Retail media rising

Advertising Week has its degree of silliness, from the decision to parade the Jolly Green Giant around Times Square and ignite police activity to the nearly decades long feud between Ad Week and Adweek. It doe serve a signaling role. It’s a data point of where the prevailing winds are blowing. Mike Shields of finds that in the mania for retail media. In addition, I talked about the challenges and opportunities in video advertising, along with many other topics, with Tom Pachys, CEO of Ex.co, our sponsor for our Advertising Week newsletters.

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The cost-benefit analysis of video

As The Rebooting’s recent video research report showed, video is viewed paradoxically by publishers. They see budgets shifting to sight, sound and motion. Video ads, formerly known as TV spots, were always valued by advertisers far more than a standard display ad, no matter what efforts were made to gussy them up. Yet for many publishers, the costs associated with video creation are certainly high but the revenue while potentially big is uncertain.

“The publishers that we work with say that this is their biggest line item when looking at the advertising part of their P&L,” Tom Pachys, CEO of online video platform Ex.co, said on The Rebooting Show. “That definitely works, but the cost of opening studios, recording videos, taking the risk, And also having that expertise – that's where the challenge is.”

At a recent private dinner The Rebooting held for publisher revenue leaders, the consensus was that launching a YouTube channel now is an impossibility without a strong paid growth plan. That layers more complexity on top of production, distribution and monetization. Consider the vogue for FAST (free ad-supported television) channels. Is anybody watching these, one publisher wondered.

The challenge of resources and where to place bets will be a recurring theme of the more-with-less era: How do publishers do more with fewer resources. The explosion of popularity of TikTok shows that very creative people can create content that is preferable to professionally produced content at a fraction of the cost. That’s not going away, so publishers will need to adapt. Publishers are again experimenting with “creator collectives” and using their muscle in packaging and brand relationships to complement the talent and deep audience connections these creators bring.

“There is a room for collaboration there and I think publishers should definitely do that,” Tom told me.

Check out the full conversation on The Rebooting Show feed on Apple, Spotify or other podcast services. Thanks to Tom for the conversation and Ex.co for sponsoring The Rebooting.

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Retail media rising

Mike Shields slanders the Manhattan Mall and checks in on why retail media is having a moment in this dispatch:

Unsurprisingly, the red hot retail media sector has a monster presence at Advertising Week this year (which is apropos, given that the event is being held at the former location of the dismal Manhattan Mall). Target’s Roundel, for example, is showing off a sizable activation in the lower level of the space.

Along with connected TV, retail media is one of the biggest digital media growth areas, predicted to become a $122 billion global market this year. The secret is out: retailers are sitting on a pile of valuable shopping data and sit at the bottom of the funnel, aka right before someone makes a buy. There’s a reason using Instacart means sorting through loads of sponsored listings before finding the item you searched for. Call it Adwords for CPG or annoying; depends on your perspective. The iron rule of digital media is what looks good on the spreadsheet wins, and retail media looks good on the spreadsheet.

Of course, digital media loves mania, and when there’s money to be had there is a rush to pile into the sector. (A cynic/realist might say that typically happens before measurement catches up.) Nobody’s saying retail media is another Web3 bubble – There are still marketing in the metaverse events going on, apparently – but there are some reasons for sobriety.

When you talk to folks on the brand and agency side of things, they say that retail media budgets are predominantly tied up with the two biggest players, Amazon and Walmart. The question is whether we are headed for another duopoly, or if all of these other newbies to advertising (Dick’s Sporting Goods, 7-11, etc.) will thrive.

Ad spending is often treated as a a single thing, but as Brian Wieser reminded media buying decisions typically take place at a category level. Much of the money flowing into retail media isn’t coming from typical advertising budgets that publishers would sniff. Walgreens, Instacart and Kroger aren’t taking display ad dollars from newspaper publishers..

That’s because so many of these ad dollars are tied to shelf space agreements and even product order sizes. This is the gray economy of marketing.

“These dollars are very locked up,” one exec said. “Sometimes you’re robbing one pocket to pay the other.”

Melissa Burdick, president of the retail media focused Pacvue, noted that siloing within many brands has the potential to slow down growth. "Trade budgets are often locked up," she said in an interview. "But these worlds are coming together."

Pacvue is one of many companies that has sprouted up to help steer budgets within this newly booming retail media ecosystem. Burdick, who co-founded the tech firm after logging 10 years at Amazon, said that it's going to be hard for any retailer to seriously make Amazon nervous. Amazon has its own ad buying platform, and its own marketing cloud. That means advertisers can use Amazon's tech to centralize buying and measurement decisions for thousands of products at once.

Still, Burdick said that the percentage of her clients' total retail spending that goes to Amazon is starting to dip as other players emerge. One thing that should help is the adoption of more self-service ads.

"If you're a brand today, there is so much you don't control,” Burdick said. “Inflation, what's going to take off on TikTok, etc. Retail media is so predictable. What's challenging is figuring out what is actually incremental."

One prediction Burdick had was that e-commerce overall was going to continue to grow- ironically due to the growth of shoplifting. "Do you want to have to wait for a key to buy deodorant, or will you just start buying it online?"

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Thanks for reading. We’ll be back tomorrow with a new dispatch.