Latest / Retail Media Breakfast Club / Is Retail Media Actually Kinda 'Mid'? PART 2
Transcript
- Retail Media Is Mid Part 2 === [00:00:00] Today we're returning to the biggest podcast beef in retail media. ~Yes, I'm returning, ~yes. I'm coming back to revisit some of the arguments that Jason Goldberg put forward on a recent episode of his podcast, the Jason and Scott show, ~where he shared some, where he shared some, frankly what I, ~where he shared a point of view, which frankly I think a lot of people have, but. [00:00:16] Aren't saying, and that is that retail media is not that exciting once you step out of Amazon's turf. And he had a few key arguments to make. Sponsored product ads dominate the ecosystem. Small three P sellers are the ones actually buying most of the sponsored product ads and that the regional or specialty retail networks lack true incremental dollars and so I heard that I totally took the bait. I wrote up a quick response three weeks ago in the hopes of buying myself a little bit more time to ~pre ~procure good data and formulate a better argument. Well, the time has come three weeks to think about it. [00:00:55] Three weeks of really good comments from the community, and three fresh [00:01:00] sets of new data. I'm ready to pull the thread again. Just to be clear, me and Jason are actually friends in real life, so consider this beef pasture raised, not cage fort, let's jump in. [00:01:12] [00:01:15] ~So I'm gonna share three lenses that I wanna look at. Retail meet. ~So I wanna share three lenses that we can look at retail media through in order to quantify the opportunity beyond just Amazon, beyond just sponsored product ads beyond just the long tail of media buyers. ~So Len, ~so we'll start with lens number one. [00:01:33] Efficiency is greater than share of wallet. There is a marketing mix modeling platform called Keen Decision Systems that's been putting out some really great content lately and they found a widening gap between where ad dollars sit and where returns accrue across these different retail media networks. [00:01:54] So, quite interesting, ~this, ~this breakdown doesn't. Quiet foot to the [00:02:00] data that we see all the time from E-marketer showing that Amazon and Walmart between them have an 85% share of the market. Keen's breakdown, which has a bit more weight on the mid-market size brands. they've actually found a share of retail media. [00:02:16] Accruing to Amazon at 64%, which is quite a bit lower than the e-marketer estimate. But that really accounts for a ~much smaller, for still a. Uh, ~majority of the budget share, but not nearly as much as that data that we've seen from E-marketer. [00:02:29] So first of all, that's quite interesting. But second of all, what they found that's really fascinating is the marginal ROI metric, which is what ~is ~the next incremental dollar is expected to earn from a media dollar. And so. It's sort of hard to explain on a podcast. I hate talking about stats because, hard to follow, but [00:02:51] For Amazon, it's 0.71. Walmart has a better marginal ROI at 0.9, and then Target and Kroger [00:03:00] actually have really. ~Uh, ~impressive marginal ROIs at 1.08 and 1.63 respectively. [00:03:07] So, while Amazon has almost two thirds of ad spend, they sit on the flattest part of the response curve ~with ~with the lowest incremental profit per ad dollar. In the long term advertisers chase efficiency. When I shared these initial findings, the response from industry veterans was pretty telling, as my old boss Jared Belsky commented on my original post media plan is always ask, how will this dollar due versus the next available spot ~if you manage.~ [00:03:39] ~And that is, that's true. ~If you manage a finite budget, whether you're a brand or an ~adv, a ~agency, your next incremental dollar should follow the steepest response curve, not the biggest pie slice. And this data from Keen suggests that ~that ~curve is starting to move away from Amazon, and smart media buyers will follow the money. [00:03:58] [00:04:00] Lens number two, inventory and advertising mix are broadening Another comment ~from another argument ~from Jason is that most of retail media spend is sponsored product ads, which are mainly purchased by small three P sellers. And it's true that sponsored product ads still bankroll most retail media networks, but the coverage and formats are evolving. [00:04:20] ~There was a new, there's a new benchmark report put out. ~There's a new sponsored product benchmark report put out by the ad server technology company, Penta Leap, which is a client of mine as a disclosure, um, but their benchmark report shows Home Depot CVS and Best Buy have all added brand carousels to their sponsored formats and are even dabbling in video. And why do these formats matter? We can look at one. Specific use case with Best Buy after it introduced bottom of page brand carousels. Penley found that overall sponsored product coverage lept up to 97% coverage overtaking Walmart in one quarter.