Retailer Media Networks Are Coming, but Where Are They Coming From?

Microsoft and Google are among the contenders

Momentum is growing for retailer media networks, but where will they come from if retailers aren't building them in-house? Sources: Getty Images, Amazon, Walmart, Target, Home Depot, Kohl's, Office Depot
Headshot of Lisa Lacy

Like so many changes in commerce to date, the rise of retailer media networks can be traced back to Amazon.

The ecommerce giant introduced its media business in 2012 as it sought to monetize its own properties. And, along the way, it not only found additional revenue for other projects that may or may not forever change the way we shop, it also created the first truly legitimate challenge to the heretofore unshakable digital marketing duopoly of Facebook and Google.

A few years later, Walmart and Target joined the party and, insiders say, more retailers will follow in 2020. In fact, just a little over a week into the new year, Microsoft announced a self-service platform to help brands advertise directly on big retailers’ websites.

Microsoft’s move wasn’t surprising after its August 2019 acquisition of vendor commerce platform PromoteIQ. Media buyers expected as much, although most predicted Microsoft would make a bigger play for the retail market as retailers look to monetize first-party data, deepen their relationships with brands, provide better experiences for their customers and, ideally, find chinks in Amazon’s armor in the process.

So, we know momentum is growing. But what if you’re a retailer that doesn’t have the resources of Amazon or Walmart to build an in-house media network?

“My view is it is really hard to build a great ad platform and that most retailers do not have the talent in-house to build a great ad platform,” said Rob Gonzalez, CMO of product experience management platform Salsify. “Think about it—Amazon … [has been] working for years [on its platform and] you have heard complaints it’s not as mature as Google. You have heard that advertisers are frustrated by the lack of features. If Amazon has been working for years and has tech [that’s not as mature], it’s unrealistic every retailer will build their own.”

Gonzalez conceded a player the size of Walmart might be able to pull it off, but the rest of the market will struggle.

Andrew Ruegger, managing partner and head of commerce and data science at advertising media company GroupM, said even Target may not have the scale to pull it off.

“If you’re a retailer who is not Amazon or Walmart—you’re the tenth largest retailer in the U.S.—you’re probably better off licensing a platform than you are doing it yourself,” Gonzalez added.

So how are smaller retailers with zero media network experience going to build successful networks? They have to find partners.

Contender 1: Microsoft

If you’re among the top 100 retailers in the world, one option is to work with Microsoft PromoteIQ, which provides a self-service platform for retailers that can’t build everything in-house, said Todd Bowman, senior director of Amazon and product marketplaces at performance marketing agency Merkle.

PromoteIQ has worked with large U.S. retailers like Kohl’s, Kroger, The Home Depot and Office Depot.

In a recent announcement, the vendor commerce platform said it helps retailers control on-site ad placements and attract consumer brands that have plenty of other advertising options. At the time, former PromoteIQ CEO Alex Sherman told Adweek that 30 of the 50 biggest retailers in the world are working on their own media networks as the industry collectively awakens to the opportunity.

But, like Walmart’s Advertising Partners Program, PromoteIQ is limited to paid placements on ecommerce websites for now. And, Microsoft isn’t much interested in helping those retailers that don’t rank among the world’s top 100—at least not yet. Sherman did not comment on plans to expand beyond the initial target audience.

Contender 2: Criteo

Melissa Burdick, president of ecommerce platform Pacvue, noted that this is sort of what ad platform Criteo already does when it runs sponsored product ads on retailer sites like Costco, which is probably not going to create its own ad platform. And while Criteo said brands and agencies can still access sponsored product placements for retailers like Walmart and Target, Bowman noted Walmart’s self-service tool will give advertisers Walmart-specific data and control, so he expects more will move to Walmart as the capabilities get better and Criteo will be used as a secondary option to buy media to fill in any gaps.

In an email, a spokesperson said Criteo has been in retail media since 2016, when it acquired performance marketing tech company HookLogic, which had an ad exchange that connected ecommerce sites with consumer brands. Criteo now boasts more than $800 billion in commerce transactions, which the spokesperson noted is triple Amazon’s 2018 ad revenue.

And while Criteo is certainly another option for retailers, the status quo is not necessarily as rosy as the email suggested.

For starters, attribution has been a problem with Criteo. Advertisers don’t know exactly where their money ends up.

