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10 minutes of expert insights every weekday. Your morning ritual for staying ahead in retail media.
Does Size Matter in Retail Media? It Depends Who’s Buying
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[00:00:00] Kiri Masters: Brian Spencer, who is the marketing director at Kroger Precision Marketing, posted a take on LinkedIn last week that he probably knew would get a reaction. He said, "There are only 10 or 20 successful [00:00:15] retail media networks. Let's stop saying 200." Now, Brian isn't disputing that more than 200 retail media networks exist.
[00:00:26] His point is that monetizing some website traffic [00:00:30] doesn't make you a media business. Ouch. What a real one needs, he says, is three things: scale, addressability, and technology. Now, [00:00:45] that was kind of a spicy take for LinkedIn, and the comments section kicked off with some good arguments on both sides, and it sent me looking back to some of the commentary I've shared on each [00:01:00] side over the years, and there are merits for various arguments here.
[00:01:06] And today, I wanna dig into the first of Brian's criteria, which is scale and whether size really [00:01:15] matters. Let's jump in.
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[00:01:17] Kiri Masters: So firstly, Brian is right about one type of ad buyer. Let's start with the national brand media team, because that is certainly [00:01:30] who Brian's filter is built for. I've told this story before because it illustrates this point really well, which was a conversation I had with the retail media leader at a major [00:01:45] CPG multinational, and they were walking me through their scorecard of how they rank and stack various retail media networks and what their requirements are for actually spending with [00:02:00] a retail media network, and it included things like scope, the growth profile of that retailer, targeting capabilities, measurement, stuff like that.
[00:02:10] And I asked if, you know, hypothetically, if 10 more [00:02:15] RMNs suddenly came to the table with all of these capabilities that you have on your requirements list, would you start spending a meaningful amount of money with 10 more RMNs? And they said, basically, "Heck, no." [00:02:30] Um, they already work with six or seven, and they don't wanna work with anymore, that the cost of planning, buying, reporting, managing across more networks isn't [00:02:45] worth it, even for a company of their resources and scale
[00:02:52] So that is the sad reality. And again, this is, you know, th- this isn't a teeny-tiny brand I'm talking about here. It is a very large brand. [00:03:00] Which brings me to look at, you know, what are these scaled media networks that Brian Spencer from Kroger is talking about? Let's look at the $1 billion club, right?
[00:03:14] So there's [00:03:15] actually only five commerce media networks that have publicly said that they're past a billion dollars in ad revenue globally. And although they count it differently, there are only five that [00:03:30] we know beyond a shadow of a doubt because they put it in their financials or they have disclosed it otherwise publicly, um, that they are past this point, which is Amazon, Walmart, eBay, Uber, and [00:03:45] DoorDash.
[00:03:45] Now, there's a few that we Believe have gotten past that point, even though it's not in their financials, and a few more that are knocking on the door. So Instacart is reported to [00:04:00] have crossed that line. Uh, Target's Roundel got very close to a billion dollars in ad revenue last year and is growing fast, so they should be over that line this year.
[00:04:11] Best Buy expects close to a billion dollars in twenty [00:04:15] twenty-six in ad revenue as well. And then there are some that don't disclose their ad revenue but are probably in the club, and Kroger is actually one of them. But they don't disclose their ad network, um, [00:04:30] revenue. They disclosed one and a half billion dollars in operating profit from alternative profit businesses, which includes their ad business.
[00:04:43] That was in twenty twenty-five. [00:04:45] Um, so there's nothing public to cite, and that is a little ironic given the post that started this whole conversation. Um, but the point here is that amongst all of those networks, [00:05:00] with the exception of DoorDash, which is new, and Uber, which is relatively new, they have all been investing in their ad business for a long time.
[00:05:13] They took it [00:05:15] seriously, and they have, you know, a l- a number of strategic assets to bring to the table, huge bases of logged-in customers. Um, in the case of Uber and DoorDash, that means that they're able to, you know, to have that addressability, [00:05:30] uh, nexus that Brian mentioned in his post. So all of this to say that, yes, if you're a national CPG media director with a fixed number of networks you can closely manage, that [00:05:45] scale filter is a sensible way to choose them because it filters out so many, um, networks.
[00:05:52] But that is certainly not the only way to allocate budget
[00:05:57] Scale depends on where [00:06:00] you're standing and what your priorities are. Fellow retail media analyst Colin Lewis questioned what counts as successful in the first place, and he points to markets like New Zealand and [00:06:15] Ireland, both of which have markets of about five million people each, and they have their own retail media networks that are locally operated.
[00:06:27] And so does that mean [00:06:30] that the retailers running networks in those countries shouldn't do it? Absolutely not. These are still meaningful media businesses for those retailers and commerce media players, [00:06:45] and they're very important for the regional divisions and local brands that want to get out into the market in those areas.
[00:06:55] And that's something Brian, to his credit, agreed with. He said a regional brand or [00:07:00] division might be completely fine with regional reach. So of course, scale is dependent as a concept on the total addressable market of a given market or territory. [00:07:15] So these networks, while they're tiny by US standards, they are still the ones that brand teams need to use in those countries in order to win.
