Latest / Retail Media Breakfast Club / The Growth Demon Inside Retail Media: Why Profitability Will Define the Next Era (Demons Series Part 1 of 3)
Transcript
- Part 1 - The Growth Demon === [00:00:00] Kiri: Hello, and welcome back to the Retail Media Breakfast Club podcast. I'm your host, Kiri Masters, and today I'm joined by a special guest, Anne Hallick, the VP Americas at Miracle Ads, and we are kicking off a three-part [00:00:15] series called The Demons Inside Retail Media. [00:00:19] The biggest threats to retail media this year aren't external. It's not AI, it's not agentic traffic, it's not disintermediation, [00:00:30] it is internal. There are three structural problems the industry has been avoiding, and we're gonna talk about what they are and what it takes to face them. So today we are kicking off with the [00:00:45] first demon inside retail media, the growth demon [00:00:50] Retail media has been measured by top-line ad revenue growth, and that metric is now actively misleading the industry. [00:01:00] 2026 is the year that profitability becomes the real scorecard, and a lot of programs aren't ready for that conversation. [00:01:07] [00:01:09] Kiri: I am here with Anne Halic, the VP Americas for Miracle Ads, the sponsor of [00:01:15] this show. Welcome to the show, Anne. [00:01:17] Anne: Kiri, I'm so happy to be here. Long time listener, first time caller. [00:01:21] Kiri: Yes. Well, thank you for being, um, such a, such a great supporter of Retail Media Breakfast Club for many months now. [00:01:27] We put this topic together [00:01:30] when we were in Miami back just a, a few weeks ago. Feels like, uh, 10 years ago at this point. But we were part of some amazing discussions at the DRUM's, uh, Commerce Media Summit and then at Possible. [00:01:45] And we wanna talk about the demons inside retail media because retail media's growing up, but there are some pain points that are persisting right now. [00:01:54] So, um, I'd love to, to get into the conversation by talking about where we're [00:02:00] at with growth in retail media. Retail media's been a lot about top line revenue growth. We saw, you know, huge growth numbers come out from th- from the sector over the last couple of years. But there's [00:02:15] some, there's some challenges to that. [00:02:17] It, it can become a demon in and of itself trying to pursue growth at all costs. We talked a little bit about how 2026 might be the year that profitability becomes the real scorecard for these media [00:02:30] networks, but that a lot of programs aren't ready for that conversation. So something that you said at Possible, I believe it was at the, uh, the Adweek, um, activation, is that this is the year that retail media networks are gonna [00:02:45] shift focus from that top line growth to profitability. [00:02:48] So what makes you make that call right now? [00:02:51] Anne: Kerry, that's right. We have this amazing format called the group chat where everyone, instead of sitting on a panel and they sort of go around the horn and [00:03:00] ask each person to answer the same question, you're kind of pinging off other people. So we had Lisa Valentino w- was there- Mm-hmm [00:03:07] who's the president of BestBuy Ads. We had Mark Grether, who was representing PayPal Ads, and a couple other really fantastic [00:03:15] folks. And I- it was not well received, if you recall. So the editor at Adweek, Ryan Joe, had asked, "What do you think the curveball is that no one sees coming?" [00:03:25] Kiri: Yeah. [00:03:26] Anne: And my answer had been, "I am seeing more and more retail media [00:03:30] networks get challenged to achieve profitability or to at least operate in a more profitable manner." [00:03:35] And you said something a second ago when you were posing the question, which is, it isn't coming from within the RMN. It's coming from within the [00:03:45] retailer. And I think- Mm-hmm ... forever when we talk about retail media and commerce media, the asterisk is always going to be next to the fact that it is a business unit within a magnitudes larger overall [00:04:00] operating organization. [00:04:02] And so when we talk about this idea that, hey, it's a growth area, it is still very often representing a more modest percentage of total revenue. Mm-hmm. And that is why when the, the larger organization was looking [00:04:15] around, it's being held to account in a way that maybe in those first couple years of growth people were not necessarily concerned about whether or not the head count was growing alongside the revenue. [00:04:26] And I would argue that this year and beyond, that [00:04:30] is going to be a, a ratio and a proportion that is much more closely guarded. [00:04:33] Kiri: Well, how do you think that these networks are really able to