that compliments any direct deals that they have with large appetizers and compliments that ~with an auction, an auction.~ With premium auction demand, a key difference here lies in how relevance gets factored into the auction. As Andreas from pen leave explains that the pen leaf technology maps each banner to a specific product or product range. When an ad impression comes in and there's 10 competing banners from 10 different advertisers. You don't wanna just pick the highest bidder. You have to look at which banners related products have really strong [00:07:00] organic coverage for that search. And that gets to that tablet versus laptop question, if you are making sure that a banner actually aligns with what users want, not just who placed the highest bid. This means maybe the retailer gives up a little bit of revenue for a wildly overpriced bid from a relevant product or brand, but they're really serving their retail business better because they're going to optimize click through rates and ultimately product revenue. Number two of part two of Melanie's vision for modernizing retail display true self-service capabilities. The managed service model that dominates onsite display today leaves brands feeling a little bit powerless. While some smaller brands may appreciate simple placement types, auto campaigns, essentially. Larger brands and the agencies that they work with want control. They want the ability to adjust [00:08:00] pacing placements and keyword strategies in real time. Real self-service requires supporting multiple bio types from lockouts, which are guaranteed ad placements at fixed prices and preferred deals, which is priority access to inventory at negotiated rates all the way through to auction based purchasing. And part three of the vision for the Future Modern Retail display should support retail native formats, including static ads, rich media, and onsite video, specifically tailored for brand storytelling in commerce environments. One example I love that was wildly successful from the moment it was introduced was sponsored brand video on Amazon. So if you're familiar with ad type, that's really what Melanie's talking about. These hybrid formats, blend display or video ads with shopable elements like sponsored products. And this creates a cohesive shopping experience ~that bridges demand, ~that bridges brand and performance goals. The path forward. The technology to solve these [00:09:00] problems exists. ~It's about the technology to solve these problems does exist. ~It's about retailers choosing retail first solutions over legacy publishing tools. ~As Melanie from Criti, as Melanie from Criteo, ~ now, Melanie Zimmerman works for Critio. It is a solution provider in this space, but I think her points are still super valid that the focus really, it's a win-win for the retailer and for the shopper whose experience is going to be a lot better, um, when a. Fit for purpose solution is implemented rather than some technology that was developed for kind of a different use case at the end of the day. And ultimately, brands are withholding spending from platforms that can't demonstrate true incremental value. We talked about a ton on this show as well as many other places, brands on average just work with 5, 6, 7 retail media networks. Amazon and Walmart controls so much of the pie already. For retailers that want to grow their retail media [00:10:00] business, these are the kind of tech changes that need to be enacted to capture more of that incremental brand budget.