Latest / Retail Media Breakfast Club / Big Agencies & Retail Media: A Slightly Unhinged Relationship
Transcript
- [Thurs 9/4] What Big Agencies Really Think About Retail Media === [00:00:00] A new study from AD Platform in Fillon landed on my desk last week. That perfectly captures a slightly unhinged relationship that agencies have with retail media. The headline numbers look great. [00:00:15] 80% of respondents call it an exciting opportunity for differentiation, and 63% of agency respondents actively encourage clients to explore it, but dig deeper and you'll find a more complicated story about an industry that is still struggling [00:00:30] with its own identity crisis. [00:00:32] This research conducted with 58 US-based senior agency professionals, mostly employed by large agencies and holding companies, reveals that while agencies are bullish on retail [00:00:45] media's potential, they're still frustrated by execution realities that hold back true strategic investment. [00:00:52] Let's jump in. [00:00:52] [00:00:54] I am gonna share a few of my personal takeaways from the report with you, and I'll link up to it in the show notes if you want to [00:01:00] check out the full report. So highlight number one, agencies love retail media, but there's still problems despite recognizing retail media's strategic value, a lot of agency responders are stuck treating it like a promotional channel. [00:01:14] [00:01:15] Only 7% of respondents view retail media as an upper funnel tactic, the lowest of any of the other medium options like social media and connected tv. Compare that to over 70% who see connected TV and linear TV [00:01:30] as brand building tools. [00:01:31] I do wanna point out that 40% of those same agency respondents expect retail media to perform across the full funnel, which of course comprises lower funnel, mid funnel, and upper funnel. [00:01:43] But when push comes to [00:01:45] shove, retail media often gets the performance marketing treatment, tactical, short term, and measured primarily on immediate sales lift. Now, this isn't entirely the agency's fault. Retail media networks have spent years positioning themselves around [00:02:00] conversion metrics and bottom funnel objectives. [00:02:03] The infrastructure involved, which features fairly limited creative options, inconsistent KPIs and measurement focused on immediate roas. Really reinforces promotional activation. Even [00:02:15] when there is strategic intent from advertisers. [00:02:19] There's a deeper reason why retail media remains stuck in promotion mode, and it extends beyond the platforms themselves. Industry Analyst, Andrew Lipman wrote in his [00:02:30] newsletter this week that ROAS is the single greatest force that determines ads spending today. [00:02:36] This creates a vicious cycle where even strategic retail media investments get evaluated on short term metrics. The problem is [00:02:45] structural In our industry, demonstrating positive ROAS has become how media, sellers, agencies, and brands. Capture more dollars, but as Andrew points out, true marketing effectiveness typically plays out over months and [00:03:00] years, not days and weeks. [00:03:02] Retail media networks desperate to prove their worth to budget Holders have leaned heavily into immediate attribution and conversion tracking, exactly the kind of short term thinking that reinforces tactical [00:03:15] activation, not top of funnel activation when agencies know that they're going to be judged on next quarter's ROAS numbers. [00:03:23] Even the most strategically minded teams default to promotional tactics. Its rational behavior [00:03:30] in an irrational system. [00:03:31] But if there's one bright spot in this research, it's connected tv. [00:03:35] Connector TV already represents nearly a quarter of retail media network investment according to this survey. [00:03:42] And share is expected to rise even [00:03:45] further. Agencies praise CTVs combination of scale. Storytelling capabilities and household level targeting qualities that few other retail media formats can match. This mirrors what I've been hearing anecdotally from the market. [00:04:00] CTV is increasingly seen as a performance driver, not just an awareness tool. [00:04:04] Thanks to advances in measurement, shopability and programmatic access, it really enables retail media to position itself as a true full funnel solution. Now, [00:04:15] contrast this to digital in-store formats, which despite all the retailer hype and so many announcements about technology partnerships receive only 2% of spend from this agency. [00:04:26] Study the lowest of all retail media [00:04:30] formats. This suggests that agencies remain skeptical about these in-store formats, or maybe this is just my