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10 minutes of expert insights every weekday. Your morning ritual for staying ahead in retail media.
Ethical dilemmas in retail media
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[00:00:00] Kiri Masters: when my former boss, Jared Belsky, launched a very public campaign against media rebates a couple of weeks ago. My first thought wasn't about traditional media, it was.
[00:00:11] What does retail media's version of this look like? [00:00:15] Belski, who is CEO of Independent media agency? Acadia, is returning media rebates to his clients and challenging other agencies to do the same, as he said, a decade after an industry report [00:00:30] exposed, undisclosed payments agencies still pocket rebates from publishers for hitting spending targets with clients' money.
[00:00:39] Now, full disclosure, Acadia acquired my retail media agency in 2022, [00:00:45] and their retail media practice was built from that foundation. I worked there for two years. This rebate campaign is beski, not mine, but it got me thinking about what ethical dilemmas exist specifically in retail media. [00:01:00] Retail media sells itself on transparency and closed loop measurement, the performance driven antidote to murky traditional media buying.
[00:01:10] But as this channel matures and the money gets bigger, some uncomfortable [00:01:15] tensions are emerging. I talked to a few brand side leaders, agency executives, and ad tech operators to figure out what's going on. This piece was originally published to my column at the drum on February [00:01:30] 24.
[00:01:30] Let's jump in pin.
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[00:01:33] Kiri Masters: Number one, brands are funding their own competition. Now, this one is unique to retail media. Retailers have private label products that compete directly with products from [00:01:45] national brands. But those private label lines don't pay into the retail media system. Branded manufacturers fund the data, the targeting, the measurement infrastructure, and their private label [00:02:00] competitors ride along for free.
[00:02:02] And this irks some brand manufacturers One brand told me that on key retailer marketplaces, the retailer's own private label product shows up first both on branded and [00:02:15] non-branded search results, often before even the ad. Brands are disadvantaged by spend, but also don't have the opportunity to defend themselves on the same brand qualities that helped these retailers initially find scale.
[00:02:29] But on the [00:02:30] retailer side, maybe it's a bit more nuanced than it appears For some retailers like Costco in the US, their private label brand is the best performing product in the assortment.
[00:02:41] Once you introduce paid placements, you're deciding [00:02:45] whether the best shopper touch points get awarded by what's best for the shopper, or by who pays the most. If you protect private label too aggressively, brands will feel like the playing field isn't fair. But if you let paid ads dominate and the store [00:03:00] starts to feel like brand land.
[00:03:02] Eroding the private label identity that customers came for. So that is a genuine dilemma about fairness and trust, not just revenue. And and the retailers actually face it just as [00:03:15] acutely as the brands that complain about it. Number two, spend incentives that tilt the playing field. So this rebate campaign from Jared Belsky focused on all forms of media, but retail media has its own [00:03:30] version of the problem. Perhaps it is not quite as slimy as elsewhere in the media ecosystem. But, um, I asked Jared how he sees his play out for retail media specifically, and he said. I actually don't [00:03:45] think that Amazon, Google, or any publisher is in the wrong.
[00:03:48] They are creating incentives to move ad inventory that is within their right. What is wrong is that the agencies take those fruits or they shuttle client funds into deals where [00:04:00] they win. Perhaps rather than sending that last dollar to a niche, RMN to test. Where they might not have a deal. So that is the ethics issue.
[00:04:12] But what do these incentives look like in [00:04:15] retail media specifically? One Amazon focused agency leader that I spoke with confirmed that incentives are happening across the board, but it wasn't in the form of straight up money into their pockets. They described rebates [00:04:30] involving the development of ad creative.
[00:04:32] So. Some of these retail media platforms creating free TV assets and similar added value perks in exchange for media spend [00:04:45] increases along with spend percentage decreases for reaching certain thresholds. So again, not the straight up cash rebates, but the structural effect is what's concerning.
[00:04:58] So [00:05:00] smaller agencies and brands that don't reach those spend thresholds end up being systematically disadvantaged versus the big agencies and the really big brands. Now, in my own time agency side, [00:05:15] I learned that my small independent agency had a higher fee on our DSP seat than competing agencies. Of a similar size, um, and that these differences were supposedly driven by spend [00:05:30] thresholds, and we had to sort of fight our way into getting the, the percentage that we deserved.
[00:05:37] Now, that might not be anything particularly new in media, but it should give brands pause that the playing [00:05:45] field maybe isn't as level as it appears, and that agency of record designations may be tilted. Towards larger agencies that get those preferential rates. [00:06:00] Miracle Ads is the only retail media solution designed for both one P and three P Marketplace brands. Why does that matter? Marketplace sellers demand a seamless advertiser [00:06:15] experience that still offers full funnel ad formats, and retailers need a flexible solution that allows you to scale your media business.
[00:06:24] Learn more@miracle.com. That's [00:06:30] M-I-R-A-K l.com. Number three, consultant selling the dream.
[00:06:36] Here's one that doesn't get discussed too much in the open, which is the prestigious management consulting firms that come in, sell the [00:06:45] dream of retail media revenue, and happen to be available to help clean up the mess when those projections fall short. For another fee. One ad tech source that spoke to me was very blunt.
[00:06:59] [00:07:00] Consultants can be incredibly valuable, but they also have a habit of painting hockey stick charts that look amazing on a boardroom screen. And impossible in real life. When the targets turn out to be fantasy, the consultants are somehow always available [00:07:15] to help correct for another fee. I've also heard the defense argument from the consultants themselves and they say, we gave our projection, but it was the executives at the retailers that wanted [00:07:30] the projection to be higher.
[00:07:32] That could also be true. Either way, the downstream effects on retail media network teams are real. There is strained internal credibility, unrealistic growth [00:07:45] expectations, and environments where pressure to hit inflated targets creates the conditions for some of the other ethical shortcuts on the list.
[00:07:54] Now, I spoke with Molly Gel last year who was the head of ACE Hardware's Red Vest [00:08:00] Media, and she told me that one of the key reasons that she took the job at ACE is that they let her set her own targets. They said, you come in and you tell us. How big this business should be, and that breathing room created [00:08:15] a different operating environment, one that allows Molly to focus on doing the right thing by advertisers rather than chasing unrealistic numbers.
[00:08:25] So that is a good news story there. We're running short on time here, so I'm gonna need to [00:08:30] speed through the rest of them. number four is a brandless echo chamber. I go to some of these industry events and it's the retailers and the consultants and the vendors all talking to each other. Without many brands in the room [00:08:45] representing their viewpoint, and I feel like that creates a bit of an echo chamber.
[00:08:50] And number five, no such thing as a free lunch. Again, this is not a, constrained just to the retail media industry, but these [00:09:00] big corporate hospitality events and entertainment.
[00:09:05] this exists in any B2B buying environment, of course,
[00:09:10] but it does mean that as the industry matures. And there is more pressure [00:09:15] on retail media to continue to grow and to continue to be efficient. There's the question of whether that cabana on the Plus at Cannes was a better investment than actually improving the technical foundation. For the [00:09:30] advertisers.
[00:09:30] So what next? Many of these dilemmas aren't exclusive to retail media. Kickbacks, hospitality, excess and inflated projections exist across the advertising ecosystem. But that doesn't mean we shouldn't try to address them, and it certainly doesn't [00:09:45] mean that brands and media buyers should remain unaware.
[00:09:49] Retail media built its reputation on being more transparent and accountable than traditional advertising. as the industry matures, that reputation faces a test, [00:10:00] will the players involved hold themselves to a standard they've set or quietly lower the bar when the money gets tight?
[00:10:07] Thanks for listening. I'll catch you tomorrow.
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