benchmark that? Because to me, y- media, even if it's not poten- po- possibly being run a- [00:04:45] as efficiently as it could be, it's still gonna be one of the most profitable parts of the retail organization. [00:04:52] So by comparison, shouldn't it just look amazing? How would you as a retailer kind of know that there's more to be, [00:05:00] more juice to be squeezed out of that rather than, you know, just taking whatever the, the leader of the RMN can say to def- defend themselves? [00:05:07] Anne: I would say more often it's the management consulting firms that have come in and done the actual sizing. [00:05:14] And so [00:05:15] part of it is that those numbers are coming from outside the business. And so you have, uh, you know, BCG, McKinsey, uh, Accenture, Deloitte coming in and actually sizing what they think the reasonable revenue opportunity is. And as you [00:05:30] have talked about quite a bit in your writing and in your podcasts, a lot of that is really just understanding the shift of those dollars from other pockets and other departments. [00:05:39] And so Kerry, I would say part of the reason why they're being held accountable is that if I'm the shopper [00:05:45] marketing leader and I see those dollars represented as attrition in my department, but really they're just flowing over to another department- Mm-hmm ... you can bet your butt that I am pointing that out, and I'm being very loud about that because within these organizations, everyone still has to kind of live [00:06:00] in the business that they're in. [00:06:01] They don't exist as an island, even if they are operating separately. [00:06:05] Kiri: Yeah. That's, that's a great point. There is a, a lot of self prese- decisions that are made for self-preservation at the end of the day, and what is gonna [00:06:15] make sure that I'm still at this company and I'm up for a promotion next year. So this is something actu- actually, Mark Williamson, the, the leader of retail media at Costco, he's talked elsewhere about this, how retail media at Costco [00:06:30] is really, given the mandate to drive the core business flywheel, it has to drive product sales, it has to drive membership affinity, otherwise it's gonna lose executive support. [00:06:43] So I'd love to hear from your [00:06:45] perspective at Miracle Ads, you work with retailers across the globe. How are you seeing the requirement to build the entire retailer's business now becoming a requirement for retail media beyond [00:07:00] just their own distinct P&L? [00:07:02] Anne: I love that. I have so much respect for Mark and what he's built, not just in his tenure at Costco, but really across the course of his career. [00:07:12] He's one of the few people, when I look [00:07:15] out at the retail media landscape, I sort of joke that there's two types of retail media leaders, the technologist or the salesperson. Mm-hmm. Um, you can kind of go around and start diagnosing, "Ah, the technologists, they built this really robust tech stack," [00:07:30] but they might be behind on revenue targets. [00:07:32] Or, "Oh, the, the sales leader is going out and telling this really compelling story," but if you look behind the curtain, there's not a lot of technology supporting it. It's really sort of people powered. Mm-hmm. And where I think [00:07:45] Mark really gets this right, and he's been able to use his example of being inside of Costco, which is so protective of the member experience. [00:07:53] The truth is that every retail media leader has had to have that conversation with their merchandising [00:08:00] counterpart. Um, Molly Jones from Ace Hardware recently at the IB Connected Commerce Conference actually brought her merchant onto a panel, which was so fantastic. It was amazing. I love that. Uh, she was a firecracker too. [00:08:13] It was a, a really [00:08:15] lively conversation. Um- Wow ... but Mark, Mark's point is really if it isn't driving the business, what is it for? Is kind of the question. Mm-hmm. And again, I would just sort of argue that everyone is playing that, that record internally somehow, which [00:08:30] is if, if it's interrupting the shopper experience, if it's somehow not encouraging sales to the degree that we thought it would. [00:08:37] When you look at Miracle's core software, the business is actually 13 years old. The focus of the business for that long [00:08:45] has been third-party e-commerce marketplace software. [00:08:50] That's what we power. 