M&M’s advertisement observable on a gas pump.
Courtesy: GSTV
The next frontier of the advertising market is not television – but screens near sales points.
Television has long been a major target for advertisers until technology companies such as Alphabet AND MetaPlatforms owned by companies such as Facebook began to eat away at market share. While advertising dollars are rapidly shifting from classic TV to streaming, much of the mix is now being taken over by retail and consumer products companies.
So-called retail media networks – advertising publishing platforms – of e-commerce, retail and consumer companies Amazon, Walmart AND Hooks They attract billions of advertising dollars, according to eMarketer and GroupM, the media investment arm of WPP, the world’s largest advertising group.
According to eMarketer, global retail media advertising spending is expected to more than double, from $114.18 billion in 2023 to $233.89 billion in 2027. Retail media is expected to account for a larger percentage of advertising spending digital, which has begun to eclipse classic media spending, growing from 18.9% of this segment in 2023 to 25.7% in 2027, according to eMarketer.
“What we’re hearing directly from brands is that they no longer wake up with a prescription to buy X amount of TV shows, X amount of social media and X amount of digital assets. They wake up every day trying to buy growth, trying to buy results for their businesses,” said Sean McCaffrey, president and CEO of GSTV, a mobile media network with more than 29,000 screens at retail fueling stations.
GSTV screens reach 115 million monthly viewers in 49 states.
Brands are “more open to where they can find their audience,” McCaffrey said.
“This is the recent TV that delivers mass advertising,” said Mark Boidman, head of media and entertainment investment banking at Solomon Partners. “If you want to reach someone quickly, the best way to do it is in the store or in the app. …It’s a 360-degree approach.”
Basket cookies
Walmart is converting approximately 170,000 digital screens in its U.S. stores into advertising opportunities. For example, a company that produces snacks or beauty products may advertise in the television aisle of the electronics department.
Walmart
These types of ads bought through retail media networks are often found on in-store displays and screens, websites, mobile apps, streaming services, clever TVs and social media. Not only is this fertile ground for an advertiser to present their offering to consumers looking to spend, but it also provides a wealth of first-party data.
The amount of data retailers have on customers – from one-time buyers to loyalists – is extremely valuable to advertisers looking to optimize their exposure.
“If [brands] advertising through digital advertising, and a week later a customer makes a transaction in a store or club, we can put it together for them and let them know that the ad really worked,” Walmart CEO Doug McMillon told CNBC earlier this year. “This is our distinctive advantage.”
Walmart was a particularly massive player. While this is still a recent frontier for the retailer, advertising has boosted the giant’s profits in recent quarters. The company also recently agreed to buy TV maker Vizio in a bid to further boost its advertising business.
Of the companies tracked by eMarketer, Amazon was considered as the largest retail media network in the US, accounting for approximately 75% of retail media advertising revenues. Other top chains by revenue include Walmart, Instacart, eBay AND Etsy.
The shift to retail media comes as advertisers face changes in technological privacy that have led to limits on data collection.
Earlier this year, Google began modernizing the way it and other companies track users online, using cookies that track users’ online activity so advertisers can target them with relevant ads.
In January, Google began restricting cookies for 1% of Chrome users, with the goal of completely removing third-party cookies by the third quarter of this year. Advertisers are wondering how to make this change.
Advertising and media executives note that retail media chains now dominate conversations at conferences and other gatherings such as the Cannes Lions advertising festival. It is also often the most significant element of earnings calls.
“[Retail media networks] Balance targeting, privacy and compliance. I think that’s where the money really starts to move,” Tim Hurd, vice president of media activation at Goodway Group. “I think this is key. “These retailers have this kind of data.”
Breaking away from television
Large brands that, in some cases, have held off for years on the TV advertising frenzy around the biggest U.S. sporting event, the Super Bowl, are back on Sunday and spending huge sums at record ad prices. It’s been a hard few years marked by pandemic-era restraint and political polarization, but the American Football Championship is offering an increasingly unparalleled viewership that’s too much to pass up.
Olivier Douliery | AFP | Getty Images
The growth in retail media advertising comes against a backdrop of major changes in the media landscape. Pay TV customer numbers and classic TV (non-sports) viewership continue to decline as more viewers shift to streaming.
And while interest in digital and streaming advertising is growing, classic television is still lagging behind. This was clear in the first quarter earnings reports of media giants such as Comcast NBCUniversal i Warner Bros. Discovery
Disney saw first-quarter advertising revenue decline across its classic cable networks and Hulu, despite growth in cable crown ESPN; Warner Bros. Discovery saw a decline in advertising revenue; The most significant global one received a welcome boost after the Super Bowl aired; and NBCUniversal’s domestic advertising revenues remained flat. However, streaming advertising revenues for legacy media giants have shown growth.
Beyond major TV moments like the Super Bowl and other live sporting events, advertisers are now strategizing on multiple fronts and splitting spend across TV, social media, e-commerce and digital, said Goodway Group’s Hurd.
“Advertising on linear TV continues to decline,” said Kate Scott-Dawkins, global president of business analytics for GroupM, noting that advertising revenues have shifted from print and radio to TV and now to digital over the past decade.
Retail media revenues have grown 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 and noting that brands’ advertising budgets may not be directly shifted from classic television to on-site retail advertising.
She added that classic TV revenues may shift to clever TVs, but this will be driven by data on customers’ consumption habits that retailers can make available.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.
