John McNerney.
Retail media is the hottest ticket in advertising - but fragmentation risks holding it back. John McNerney, Managing Director (AUSEA) of Yahoo DSP, makes the case for a more connected, standardised approach through commerce media.
Retail media is booming across the world,and Australia is no exception. It’s generating as many column inches in the media as it is dollars for these non-media businesses.
But while things are rosy now, there are challenges creeping up we all need to address as an industry to avoid falling into the familiar problems of the past.
Once considered a niche add-on to trade marketing, retail media networks (RMNs) have rapidly emerged as a core part of marketing strategies for brands across most sectors. That’s because RMNs offer what few channels can in today’s privacy-first world: direct access to rich first-party data and the ability to close the loop between ad exposure and purchase.
This potent combination is why investment in the space has surged. According to PwC, Australia’s retail media sector is projected to grow from $850 million in 2023 to over $3 billion by 2027.
Major retailers were the earliest to jump to emulating their US counterparts, with Woolworths’ Cartology first to market and Coles 360 emerging a few months later. We’ve subsequently seen the emergence of media arms from Bunnings, Priceline, Officeworks and even Australia Post.
But it’s not just major retailers hopping into the space, with gaming and pop culture venue Fortress and hospitality operator Australian Venue Co. both entering the space in recent months, showing how broad the appeal has become.
And the appetite is matched - a study by the IAB even found that 81% of Australian brands are already investing in or experimenting with retail media.
The appeal for advertisers is clear. In an environment where identifying customers online is increasingly challenging and traditional linear reach is declining, RMNs provide brands with highly engaged audiences, granular shopper data and advertising placements that sit directly at the point of purchase.
Yet, this explosive growth has brought with it a significant challenge: fragmentation.
With new RMNs launching almost every week, marketers and agencies face an increasingly complex and siloed landscape. Each network comes with its own data sets, measurement standards and buying platforms, which makes it incredibly difficult to plan, execute and measure campaigns holistically.
While fragmentation is a broader issue across the media landscape, retail media is feeling the pain most acutely. That’s because the same qualities that make RMNs valuable - their first-party data and closed-loop environments - also make them hard to integrate.
Marketers are now faced with the challenge of juggling dozens of separate systems, interfaces and attribution methodologies just to activate a national campaign.
That complexity is not sustainable and it’s already pushing advertisers to stick with just a few big players, sidelining the rest
This lack of standardisation hampers marketers’ ability to measure performance across platforms, leading to inefficiencies and reduced return on investment. For RMNs to continue to grow and develop, this has to change.
Even IAB Australia’s Retail Media State of the Nation 2024 report found 78% of buyers citing attribution measurement as an area most in need of standardisation, with 73% pointing to media measurement - making clear that attribution and measurement are some of the biggest challenges at hand for marketers.
The absence of interoperability between RMNs also means that first-party data will only remain siloed within individual networks. This not only limits the potential for holistic audience insights, but also increases the risk of overexposing consumers to repetitive messaging, potentially leading to ad fatigue.
Beyond all that, it’s also a waste of your valuable first-party data, which should be used to supercharge any media strategy.
To address these challenges, the industry must take a more holistic mindset and shift towards a commerce media model that unifies retail media efforts across platforms.
Commerce media brings the best of both: broad category breadth, with the power of retail SKU (Stock Keeping Unit) level performance. Commerce brings the traveler from their flight, to their hotel booking, through to the concert event and the merchandise and food they purchase instore at the stadium. This is a different ‘ball game’ from just products on shelves, that we’re starting to see come to life with Commerce Media.
The difference between RMNs and commerce media is that the latter integrates data from various sources - online and offline - to provide a comprehensive view of the consumer journey. It therefore helps advertisers deliver more personalised and effective campaigns while ensuring consistent measurement and attribution standards.
We have already seen how in the United States, the IAB's Commerce Media Committee is working towards establishing such standards, recognising the need for a cohesive framework to support the growing number of RMNs.
Australia would benefit from a similar initiative that would bring together retailers, advertisers and technology providers to develop interoperable systems and shared measurement protocols.
This would be something like a "network of networks", which would allow for seamless collaboration between RMNs, enabling advertisers to plan and buy media across multiple platforms efficiently.
This federated approach would preserve the unique value propositions of individual RMNs while facilitating data sharing and standardised measurement.
But no brand or agency can go it alone, particularly in a space that’s evolving as rapidly as this one. The right tech partner can play a pivotal role in this transformation by providing the infrastructure and expertise needed to connect disparate systems.
By acting as neutral facilitators, these partners can help establish common standards and promote interoperability, ultimately benefiting the entire ecosystem.
As an industry we need to avoid making the mistakes of other emergent media channels over the last few years and think about the needs of advertisers as well as the end customer.
Marketers don’t need another media channel —they need better ones. And they have shown time and again that they’ll walk away from those that don’t deliver. . This is the challenge we must all overcome to reach the potential of this incredible new advertising channel.