The retail media sector is currently characterized by a dichotomy where major players like Amazon and Walmart dominate over 80% of all retail media spending. While these giants exert significant control over the market, the landscape is also populated by over 70 competing retail media networks across North America. This creates a fragmented ecosystem, complicating the efforts of brands to navigate effectively. Managing multiple relationships and dealing with inconsistent interfaces, workflows, and reporting methodologies are ongoing challenges for brands, exacerbated by smaller networks struggling to maintain competitiveness despite their unique audiences.
The Dominance of Retail Giants
Amazon and Walmart’s overwhelming control of the retail media landscape presents notable challenges for both brands and smaller networks alike. Dominating a significant portion of market share, these retail giants set the standards within the industry, creating disparities that make it difficult for other players to compete. Brands often find themselves juggling numerous relationships with various retail networks, averaging about six partners, which highlights an inefficiency rooted in the fragmented nature of the ecosystem.
The need for cohesive interfaces and standardized workflows becomes evident in such a scenario. Moreover, differing reporting methodologies further complicate the situation for brands aiming to maintain consistent and accurate performance metrics. This dominance and subsequent inefficiencies underscore the necessity for a standardized solution that can streamline the process and level the playing field for smaller networks.
Challenges in the Fragmented Ecosystem
The fragmented retail media landscape poses considerable challenges for brands attempting to capitalize on retail advertising opportunities. Smaller networks often offer valuable and niche audiences, but their inability to compete with giants like Amazon and Walmart makes their survival difficult in a cutthroat market. Brands, on the other hand, find themselves burdened with managing multiple direct relationships, leading to inefficiencies and increased complexity.
The inconsistent user interfaces across different networks add to the challenges. Brands are forced to adapt to varied workflows and reporting methodologies, complicating the tracking and analysis of advertising performance. This inconsistency can dilute the effectiveness of advertising strategies and force brands to make difficult choices regarding the allocation of resources among different networks.
The Promise of Real-Time Bidding (RTB)
Real-Time Bidding (RTB) offers a transformative solution for retail media, providing a standardized mechanism for the automated buying and selling of ad impressions in milliseconds. This technology revolutionized digital advertising over a decade ago, and its potential to do the same in the retail media sector is significant. RTB standardizes the processes across different networks, allowing advertisers to manage campaigns from a single platform, thus addressing one of the key inefficiencies in the fragmented ecosystem.
By integrating RTB, the management process for advertisers becomes far more streamlined. The ability to execute campaigns across multiple retailers through one unified platform not only saves time but also enhances effectiveness by leveraging a standardized approach to ad buying. Thus, RTB promises to simplify operations, making it easier for brands to capitalize on retail media opportunities effectively.
Addressing Major Industry Pain Points
RTB can effectively address three major pain points within the retail media industry: fragmentation and scale, measurement and transparency, and democratization of inventory. By offering standardization across different networks, RTB helps reduce fragmentation and enables advertisers to scale campaigns more efficiently. A single standardized platform makes it easier for advertisers to manage multiple campaigns, increasing overall efficiency and reducing complexity.
Moreover, RTB can bring about consistent measurement and transparency in reporting. Standardized RTB protocols enable unified measurement methodologies, allowing brands to track and analyze their advertising performance more effectively. This, in turn, enhances the accountability of ad spending and ensures that advertisers have access to reliable data for making informed decisions.
Additionally, RTB democratizes inventory by opening access to a broader range of advertisers. This mechanism increases competition, potentially improving yields for retailers and providing brands with more options for visibility. The increased competition also leads to better optimization of ad inventory, enhancing the overall efficiency of the retail media landscape.
Success Stories in Other Advertising Sectors
Real-Time Bidding has previously revolutionized other advertising ecosystems, notably display advertising and connected TV (CTV). The adoption of OpenRTB protocols, facilitated by the Interactive Advertising Bureau (IAB), led to a significant shift of digital display ad dollars towards programmatic buying methods. The efficacy of RTB is evident from the fact that over the years, more than 90% of U.S. digital display ad expenditures have come to rely on RTB, demonstrating its transformative potential.
