Advertisers to Increase Investment in Retail Media, Study Finds
Retail media was one of the fastest growing U.S. advertising channels in 2022, up 22% year-over-year to $38 billion, according to a report by the Interactive Advertising Bureau (IAB) titled “Retail Media 2023: Operational Strategies to Meet the Growth Potential.” That number is projected to more than double over the next five years to $107 billion as incremental and reallocated funds are funneled into the ecosystem.
“It’s a sea change in how the biggest advertisers are planning to reach customers,” IAB's Jeffrey Bustos, vice president of measurement, addressability and data center, said in a media release. “Retailers have a treasure trove of first-party data that enables advertisers to reach high-intent audiences and provide closed loop measurement, and budgets are shifting accordingly.”
The study, released on Sept. 13 at the IAB Connected Commerce Summit: Retail Reimagined, was created in partnership with BWG Strategy. The partners surveyed 200 retailer media network ad buyers at brands and agencies and conducted over 30 interviews with senior decision-makers at retailers, brands, agencies and intermediaries, including demand side platforms (DSPs), supply side platforms (SSPs) and data providers.
Key Findings
Retail media network ad buyers are projected to increase spending by 11% year-over-year in 2023, per IAB’s research. These are defined as buyers at brands and agencies that spend at least $5 million on RMNs annually. Some takeaways from IAB’s research include:
- RMN ad spend is expected to account for more than 28% of buyers’ total overall media buys.
- Among those buyers increasing spending on RMNs, investments are expected to rise by nearly 20%.
- Top reasons to buy include the ability to reach incremental audiences (55%); leverage retailer first-party data (52%); drive performance (48%); and leverage customer data (45%).
- The endemic brand “spend tax grievance” is a myth. Only 28% of buyers cite the requirement to spend as a top reason for buying.
- To fund increased RMN investment, more than half (52%) are reallocating funds from across digital platforms, including social, search and digital video/CTV while more than one-third (36%) are reallocating funds from linear TV, print and out-of-home.
- Cross-RMN measurement standards and transparency around attribution windows, incrementality and viewability, for consistent RMN comparisons will significantly help propel ad spend.
- RMN ad buyers see the biggest benefits of Generative AI for activation-related tasks — including ad targeting, segmentation, and bid management — as well as campaign and ad-generation, including copy-editing, fact checking, customization and personalization.
IAB’s research also indicates that retail media can grow even faster but must first address “key ecosystem-wide issues:
- Improving measurement and data collection is the No. 1 opportunity area identified by buyers.
- Over two-thirds of RMN ad buyers (69%) cited the need to resolve complexity in the buying process. While many RMNs operate in silos and lack automated buying and cross-RMN performance capabilities, some have begun to provide self-service and managed-service activation platforms. Private marketplaces (PMPs) have also begun to emerge.
- Nearly two out of three buyers (62%) cited the lack of measurement standards as a top challenge to continued growth, followed by nearly 60% wanting greater transparency.
- 60% of ad buyers want better collaboration and communication with RMNs. Notably, only one in ten (12%) ad buyers said they are “very satisfied” with their RMN partner relationships and communication.
“Everyone notes a lack of alignment of stakeholders across shopper marketing, performance marketing, brand marketing and beyond” Bustos said. “There’s a big opportunity for brands to leap ahead of their competition if they do the work to align everyone’s interests and provide a unified point of view and clarity around goals.”