450 retailers worldwide actually leverage the marketplace software. And so when we look at why Miracle Ads was built and what is it [00:09:00] for, it's, it came out of the fact that these retailers were layering in hundreds, if not thousands, of new sellers who they wanted to convert into advertising, and the tech stack that existed just simply didn't support that kind of [00:09:15] advertiser. [00:09:15] These are people who want more of an always-on type budget. They're not always represented by a media agency. But really it came out of the fact that we already have the catalog, we already have the transaction data. All we had to do was flip it on and make sure that they were able to manage that inventory and do that yield [00:09:30] management for themselves. [00:09:31] And we have clients, by the way, who are not marketplace clients. They're pure ads clients. Um, and so the opportunity that we have had with what we've built at Miracle Ads is to support exactly what Marco has been talking about, which is [00:09:45] that if the ads flywheel doesn't actually drive incremental business, then it isn't really fulfilling the promise for the retailer. [00:09:54] It's only fulfilling the promise for the media leader. And- Oh my gosh, yeah ... you know, Marco talks about this publicly. [00:10:00] Marco talks about the fact that Costco has committed to him that he is gonna be able to do it right, and you see what he has stood up and you see the success that he, he has had, and I think everyone is just really proud of that for him. [00:10:13] He is a [00:10:15] model for what is going to be sort of held to account within these other organizations. When I talk about something like profitability, we don't get to just go hire a sales team of 30 people and, you know, try to follow an old playbook. It [00:10:30] really has to be driven by technology that's gonna allow reinvestment of that ad dollar at a very low cost to serve that advertiser. [00:10:37] Kiri: Absolutely. Yeah, and these things, there is a cycle that needs to [00:10:45] happen where there is investment required to actually get to that point where it can be profitable. I look at what Home Depot announced a few weeks ago. They made all of these announcements. Almost every single one was made available self-serve [00:11:00] right from the jump. [00:11:01] that is something that requires a lot of effort to do, but to fuel that next stage of growth is, as you said, there needs to be that investment needs to come before- That's right ... the dollars start flowing in. [00:11:13] Anne: That's right, and I [00:11:15] think what the Home Depot has done with their upfront format is just so exciting. [00:11:20] I think they call it the In Front. Um- Yep ... and, uh, you know, what is fun about that for me is you see retail media leadership, people like Molly Batten, who's the CMO over there [00:11:30] They're really owning the narrative and really creating moments of celebration, and that's what gets people so excited about what retail media can really hold. [00:11:40] And you look at Orange Apron Media and what they've been able to do, [00:11:45] and it's- it's had to be at scale, one, because of the size of that organization overall, that that's a- a meaningful retailer within the US market specifically. And when they're attracting those ad dollars, if they really wanted to scale, they [00:12:00] have to get out of that managed service trap where you're gonna see margin on top of managed service. [00:12:05] But if you're competing with, you just read about this recently, the idea of, like, national dollars, that- that has to really be an apples to apples type conversation. [00:12:14] [00:12:15] Kiri: Well, we have just spent a good 10 minutes talking about the growth demon inside of retail media. There are two more demons that we're gonna talk about in this series- [00:12:26] the silo demon and the shortcut demon. So make sure you [00:12:30] stay tuned for the, um, upcoming episodes next week and the week after. But in the meantime, Anne, I am so excited about your summit that is coming up June 10 in New York at Convene. What are you excited [00:12:45] about for Outpace? [00:12:46] Anne: This is an incredible event. [00:12:48] I had just joined the company last year when we had it, and, you know, I was ready to run through a wall afterward. I mean, the speaker lineup is absolutely- Nice ... incredible. The- the way that we're able to [00:13:00] celebrate our clients but also really showcase their success for other retailers, I don't know that there's an event like it anywhere else in the market. [00:13:08] Kiri: Amazing. Well, I will be there, and listeners of the show can definitely, uh, should definitely [00:13:15] sign up to attend if you're in the New York area or if you wanna come in especially for it. There is a really great line up here. It's June 10 at Convene in New York. [00:13:23] We'll link up to the registration page in the show notes. Anne, thank you for joining me. I will see you next week. [00:13:29] Anne: [00:13:30] Thanks, Kerry. This was fun. [00:13:31]