Similarly, the integration of OpenRTB 2.6 protocols allowed for efficient transactions of video ad spots in streaming apps, underscoring the adaptability and effectiveness of RTB in various digital advertising contexts. These success stories from display advertising and CTV signify the potential impact that RTB could have on the retail media sector, provided the unique challenges in adoption are addressed effectively.
Unique Hurdles in Retail Media Adoption
Despite the proven success of RTB in other sectors, the retail media landscape presents unique hurdles that have slowed adoption. One of the critical challenges is latency, which can considerably impact user experience and conversion rates. Traditional RTB communication with external platforms can introduce latency issues that negatively affect the speed at which ads are displayed, pushing retail media towards relying on direct deals and pre-cached bids rather than real-time auctions.
Moreover, the need for highly relevant product ads that reflect user intent in retail environments imposes additional demands. These product ads must be displayed instantaneously, requiring more sophisticated and faster solutions than those available through traditional RTB mechanisms. These difficulties necessitate the development of specialized RTB solutions tailored to meet the specific needs of retail media.
IAB and Technological Advancements
In response to these challenges, the IAB and the IAB Tech Lab are working to adapt OpenRTB specifications to suit the retail media context. These efforts aim to balance the technical demands of programmatic buying with the need for highly relevant ad delivery in real-time. Advances in technology are focused on standardizing the sharing of product information while maintaining control over ad appearances on retailer websites.
The IAB’s initiatives seek to create an environment where RTB can function effectively within the unique constraints of retail media. By developing protocols that address latency and relevance requirements, the IAB aims to make RTB a viable solution for retailers and brands, thereby enhancing the efficiency and effectiveness of retail media advertising.
Major Platforms Leading the Charge
Major technology platforms, such as Microsoft and Google, are at the forefront of efforts to standardize retail media buying through RTB. These companies are leveraging their existing advertiser relationships and extending them into the retail media supply chain. Microsoft’s approach involves simplifying campaign management across multiple properties by integrating RTB technology, aiming to aggregate various networks and facilitate efficient product campaigns.
Google, too, is pursuing similar objectives by emphasizing standardization and scalability as pivotal components of the future of retail media. However, the transition to RTB is met with hesitation from retailers concerned about control, brand safety, and the potential risks associated with broader participation in RTB-based systems.
Retailers’ Concerns and Hesitations
Retailers’ concerns regarding RTB adoption cover several areas, including control over their shopping experience, brand safety, premium inventory, data protection, and technical complexity. Retailers worry that allowing third-party demand-side platforms to bid on their inventory could introduce inappropriate products or messaging, impacting customer trust. The potential for introducing price competition through RTB that could lower average revenue per impression also raises concerns.
In addition to these concerns, the sharing of valuable first-party data in real-time and the technical complexities involved in setting up a real-time bidding environment contribute to retailer hesitations. Implementing RTB requires significant infrastructure for ad server integrations, consent management, and fraud detection, which can be daunting for retailers without the necessary technical expertise.
The Inevitable Progression Towards RTB
Despite these apprehensions, the intense competition within the retail media landscape and the need to increase fill rates are likely to drive retailers toward adopting RTB technology. Retailers need to tap into broader demand sources to remain competitive, especially mid-tier networks struggling to attract advertiser budgets.
For brands, navigating the fragmented landscape means managing multiple separate retail media platforms with varied interfaces and workflows. Inconsistent measurement methodologies make the process even more challenging. RTB promises to alleviate these difficulties by bringing the same level of efficiency and standardization to retail media buying as seen in other digital advertising channels.
Preparing for the RTB Revolution
The retail media sector currently features a stark contrast where giants like Amazon and Walmart command over 80% of all media spending in the industry. These major players have a strong grip on the market, but over 70 other retail media networks are vying for attention across North America. This fragmented landscape makes it difficult for brands to navigate efficiently. They face the challenge of managing multiple relationships and dealing with varying interfaces, workflows, and reporting formats. Smaller networks battle to maintain their competitiveness, despite offering unique audiences, adding to the complexity for brands. This diverse ecosystem complicates efforts for brands aiming to create cohesive marketing strategies. Brands constantly juggle inconsistent reporting methodologies and different standards set by smaller networks, which struggle to compete with the larger corporations’ far-reaching impact. The situation highlights the need for a more streamlined and unified approach in the retail media sector to ease navigation and improve efficiency for all stakeholders involved.