[00:05:00] [00:05:00] These carousels unlock inventory that the top grid of sponsored product ads can't reach, giving brands extra reach without crowding the prime slots. So. ~The very shape of the marketplace is widening. ~The very shape of the marketplace is widening on two fronts. So with that data, we can see what can be bought, that we have these new ad formats outside of sponsored product ads, but also we're seeing. [00:05:24] The shape evolve in terms of who is buying it. Penta LEAP's report also shows the makeup of the advertiser base is actually broadening. So there's a concept called head torso, tail when it comes to advertisers, and that means the combined footprint of large advertisers, mid-size advertisers, and small advertisers being. [00:05:48] The head, torso and tail. And so a jump in the torso plus tail share means more mid-market and long tail brands are buying ads, not just the handful of [00:06:00] giants. ~So, ~so Penta leaps data shows, over a six month period that the torso and tail advertisers have expanded rapidly. For grocery in particular, there's been a little bit of a more muted, change in makeup for specialty, but still heading in the direction of more. [00:06:20] Torso and tail advertisers, and then multi-category, which is gonna be your, probably just the Amazons and, and Walmarts, uh, of the world didn't really see any change. But that's because they actually have a very long tail already at about 51% of advertisers being long tail. So this is showing us that there's more of a robust mix of advertisers across these different segments than, um, strictly just talking about third party sellers. [00:06:50] [00:06:52] ~And finally, lens number three, channel evolution. A channel evolution from offsite.~ [00:06:52] ~And finally, lens number three, offsite is tipping. And finally, lens number three.~ [00:06:52] And finally, lens number three, offsite is where Amazon's media moat starts to drain. [00:06:59] [00:07:00] So we're seeing some evolutions in format. And broader advertiser participation. And that signals a maturing ecosystem. But the real disruption happens when retail media breaks free from retailers own onsite properties entirely. So the third piece of research I'm gonna share with you today is, , eMarketers Retail Media Forecast update for the first half of 2025. [00:07:24] Just dropped this month, authored by the Rockstar analyst, Sarah Marzano. And there's many gems in this report, but the one I wanna call out, it shows an ecosystem that's shifting ~beyond onsite, ~beyond onsite advertising. So e-marketer prediction is that offsite retail media spend will jump 36% in 2025. And within offsite, we're typically talking about and social media are big, big pieces of that. [00:07:52] CTV alone is going to grow 43% [00:07:56] onsite ads still. Rule in terms [00:08:00] of ad spend, but its share is going to slide, onsite advertising. Still rules, but its share is going to slide to 73% by 2029. ~And crucially, Amazon's share tumbles from 79% onsite to 69.~ [00:08:10] ~Okay, ~and crucially, Amazon's share of ad spend is 79% onsite, and this is where, like I mentioned, the numbers between Keen and E-marketer don't line up, but the comparison here is amazon accounts for 79% of onsite ad spend, but only 69% of offsite ad spend. And when we look at the whole retail media landscape, ~that's a $4 billion opening for other players to,~ [00:08:34] that's a $4 billion opening for other retailers to claim. again, offsite is where Amazon's media moat starts to drain. Offsite ads run on partner channels, so you think streaming TV apps, news websites, social media, et cetera, ~and, ~and a handful of retailers ~with those,~ [00:08:55] ~with those deals.~ [00:08:55] With those deals all appear in the same arena. At that [00:09:00] point, it's no longer about who has the biggest storefront. It's about who can wield the best shopper data to hit the right person with the right message. [00:09:11] So ~off ~offsite is a really exciting space for. Retailers, especially the long tail. ~It's a place that they can claim. It's a place that ~, Amazon is playing a different game with offsite, which is building their own channels, whereas the retailers are partnering with offsite publishers and building. [00:09:29] A business proposition there, [00:09:31] and that's where a lot of the growth in retail media is going to come from. [00:09:35] [00:09:38] So, wrapping things up here, [00:09:40] the reality is sponsored product ads on Amazon have worked really, really well for brands of all sizes for a very long time, and Amazon built a great product here. They have every right. To their current dominance in that area. But retail media is also becoming more [00:10:00] sophisticated. There's competition from new entrants. [00:10:03] There's more demand from media buyers, there's better technology. So we are seeing an evolution of retail media from being synonymous with sponsored product ads on Amazon to meaning much, much more. [00:10:16] These are the tea leaves that I'm reading. I hope that, uh, this sparks even more conversation in the space. Definitely check out those resources that I mentioned. I'll link up to them in the show notes and you can also read. A written version with more data and quotes, um, on the newsletter. [00:10:36] ~You can check it out on. ~You can check it out on LinkedIn or at retail media breakfast club.com. Thanks for tuning in.