Manning: my advertising medium of the year? Retail media networks
While it might not have the glitz of other channels, retail media is where the money is going.
When the media history books are eventually written, 2022’s chapter will no doubt be dominated by the Twitter fiasco.
Future audiences will be shocked at how the world’s richest man paid $44bn for something worth roughly a quarter of that amount, and then proceeded to lose a huge chunk of its advertising revenues while granting airtime to dangerously extremist voices.
No doubt the free-speech champions will be delighted at the relaxation of content moderation on Twitter, but they will be less pleased when Twitter’s very existence is jeopardised as advertisers, rightly, head for the hills.
Advertisers fleeing from Twitter, such as Apple, won’t be troubled by low-grade accusations of not caring about free speech. They are also free to advertise where they choose.
Twitter is not a significant advertising property and is easily excluded, even if its profile suggests otherwise. The nature of its new ‘anything goes’ approach is exactly what advertisers don’t want, so Twitter’s misfortunes have little impact on the advertising market.
Apple itself and TikTok could both claim to be this year’s most newsworthy stories for the advertising media sector. Apple’s influence over the online advertising market has been in plain sight as its hold on devices eats into the advertising revenues of the big social platforms, except for TikTok — at least for now.
Apple is in the process of developing an ad business that will take advantage of its hold on the consumer electronics market and the consequent effect on competitors such as Meta. No-one should bet against the world’s most valuable company.
TikTok itself has had a remarkable year with its superior video product overshadowing Facebook and Instagram, but it too has written down its ad revenue forecast due to the adtech crunch.
Meta will be a 2022 story of a different sort as it desperately attempts to shift towards the chimera of the Metaverse and sees both Facebook and Instagram lose share to TikTok.
In fact, this year will be seen as the year that the online advertising balloon deflated, as predicted by Arete Research.
Enter retail media
For good or bad, the big platforms hog the headlines but the biggest advertising story of the year is not sexy enough to make the front pages.
Retail media networks have emerged in 2022 to become a major force in the advertising market, even being dubbed ‘the third wave in digital advertising’ after Search and Social.
For the few uninitiated, retail advertising covers multiple aspects of customer communications across a retailer’s estate, usually hosted within retailers’ websites and other online properties fed by the data-led relationship between the retailer and its customers.
While there is rapid growth in the online element, retail media is increasingly becoming ‘omnichannel’, including instore media, digital out-of-home, customer e-mail and magazines, using data signals from a variety of sources, including location-based services in and around retail estate.
It effectively copies Amazon’s playbook and avoids some of the privacy issues of online display by use of registration and logged-in customer data, usually first-party and now ‘zero party’ data which is fed by purchase history, preferences and intentions.
Amazon itself is now making about $40bn in ad revenues, more than it does in Prime, and with growth of 25% in the third quarter.
With retail margins under pressure from Amazon, among many, traditional retailers are fighting back by using their properties to build both consumer and brand relationships.
One reason advertisers are switching spend out of social media into retail is the ability to use data more sensitively, including the potential to match purchases more closely to ad exposure. Data is notoriously difficult to extract from the big ‘Walled Gardens’, so realistic attribution is hard to achieve.
Advertisers’ ability to combine many data-sets to greater effect is being facilitated by advanced intelligence techniques and the adoption of ‘clean rooms’ (such as Amazon Web Services’ new offering), leading to greater data protection.
Retail online advertising is also less prone to the problems of low viewability and ad fraud in conventional online display in the Open Web.
This is where the money is going
Brands are aiming to make their presence as ‘native’ as possible within retail networks, with messaging as tailored as possible to the customer’s known purchasing behaviour, sometimes gleaned from loyalty schemes. Retailers know not to stuff their properties with irrelevant and obtrusive ads and, as they do not rely on ad revenue, they can avoid the pitfalls of over-monetisation that bedevil online publishers.
The UK is developing fast, with Boots and Tesco among the vanguard, but the biggest news is in the US where Insider Intelligence estimates that retail media networks will take $37bn in revenue this year, up 20% year-on-year.
It’s still early days, but this year was the year that Retail Media Networks broke through. While they may not have the glitz of other channels, it’s where the money is going.
Next year will be tough, but we can expect some channels to do better than others. Retail Media Networks will never set pulses racing, but they will be a far more important part of the advertising market than many of their higher-profile peer group.
Nick Manning is the co-founder of Manning Gottlieb OMD and was CSO at Ebiquity for over a decade. He now owns a mentoring business, Encyclomedia, offering strategic advice to companies in the media and advertising industry. He writes for The Media Leader each month — read his column here.