Retail media has risen to become the fastest-growing marketing channel in recent years, but the chance for aspiring networks to get a piece of the $100 billion-plus pie could be in peril if the category doesn’t clean up its act. As frustrations mount, with more brands becoming reluctant buyers in a fragmented ecosystem with a patchwork approach to transacting, measurement and campaign reporting, calls for standardization have gained notice in recent months.
Experts see true industry standardization as a difficult concept to realize and one that would be unlikely to get buy-in from the players that wield the most influence in shaping actual retail media practices. On the other hand, a failure to achieve some sort of level playing field could result in a reckoning for smaller platforms that are trying to prove their worth in the face of a handful of giants that are eating up more and more market share.
“From the publisher side and also on the brand side, the questions are popping up more: What's this investment going to do for me?” said Nich Weinheimer, executive vice president of strategy at Skai, formerly known as Kenshoo. “CMOs are going to be asking why they are going to continue to support this 30% year-over-year growth in investment in retail media.”
The ‘trough of disillusionment’
One of the biggest pitches for standardization is coming, not from watchdogs or regulators, but the publisher side. At Cannes Lions in June, Albertsons Media Collective, the retail media unit of Albertsons Companies, proposed a framework for bringing greater unity to the landscape, with a focus on implementing common practices around product characteristics, performance measurement, third-party verification and network capabilities. In the pitch, which received endorsements from Omnicom Media Group and Unilever, the grocery chain painted the lack of standardization as an existential problem for all retail media networks.
“To ensure the survival of this industry, we must come together toward a greater goal,” said Kristi Argyilan, senior vice president of retail media for Albertsons, in the announcement.
While the language is lofty, some underlying anxiety is founded. Albertsons cited a January study from the Association of National Advertisers that revealed many member marketers of the trade organization now begrudgingly buy retail media.
“From the publisher side and also on the brand side, the questions are popping up more: What's this investment going to do for me?”
EVP of strategy, Skai
A lack of ways to accurately measure performance; the growing sentiment that retail media buys are imposed as a tax by retailers versus a benefit; and the overall fragmentary state of the landscape have pushed 42% of advertisers to question their investments in the space, according to the ANA.
“When I'm buying banner ads or TV or streaming advertisements, I can create one unit and it can go to many different places,” said Nii Ahene, chief strategy officer for Tinuiti. “That ability does not exist at all for retail media.”
That said, retail media networks remain a juggernaut in an otherwise patchy ad market. The category is forecast by GroupM to grow revenue by 9.8% to $125.7 billion this year and overtake TV in terms of ad sales within the decade. Retail media networks have been a major beneficiary of cookie deprecation, which has driven brands to seek targeting methods that rely on the types of first-party transaction data that retailers wield in troves.
Still, souring sentiment today could carry long-term consequences. Weinheimer said that brands likely reached a “trough of disillusionment” in the retail media hype cycle in the second half of 2022 as an anemic economy battered marketing budgets. The standardization campaign demonstrates that publishers are taking the potential fallout’s impact on their bottom lines seriously.
“A lot more of the pressure has flowed upstream to the publishing side of the house, a.k.a. the retail media networks themselves,” said Weinheimer.
Who benefits from standardization?
While Albertsons has identified a clear pressure on the industry, its gestures toward standardization have invited some skepticism. Albertsons is effectively asking rivals to buy into its own framework for how the industry should be run, though it has an advisory council to oversee the development process and has pledged to support key initiatives being led by the Interactive Advertising Bureau (IAB), a trade group dedicated to digital marketing best practices.
Albertsons is also in the process of merging with Kroger, whose retail media network is among the most mature and sophisticated. Some perceived Albertsons’ move as essentially a brand-building play, allowing the group to position its retail media offering as a leader in a sea of networks that are still ironing out their identity and value proposition.
“They’re pushing for something that they know their advertisers are going to want,” said Andrew Covato, founder and managing director at Growth by Science. “If you’re the one controlling the standards, then you can make them favorable. My feeling is it’s almost like a strategic positioning.”
Even if nothing in Albertsons’ proposal is disagreeable on paper, retail media networks have gravitated toward an insular approach that is commonplace in a digital media world dominated by walled gardens like Google and Facebook. Getting the mass sign-on required to make a unified framework viable read to some as a pipe dream.
Albertsons has said its guidelines won’t be finalized until they’re properly pressure-tested and widely feasible on the execution front. Albertsons Media Collective did not respond to a request for comment on whether it is proactively reaching out to other retail media networks to join its standardization push and how many have signed on to its initiative.
“The walled gardens don’t want to compare results to each other, so what makes retail media all that different?” said Russ Dieringer, founder and CEO of research firm Stratably. “I haven’t seen the convincing argument.”
Elephant in the room
Albertsons is hardly alone in championing a clean-up for retail media. Interpublic Group of Companies in July stood up a new solution that helps clients manage their investments across channels. The market for tech intermediaries that serve similar purposes is booming as brands juggle managing dozens of networks. And, in the fall, the IAB will release retail media measurement standards overseen with the Media Rating Council for public comment.
“Anyone who can sit across the walled gardens is going to have a key role to play in influencing standardization,” said Weinheimer. “It's not mired in any sort of competitive layer between the publishers.”
Some experts could see the case for standardization benefiting smaller retail media networks that do not have the know-how or size to implement their own closed-loop ecosystems. Having apples-to-apples comparisons with larger competitors might be a way to more concretely demonstrate value, but doesn’t address the risks posed by overcrowdedness and sameness on the product front.
“The retail media industry would attract more dollars faster if there was more trust in how media was being measured,” said Greg Stevens, founder and president of Turbyne, a startup that just came out of stealth, in an email.
“Those mid-tier regional retailers like Meijer or HEB stand to benefit the most because the easier they can make their process the more they can offset their lack of scale compared to the big players,” Stevens added.
The elephant in the room amid these discussions is Amazon, which functionally operates in a category of its own. Analysts have indicated that the e-commerce giant controls more than 70% of the market in the U.S., where retail media is most prevalent.
“The challenge for any standardization effort is the fact that Amazon's not participating in it and they don't need to participate in it."
Founder and CEO, Stratably
Amazon’s ad sales leaped 22% year-over-year to $10.7 billion in Q2, more than triple what the No. 2 retail media network Walmart made across the entirety of 2022. And while Amazon has not quite refined its brick-and-mortar strategy, in-store is only just starting to become a bigger piece of the retail media discussion. Put another way, devising retail media standards without Amazon’s contribution would be similar to trying to standardize search marketing without recognizing Google.
“The challenge for any standardization effort is the fact that Amazon’s not participating in it and they don’t need to participate in it because they’re so far ahead,” said Dieringer. “If Amazon’s not a part of it, then you’ve standardized maybe 15% of the market, and that’s if everyone else goes along.”
A fight for survival?
Murkiness around standardization, where it’s clear some change needs to occur but unclear what mechanism might achieve that goal, offers another sign that retail media may be due to contract in the near future. Though the amount of spend flowing to the channel categorically remains healthy by any metric, the number of networks actually reaping the windfall could shrink. This year has already seen Gap pull back on its retail media bets, one of the first noteworthy failures in a space that’s otherwise been perceived as booming in the face of a downturn.
Even if standardization is broadly adopted, it’s an open question as to whether the industry’s current state is sustainable. Brands ultimately only have so many dollars to spend and so many ways to advertise on networks that functionally serve the same purpose, and they’re more likely to pick the ones that are attracting the most high-purchase intent traffic.
“Can all of these media networks agree and go along with whatever standardization comes about?” said Dieringer. “There’s going to be winners and losers. That’s going to be a real challenge.’