The Evolution of Retail Media: Embracing Offsite Programmatic Strategies

Advertiser Spending on Retail Media Networks in the U.S.

Advertiser spending on retail media networks in the U.S. is projected to increase by 30% this year. The growth is mainly driven by offsite programmatic media, as stated in a recent report by Advertiser Perceptions.

Offsite programmatic retail media is projected to reach $20 billion in 2024, a significant increase from the $7.5 billion spent in 2023. This growth is fueled by the expanding options of streaming services and publishers offering programmatic advertising.

By 2025, retail media is forecasted to reach $81.6 billion in ad spending, accounting for approximately 23.5% of the total U.S. digital advertising market. This upward trend coincides with the resurgence of concerns regarding programmatic transparency.

Retail Media Growth in Digital Marketing

Retail media is rapidly becoming one of the fastest-growing channels in digital marketing. It initially gained traction through on-site search and display advertising, aiming to offer an alternative to cookies. Now, it is expanding into the offsite programmatic space, setting the stage for retail media networks to achieve greater scale and revenue in the future. However, as these networks grow, the complexity also increases. Some marketers may start to question the quality of their offsite programmatic purchases, especially with concerns rising about transparency in the open web ecosystem.

The groundswell for offsite programmatic retail media is being supported by a few factors. Retailers are expanding into channels like connected TV and streaming to provide more options for advertising partners and run effective full-funnel campaigns. Additionally, streaming services and digital platforms that were previously ad-free are now open to monetization opportunities to boost profitability.

Moreover, mature retail media networks are facing the challenge of on-site advertising overload. When too many surfaces are covered with brand messages, the user experience suffers and shoppers may be deterred.

Eric Haggstrom, director of business intelligence and head of forecasting for Advertiser Perceptions, highlighted the trend of brands using retailers' data for advertising beyond the retailers' own platforms. According to Haggstrom, media and ad tech companies must establish partnerships with retail media platforms to tap into this rapidly growing segment of the digital advertising market.

Advertiser Perceptions gathered information from financial reports of over 100 publicly traded companies, feedback from media buyers, and government research. The exact size of the retail media sector is challenging to determine as retailers typically do not disclose specific revenue figures. A broader evaluation of programmatic advertising suggests that ad spending on mobile and desktop platforms will see more moderate growth.

Offsite programmatic is considered advantageous for retail media networks, but it is also facing increased scrutiny. According to a recent analysis by Adalytics, retail media networks are being criticized for transacting on Made for Advertising (MFA) websites. These sites are known for being low-quality click-bait farms that struggle to attract genuine reader interest. Brands that use retail media networks, especially consumer packaged goods companies, are calling for more industry standardization to enhance measurement and transparency.

The debate around MFAs continues within the industry, with concerns about the high costs for advertisers and negative environmental impacts. The Association of National Advertisers reported last summer that MFA publishers accounted for 15% of programmatic ad spend.

Editor's P/S:

The rapid growth of retail media networks, particularly in the offsite programmatic space, is driven by the increasing adoption of streaming services and publishers offering programmatic advertising. This growth presents both opportunities and challenges for marketers. While retail media provides valuable touchpoints for reaching consumers, it also raises concerns about transparency and the quality of offsite programmatic purchases.

The industry must address these concerns to ensure the long-term viability of retail media networks. This includes establishing partnerships with retail media platforms to tap into their data and creating industry standards for measurement and transparency. By addressing these issues, retail media networks can continue to grow and provide advertisers with effective channels for reaching their target audiences., and promoting ethical practices throughout the supply chain. By addressing these challenges, the industry can foster a sustainable and transparent ecosystem that benefits both advertisers and consumers alike.