Technology

How much will commerce media grow for media agencies in 2023?

January 4, 2023 | By Michael Bürgi

Ivy Liu

This article is part of a limited editorial series, called The 2023 Notebook, and is designed to be a guide to marketing and media buying in the new year. Explore the series here.

It’s not often a new revenue opportunity comes along for media agencies, as their traditional sources of income (commissions on planning and buying) dry up in the age of procurement.

That’s in large part why both holding companies and independent agencies have rushed to grow their commerce media units — it’s a new vein of revenue that happens to coincide with and take advantage of the rush of new retail media networks and e-commerce companies formed over the last two years.

IPG’s UM shop recently expanded the scope of its long-time UM Shopper offering to the broader UM Commerce, a tacit realization of the broader commerce media potential. Likewise, Omnicom earlier in 2022 tapped a commerce czar in Frank Kochenash. On the indie side, Court Avenue expanded its e-commerce offerings while Icon Commerce rebranded to reflect its focus in the area.

Commerce media nuance

There are numerous facets to commerce media, with a long-term enterprise value McKinsey pegged at $1.3 trillion by 2026 (of which agencies can expect to generate $5 billion in revenue).

For one, there are the growing number of retail media networks (RMNs), most of them based in the U.S., which together could haul in something like $100 billion by 2026, according to McKinsey’s report. Seemingly, there’s a new one announced almost weekly, the most recent being Fyllo, a cannabis-themed RMN, as well as a new retail ad network from ad-tech firm Quotient, which introduced an aggregator of sorts to other RMNs just before the holidays.

“At present, retail media only accounts for about one-tenth of a brand’s total ad spending on average, but we’re hearing from our clients and partners that more and more conventional media dollars are going to be reallocated to retail media,” said Lisa Hurst, evp of marketing and strategy at full service creative shop Upshot Agency. “Especially as these networks become more sophisticated and better partners in executing omni-commerce campaigns. We expect to see more retailers launching their own media platforms.” 

Agencies with multi-national reach could end up benefiting, as RMNs are expected to grow quickly in other parts of the world as well, noted Carolyn Murphy, vp of Americas with WARC/Ascential.

The shadow of Amazon

Then there’s the broader e-commerce world, which includes the granddaddy of them all, Amazon — a company that seems to grow but under the strains of a competitive pinch from companies like Walmart. E-commerce also includes livestream shopping, which hasn’t quite materialized as its proponents would hope — although not for lack of trying.

Possibly the main challenge within both the agency and client worlds — when progress is being made — is getting one side of the business to talk to the other. Shopper marketing budgets aren’t the same as media budgets, and they’re usually under different P&L lines in both agencies and brands.

Likewise, much of lower-funnel, performance-driven media work relies on wholly different stats, KPIs and measurement tools than upper-funnel brand-driven efforts. For commerce media to deliver better results, those gaps need to be filled by other insights. That doesn’t always happen.

“The distinction at the client level between retail media performance media, or commerce media, is not a clear distinction,” Jay Pattisall, vp and senior agency analyst at Forrester, told Digiday in September. 

There’s another potential challenge some brands will have to overcome in this growing space, noted Michael Shields in a recent Next in Marketing blog post. He wrote that brands that don’t already have shelf space with a retailer that offers an RMN can end up paying higher prices.

But on the positive side, there’s a good chance that media agencies will be able to figure out with their clients how to harness the right insights to start getting non-endemic categories (from autos to travel to entertainment) to spend their marketing dollars in commerce media. And why not? Just because you bought more detergent on Kroger’s website doesn’t mean you might not also be interested in a deal on a new car, right?

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