[00:07:24] As many of you know, I moved back to Australia this year, and Kroger's scale means absolutely [00:07:30] nothing here. Australia has two dominant supermarket chains. The larger of the two, Woolworths, is roughly the same size as H-E-B, which operates in a single US state plus [00:07:45] northern Mexico. So is either Woolworths or H-E-B a scaled network?
[00:07:53] Well, relatively speaking, no. But they certainly are critical to [00:08:00] the brands that are buying from there. To a US national media plan, H-E-B is one state, but H-E-B's dominance in Texas makes it hard for any brand that wants to win there to leave it off their media [00:08:15] plan. And likewise, to a multinational's APAC team, Woolworths, of course, is going to be extremely important to win, and those teams have their own targets and their own [00:08:30] budgets your advertisers can't wait weeks for audiences. GrowthLoop's Composable Commerce Media solution helps [00:08:45] media teams turn first-party data into high-value audiences, launch campaigns faster, and prove what's working across every channel. Learn how retail media leaders at Costco, [00:09:00] Fanatics, and Gopuff use GrowthLoop to create highly segmented audiences and deliver stronger results for their brand partners.
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[00:09:22] So we still come back to this question of who. Who buys the small networks? If a [00:09:30] national media team cuts off the list of RMNs that it wants to manage at six or seven or eight or even 10 or even 15, then the smaller networks need a different buyer. [00:09:45] One possible answer to this conundrum is the shopper marketing team, and this is a concept that I flagrantly stole from Brian Gildenberg, who popped up in the comments as well, [00:10:00] um, which is that, look, okay, the, the national media teams are not going to wanna manage these smaller regional sub-scale networks, but there is a team inside of a brand that has [00:10:15] deftly allocated media spend to dozens of retailers, in the case of a CPG, for decades now, and it is called shopper marketing, and they are good at this.
[00:10:27] And I h- also did a piece, uh, must be coming [00:10:30] up almost two years now, actually, interviewing shopper marketers and trying to learn from them, "Hey, what do you think of this whole retail media game? Does this concern you? Do you think that we've seen it all before and it's just called [00:10:45] something different?
[00:10:46] What are the shopper marketers' attitude toward retail media?" And it was super interesting because most shopper marketers love retail media, and they really align with what [00:11:00] retail media provides to them that they were never able to get before. So they can plan things and adjust course as they see the numbers come back, rather than shipping off cardboard and not being able to change anything mid-flight.
[00:11:14] With retail [00:11:15] media, of course, you can adjust mid-flight, you can act on insights as they're coming through. It's adaptable, it's flexible. They get so much data back, performance metrics. They can segment by different buyer types. So [00:11:30] shopper marketers, they're not stuck in the '90s. They have moved with the times, and often they have been part of a, sort of a rebrand internally, where they're no longer called shopper marketing.
[00:11:42] They're part of an omni-channel team or [00:11:45] some kind of, uh, multi-dimensional team that is looking at both digital and in-store. So talk about a group of people that have moved with the times and are are willing and able and have proven that they can [00:12:00] leverage these new types of buying formats. So long story short, these are the teams that they're already buying digital media.
[00:12:08] They know which retailers matter to which parts of the business. They do it at a local level. They have those relationships [00:12:15] with regional players. This is one obvious answer to who is buying this long-tail retail media value proposition
[00:12:24] Now, none of those media buyers actually show up on a national [00:12:30] CPG media director's scorecard, which is why we can now see that two things can be true. Brian can be true that only 10 media networks matter because [00:12:45] that's mattering to the context of the national media director's scorecard, and this long tail of 200 retail media networks still matter at the local regional shopper [00:13:00] marketing level
[00:13:01] So wrapping up here, I revisited my retail media doom loop a couple of weeks back. I'll- we'll link up to that in the show notes, Brian's scale test that he talked about in [00:13:15] this post describes that retail media doom loop from the inside.
[00:13:20] Without scale, you can't afford the technology and the talent that you need to grow, and without the technology and talent, [00:13:30] you can't win the budgets that would give you scale
[00:13:33] So it all depends on which club a retailer wants to be part of. The $1 billion club with those five exclusive members for now [00:13:45] sounds really awesome until you look at what growth requires once you're actually in it. Those networks now have to go out and win upper funnel brand budgets if they wanna continue [00:14:00] growing.
[00:14:00] And recent research from eMarketer and Bain & Company that I just posted to my column at The Drum today suggests that that is proving to be quite difficult. Now, the long tail of retail [00:14:15] media networks, they have a different problem, which is getting a seat at the table at all. For most of those networks, the seat is more likely to be with a shopper marketing team or a regional team than with a national media director.
[00:14:29] [00:14:30] Well, that's all we've got time for today. Thank you so much for listening. I'm gonna link up to a few of those pieces that I mentioned here in the show notes. Thanks for listening, and I'll catch you tomorrow
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