perspective, this is just me guessing brands are buying these placements directly with the retailer instead of through an [00:04:45] agency. [00:04:45] That's just a hunch though, and something I plan to dig into further. Shoppers don't think in silos. They bounce between online and in-store without [00:05:00] skipping a beat. Acosta Group's. Connected Commerce agency helps brands unify trade and retail media budgets to invest where shoppers are most likely to convert, whether that's on mobile or in the store aisle. Learn [00:05:15] more about acoa Group Connected Commerce at ACOA Group and let them know Retail Media Breakfast Club sent you. [00:05:22] That's A-C-O-S-T group. [00:05:28] So what is holding [00:05:30] large agency media buyers back from investing more in retail media? [00:05:35] The biggest barriers are gonna shock. No one who has listened to this podcast for a while. The top challenge is around measurement. [00:05:45] 40% of these agency buyers cite inconsistent measurement as the top challenge. While 33% are frustrated by the lack of third party validation or benchmarking, [00:05:57] here's what strikes me. Retailers [00:06:00] are rolling out flashy new features like in-store media formats, audience activation tools, shoppable video when upgrading basic self-serve measurement capabilities. Might win them more points. With existing [00:06:15] media buyers, the agencies are telling us exactly what they need. [00:06:18] Yet retailers see more focus on expanding their ad inventory than fixing the fundamentals that drive actual spend Allocation [00:06:26] beyond this cost and inflexibility concerns are [00:06:30] also highlighted among heavy retail media ad buyers. 43% of heavy media buyers cite high costs and budget inflexibility as challenges. [00:06:40] The backdrop here is rising CBCs for onsite media among the big [00:06:45] players like Amazon and Walmart. And when we're talking about offsite activation and connected TV activation, tapping into retailer's audience data, there's pretty high minimums. [00:06:56] And fees associated with that. There was a scoop [00:07:00] from Adweek that came out last week detailing what it costs to activate against retailer audiences using the trade desk. Across the board, the spend minimums are in the 50 to a hundred K range and a 30 to [00:07:15] 50% fee of media costs for custom audiences. [00:07:18] Seems steep to me, but I guess that's the going rate. But the challenges in buying retail media can't all be leveled at the retailers, agencies and the brands they represent [00:07:30] have structural issues that prevent the most effective uptake. [00:07:34] Of this medium. One of the top barriers to retail media investment among agency buyers is siloed budget ownership, specifically the divide between brand performance and [00:07:45] shopper marketing teams. There is a lot to unpack these divides make it difficult to connect targeted shopper data to broader digital plans and integrate retail media into existing tech stacks. [00:07:57] Within the different parties involved, there's. Discreet [00:08:00] challenges on the brand side. There's fragmentation between those individual teams that leads to competing KPIs and fractured budgets. The agencies sit in the middle of this complexity. They have to navigate the politics of the brand side [00:08:15] silos. [00:08:16] And try and translate those into workable retail media plans. And then retailers contribute to the friction too, but mainly in terms of data access, placement visibility, and preferred partner rules. There's also a question of [00:08:30] budget ownership as well. If we're talking about trade budgets versus retail media. [00:08:34] This organizational friction means that even when retail media platforms improve their capabilities, internal agency and brand politics might still limit investment. So [00:08:45] wrapping up here, this research from Inficon, while a small sample size is a pretty interesting data set of senior media buyers at large agencies, and I think we can look at this as being directional in nature in terms of [00:09:00] what big media buyers are excited about, what's preventing them from spending more with retail media. [00:09:05] And it's clear that agencies see. This opportunity. They want retail media to work as a strategic channel, but there are pretty fundamental infrastructure [00:09:15] challenges around measurement, transparency, and cross funnel capabilities that are still holding them back. The winners will be the platforms that can bridge this gap, particularly through formats like CTV, that naturally support full funnel objectives. [00:09:28] And the losers will [00:09:30] be those that continue operating as if enthusiasm alone is enough to drive strategic investment. [00:09:35]