“The [retail media network] winner is going to be one that can parse out each retailer performance,” Burdick said. “That has been a criticism of Criteo—before, you put in $1 million and get out this return, but it’s not broken out by retailers. People demand better tools and platforms and so there’s always going to be a need for someone who can build out a better platform that has more detailed data reporting, that’s a clean UI, easy to use … makes their life easier.”

Bowman, however, said while sales are typically aggregated across platforms, Target at least now allows advertisers to separate out ads to see what was sold on Target.

“We are hopeful that other retailers will follow Target’s move and allow Criteo to separate all retailers in their platform to give brands more valuable insights and control,” he said.

In addition, David Dweck, head of paid search at digital marketing agency Wpromote, noted that while HookLogic allowed Criteo to push ads to Walmart, Best Buy and a handful of other retailers pretty quickly, one big problem was that a lot of brands were using HookLogic/Criteo for access to Walmart, which they can now get directly from the source.

Another option is digital retail media company Triad Retail Media, which started working with Walmart in this capacity in 2004. It lost that business when Walmart built its own platform. But, while undoubtedly a blow, Triad still boasts relatively large retail clients like CVS and Wayfair.

Contender 3: Google

What’s more, Criteo is potentially facing competition from Google. Bowman noted, Google has tested product ads in Google Shopping.

“As Amazon and Google are competing the most—Facebook, too—we see Google make moves to be more like Criteo as Microsoft moves into the ecommerce space,” Ruegger said. “The future of Criteo will be very interesting.”

Dweck, on the other hand, said Google has the chops to do something like this; it’s just not leaning into it.

“Google Shopping … was supposed to offer the ability for CPG brands to utilize their platform to promote ads,” he said. “Google Shopping flamed out—it faced so much competition from Instagram and others, but Google certainly has the technology chops to roll it out for retailers.”

Gonzalez agreed Google is always a possibility, but it would be a lower margin opportunity.

“In terms of the overall media ecosystem, Pinterest is the one that I keep looking at,” he said.

A spokesperson noted Google’s ad-serving platform, Google Ad Manager, is “used by a significant number of retailers” for display banners as well as native ad formats similar to Criteo and Amazon.

“We are invested in this space and actively working with our partners to help them recognize the value of their data and how digital ad revenue delivers high-margin revenue to their bottom line,” the spokesperson said.

In fact, Merkle recently launched a retailer media network offering, New Stream Media, in partnership with Google Ad Manager and advertising and analytics platform Google Marketing Platform.

What it means for advertising

Ultimately, whoever leads the charge, media buyers say the market can sustain multiple players, and new features will empower advertisers to ask for more transparency.

“The push for this addition of options is going to help the market overall in terms of pushing everybody to do better and push these brands to ask better questions,” said Elizabeth Marsten, senior director of strategic marketplace services at digital marketing agency Tinuiti. “These retailers offer different metrics, different measurement, tools. … Some are more in-depth, so a brand can come back and say, ‘We get this from X, can we get this from you, too?’”

For smaller retailers, such as those in a specific geographic region that have data about their customers but not on par with Amazon, retailer media networks offer a new revenue stream, Marsten said. Plus, if sales are lagging somewhere, they’ll be able to buy ads targeting the area or demo that needs a boost.

“We all know that all products and variations don’t sell evenly on every site and that customers are increasingly expecting to be met on their terms and timelines. This gives them the flexibility to answer that call,” she said.

But it probably won’t hurt Amazon.

“I think the primary benefits/impact will be more in bridging the online and offline more than anything else for those retailers, and that’s not a core business line of Amazon’s,” Marsten said.

Bowman agreed it’s not something that will affect Amazon in the short term.

“A lot of brands are starting to find incremental budget and are looking to spread money out to go to newer media networks,” Bowman said. “I don’t know if it’s something that hurts Amazon directly in the short term, but … if Microsoft can build this type of platform and get people to run more product listing ads on Microsoft, or Google can [get people to run more product listing ads on Google], they can [help] retailers … fill in gaps where traffic has been lost.”

But overall, the ad ecosystem should benefit.

“If that does happen, whether it’s a Microsoft or an Adobe, if someone produces a really great ad platform they could roll out across retailers, that will be interesting,” Gonzalez said. “It will simplify the landscape, helping to drive value in advertising.”

@lisalacy Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.