Advertisers are driving retail media spending as TV declines

Seen an M&M's ad on a gas station.

With thanks to: GSTV

The next frontier for the advertising market is not on television, but on screens near points of sale.

Television was the main target for advertisers for a long time, until tech companies like Alphabet And MetaPlatforms like Facebook started gobbling up market share. As advertising dollars rapidly shift from traditional TV to streaming, retail and consumer products companies now account for a significant portion of the mix.

The so-called retail media networks – the advertising publishing platforms – of e-commerce, retail and consumer companies such as Amazon, Walmart And Kroger attract billions of dollars in advertising, according to data from eMarketer and GroupM, the media investment arm of WPP, the world's largest advertising group.

According to eMarketer, global retail media ad spend is expected to more than double from $114.18 billion in 2023 to $233.89 billion in 2027. Retail media is expected to represent a larger percentage of digital ad spend, surpassing traditional is starting to eclipse media spending, growing from 18.9% of that segment in 2023 to 25.7% in 2027, according to eMarketer.

“What we're hearing most directly from brands is that they no longer wake up with a prescription to buy X amount of TV, X amount of social media, X amount of digital. They wake up every day trying to buy growth, to buy results for their business,” said Sean McCaffrey, president and CEO of GSTV, an on-the-go media network with more than 29,000 screens at convenience store fuel stations.

GSTV screens reach 115 million viewers per month across 49 states.

Brands are “more open-minded about where to find that audience,” McCaffrey said.

“It's the new TV for long-reach advertising,” said Mark Boidman, head of media and entertainment investment banking at Solomon Partners. “If you want to reach someone quickly, it's best to get them in a store or on your app. … It's a 360-degree approach.”

Cookies for carts

Walmart is turning the approximately 170,000 digital screens in its American stores into advertising opportunities. For example, a company that makes a snack or a beauty product can advertise in the electronics department's TV channel.

Walmart

The type of advertising purchased through retail media networks is often found on in-store displays and screens, websites, mobile apps, streaming services, smart TVs and social media. Not only is it fertile ground for an advertiser to get their offering in front of consumers looking to spend money, it also comes with a lot of first-hand data.

The amount of data retailers have on customers – from one-time buyers to loyalists – is extremely valuable to advertisers looking to optimize their visibility.

“Like [brands] For example, if you advertise with a digital ad and a customer makes a transaction at a store or club a week later, we can match that for them and let them know that the ad really worked,” said Doug McMillon, CEO of Walmart. told CNBC earlier this year. “That's the differentiating advantage we have.”

Walmart has been a particularly big player. While this is still a new challenge for the retailer, advertising has boosted profits at the major retailer in recent quarters. The company also recently agreed to acquire TV maker Vizio in an effort to further boost its advertising business.

Among the companies eMarketer tracks was Amazon considered the largest retail media network in the US, with an approximately 75% share of retail media advertising revenues. Other top networks in terms of revenue are Walmart, Instacart, eBay And Etsy.

The shift to retail media comes as advertisers face changes in tech privacy that have led to a decline in data collection.

Earlier this year, Google began revamping the way it and other companies track users online, using cookies, which monitor Internet users' activity so advertisers can target them with relevant ads.

In January, Google began restricting cookies for 1% of its Chrome browser users, with the aim of completely removing third-party cookies by the third quarter of this year. Advertisers are struggling with how to make the switch.

Advertising and media executives note that retail media networks now dominate conversations at conferences and other gatherings, such as the Cannes Lions advertising festival. It's also often a highlight of earnings calls.

“[Retail media networks] ensure a balance between targeting, privacy and compliance. I think that's where the money really starts to shift,” Tim Hurd, vice president of media activation at Goodway Group. “I think that's the key. These retailers have that kind of data”

Away from the television

Major brands that in some cases had to sit out the TV advertising frenzy surrounding the biggest American sporting event – ​​the Super Bowl – for years are returning on Sunday, spending big at record advertising prices. It's been a bumpy few years, marked by pandemic-era restraint and political polarization, but the American Football Championship offers an increasingly unparalleled viewership that's too big to pass up.

Olivier Douliery | AFP | Getty Images

The rise of retail media advertising is taking place against the backdrop of major shifts in the media landscape. The number of pay TV customers and the number of traditional TV viewers (outside of sports) continue to decline as more viewers turn to streaming.

And while ad buying is digital and streaming While things are recovering, traditional TV is still lagging behind. That much was clear in the first-quarter earnings reports from media giants like Comcast's NBCUniversal and Warner Bros. Discovery.

Disney saw a decline in ad revenue for its traditional cable networks and Hulu in the first quarter, despite an increase at cable crown jewel ESPN; Warner Bros. Discovery reported a decline in advertising revenue; Big global got an expected boost from broadcasting the Super Bowl; and NBCUniversal's domestic advertising revenues were flat. However, streaming ad revenue for the legacy media giants showed growth.

Beyond TV tentpole moments like the Super Bowl and other live sports, advertisers are now strategizing on multiple fronts and dividing their spend across TV, social media, e-commerce and digital, Goodway Group's Hurd said.

“Linear TV advertising continues to decline,” says Kate Scott-Dawkins, GroupM's Global President of Business Intelligence, noting that ad revenue has shifted over the past decade from print and radio to TV and now to digital.

Retail media revenue grew from less than $1 billion in the U.S. a decade ago to a projected $42 billion this year — or $129.4 billion globally, Scott-Dawkins said, citing GroupM data, noting that brand advertising budgets may not immediately shift from traditional TV to on-site retail advertising.

She added that traditional TV revenues could shift to smart TVs, but based on the customer spending behavior data that retailers can provide.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

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