GUEST COMMENT The future of retail media is the future of all media

Andrew Lipsman the founder of Media, Ads + Commerce. Andrew is known for creating the first ever insights into retail media – “digital advertising’s third big wave”. He is a keynote speaker internationally and a prolific writer with incredible insights not just in retail media but also marketing, digital media, advertising, and commerce ecosystem. Andrew’s substack with all of his insights is here

This guest article reflects the content that Andrew presented at the Retail Media Ascendant Silicon Valley Boot Camp where Andrew went into a lot of detail as to why Retail Media is a fundamentally substantive and transformative trend, why  it’s still significantly undervalued and underinvested by advertisers.

The third wave of digital advertising is destined to be the biggest

Retail Media is digital advertising’s third big wave after search and social and is destined to be the biggest. Thanks to EMARKETER’s latest forecast, which extends to 2028, we now have a sightline into that future when it’s expected to reach $130 billion and surpass social media at $128 billion and search at $107 billion.

$130 billion is an ambitious target to reach in the next four years. And there’s virtually no way for that to happen if we think about retail media as a standalone channel. But as Conor McKenna of Luma Partners has rightly pointed out: retail media is both a channel and a layer. 

To date, most of the dollars have flooded into the channel—and plenty more will continue to do so—but reaching these future heights depends substantially on its evolution as a layer.

This is a credible scenario when considering that retail media now influencing, disrupting, and transforming every major pool of ad spending—including search, display, social media, and TV. Not to mention physical retail.

Why Retail Media is a thing

The first time I encountered “retail media”—long before that term entered the consciousness of digital advertisers was 2012. My boss at the time, Gian Fulgoni, co-founder of Comscore and former CEO of IRI, and I were working on a presentation about ecommerce. During our research, we noticed that CPG brands—specifically, P&G and Kraft Foods—had begun to advertise on the homepages of Amazon.com and Walmart.com.

Gian remarked that these display ads were serving a similar function to the in-store displays in grocery stores. “It’s almost like a ‘digital endcap’, he said. I realised immediately he had coined a new term.

Then, understanding the inherent value of ads so close to the point of purchase, he exclaimed: “These retailers must be making a fortune from these ads!”

I responded that we could check to see how much the retailers were charging, since our display ad measurement product had visibility into average CPMs.

It turned out that these ads were going for an average of $2.74—6% lower than the average overall display ad CPM of $2.91.

Retail media ads were undervalued then, and they’re still undervalued today.

The power of quality x context x relevance

The value of advertising can usually be distilled into three factors. 

The first is creative quality, which is often the most overlooked in digital advertising because it’s the hardest to measure. 

The second is the media context where the ad appears, which is also overlooked in an ecosystem now dominated by programmatic audience-based buying. 

The third is the relevance to the audience reached by the ad, which is rarely overlooked—and yet still falls far short of its potential.

Retail media is valuable because it can uniquely and consistently deliver on all three dimensions.

• Creative Quality – This is the most variable dimension for any advertising format. But retail media offers feedback loops to determine which creative works best and for which audiences. The modern version of digital endcaps—Sponsored Brands and Sponsored Brands Video ads—outperform other ad units in driving incremental sales largely due to the branding impact of the creative as it combines with the power of context and relevance.
• Media Context – Of all the dimensions, this is where retail media most outperforms other channels. For on-site and in-store retail media ads, the ability to reach consumers while they’re shopping is an unparalleled contextual advantage, affording brands the opportunity to create mental and physical availability close to the point of sale. There is simply no more opportune moment for advertising to influence what people buy.
• Audience Relevance – This is another area where retail media excels. On-site ads are delivered to highly qualified audiences based on their search and shopping behaviour. Off-site ads can be targeted according to the same variables, ensuring a higher likelihood of reaching prospective customers. Even pricier CTV ads can be more narrowly targeted to the highest value audiences to drive cost efficiencies. Retail media draws a much more direct line between the advertiser and the consumers they most want to reach.

Retail Media’s Unique Power

Retail media derives its unique power from the intersection of content and commerce, of media and merchandising, of branding and performance. 

When these things come together, it’s 1+1=3. All too often they don’t come together, and the incremental value is lost.

I’m obviously optimistic about retail media’s future, but I also don’t harbour pollyannish views about it. There are hurdles to realizing its potential. While I have plenty of conviction about the direction, and ultimately, the magnitude of this market, I have much less conviction about how long it will take to get there.

Retail media is more capable of checking all the boxes that drive advertising performance. Whether any individual campaign performs still depends on how a brand manages each of these variables. They can still roll out weak creative, or buy ads on fraudulent websites, or target audiences too narrowly. 

But when executed properly, I don’t think any media can produce more advertising value than retail media.