Retail media networks under scrutiny amid calls for transparency and accountability
By Kimeko McCoy • October 10, 2024 •
Ivy Liu
It’s a familiar tale: A new media channel becomes the ad industry’s shiny object, touted as a silver bullet only for concerns about return on investment, performance and transparency to arise after marketers have already shelled out ad dollars to invest in said channels.
Most recently, it was a scene from the programmatic space, in which the Association of National Advertisers released its Programmatic Media Supply Chain Transparency Study, kicking up questions around transparency — or the lack thereof — and ultimately revealing $22 billion in wasted programmatic ad spend.
Now, the industry has turned its attention to lagging transparency in retail media networks. Notably, retail media networks are expanding their offerings to off-site channels, like search or social, to expand their reach and diversify revenue streams to take in more ad dollars. But with these expansions, some media buyers and executives say it’s more difficult to get a sense of the actual return on investment.
“Those conversations have now started. I expect them to grow louder, the ask [about performance] to grow louder,” said an industry expert who spoke on the condition of anonymity. “It’s a sign of how big this whole category has become and how literally every retailer out there now has a media network, but not much to report or show.”
Let’s put some numbers to it. Retail media networks are gaining ground, expected to make up one-fifth of worldwide digital ad spend this year, raking in $140 billion, up from $115 billion last year, according to eMarketer. But for all its projected growth, “55% of marketers see the lack of standardization across platforms as the greatest challenge,” according to a recent report from the Association of National Advertisers. There may also be concerns about brand safety as made-for-advertising sites are now part of some off-site offerings, per the report. (Sounds familiar?)
Some RMNs have answered the call, meeting the Interactive Advertising Bureau (IAB) and Media Rating Council (MRC)’s retail media measurement standards, which were finalized in January, and announcing partnerships to increase measurement capabilities for more data insights.
Still, as the first expert said, the calls for transparency are growing louder. And consider the space as of late: media execs are questioning if the CPMs are worth it, especially amongst longer-tail networks. Then there are questions around kickbacks and quid pro quo relationships in the RMN negotiation process, and pressure to spend big with retailers to secure and maintain premium in-store shelf space.
And then that leaves new questions for off-site about pricing and data extrapolation. Retailers are offering retail media solutions that aren’t technically retail media, said a second media executive who asked to remain anonymous in exchange for candor. “They’re co-opting dollars and sending them to another large enterprise agency, a holding company, network of agencies,” the second exec said. Media buyers have to have “totally blind trust” that a retailer is adhering to industry standards as opposed to grading their own homework.
It leaves the exec to question if the juice is worth the squeeze, offering this example: An agency has a client’s six-figure budget to spend with a retailer’s on-site retail media. The RMN puts together a plan where 15% of those invested dollars go toward on-site search ads, another 15-30% would likely to go display banner ads while the remaining dollars would go toward off-site advertising, the second anonymous exec said.
All the while, that off-site advertising, which typically shows up in places like social media, search engines, or other third-party websites, accounts for the bulk of sales. If that’s the case, it begs the question: Why invest in on-site advertising and what’s making up the off-site ad inventory?
A third executive, who agreed to speak to Digiday on the condition of anonymity, said similarly that clients have been asked to invest in the retailer’s data insights as a separate entity rather than an offering included in a RMN’s service. The exec said it felt like double dipping. Retailers ask advertisers to spend with their RMNs and then spend again separately on the retailer’s data insights, “which generally, most of the brands think they’re paying for in the retail media network, but it’s a different organization,” the third exec added.
“We’ve had retailers come to us and say we need to sell their data component, brands are complaining. Yes, because they think they’re buying it as part of the off-site,” the third anonymous exec said. “It builds a lack of trust that you’re trying to squeeze every last dollar out of me.”
In the grand scheme of things, retail media networks are in their infancy, especially considering long-tail players, like Costco, Belk department stores and Thrive Market, an online grocery store, that have all launched within the last few months. With all of the entrants ranging in capabilities, offerings and scale, it’s created a fragmented market with no consistency, including a streamlined way of measuring performance, and determining pricing and data.
But this lack of transparency may be less nefarious than what it’s pegged, according to David MacDonald, head of retail and commerce experiences practice at Razorfish ad agency. It’s partially due to how these late-state retail media networks have been stood up. They were built by retailers or sellers as opposed to media buyers. At the same time, there’s no overarching regulatory body to say what standardization in this space should look like, he added.
“The lack of transparency at times comes from a lack of standardization. Because what one retailer may call a specific KPI or measurement another retailer uses a different term,” said MacDonald. “At one point, it was a Wild Wild West where we’re building these up, and there’s a lack of coordination of what that is.”
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