Advertisers Increase Retail Media Spending as TV Declines

The next frontier in the advertising market isn’t on TV, but on screens close to retail outlets.

Television has long been a major target for advertisers, alphabet and MetaPlatforms owned by companies such as Facebook have begun to take market share, ad dollars are rapidly shifting from traditional TV to streaming, while retail and consumer goods companies are taking a bigger part of the advertising mix.

So-called retail media networks (advertising platforms) are offered by e-commerce, retail and consumer companies. Amazon, Walmart and Kroger These companies rake in billions of dollars in advertising spending, according to data from GroupM, the media investment arm of WPP, the world’s largest advertising group, and eMarketer.

According to eMarketer, global retail media ad spending is expected to more than double from $114.18 billion in 2023 to $233.89 billion in 2027. Retail media is expected to make up a larger share of digital ad spending, which is beginning to surpass traditional media spending, growing from 18.9% of the segment in 2023 to 25.7% in 2027, eMarketer said.

“What we hear most directly from brands is they no longer wake up in the morning and decide how much TV they’re going to buy, how much social media they’re going to buy, how much digital they’re going to buy. They’re buying growth every day, they’re buying business outcomes,” said Sean McCaffrey, president and CEO of GSTV, an on-the-go media network with more than 29,000 screens located in gas stations attached to convenience stores.

GSTV screens reach 115 million viewers monthly across 49 states.

Brands are “becoming more open about where they can find those customers,” McCaffrey said.

“This is the new TV for mass-reach advertising,” said Mark Boydman, head of media and entertainment investment banking at Solomon Partners. “If you want to reach someone quickly, the best way to do it is to send them to a store or an app. … This is a 360-degree approach.”

The types of ads bought through retail media networks are often seen on in-store displays and screens, websites, mobile apps, streaming services, smart TVs and social media. Not only does this provide advertisers with a great opportunity to get their ads in front of consumers who are ready to make a purchase, it also provides them with a wealth of first-party data.

From one-time buyers to loyal customers, the amount of customer data that retailers hold is invaluable to advertisers looking to optimize their exposure.

“if [brands] “If we promote something in a digital ad and the customer makes a transaction in a store or at a club a week later, we can connect that to the customer and let them know that the ad really worked,” Walmart CEO Doug McMillon told CNBC earlier this year. “That’s what differentiates us.”

Walmart is a particularly big player: Though it’s still new to the company, advertising has boosted the retail giant’s profits in recent quarters, and the company also recently agreed to buy TV maker Vizio to further expand its advertising business.

Among the companies tracked by eMarketer, Amazon is considered the largest retail media network in the U.S., capturing approximately 75% of retail media advertising revenue. Other top networks by revenue include Walmart, Instacart, Ebay and Etsy.

The shift to retail media comes as advertisers face technological privacy changes that lead to a rollback of data collection.

Earlier this year, Google began reviewing how it and other companies track users online, specifically its use of cookies, which track internet users’ activities to allow advertisers to target relevant ads.

Google began restricting cookies for 1% of its Chrome browser users in January, with the goal of removing third-party cookies entirely by the third quarter of this year, leaving advertisers struggling with how to navigate the transition.

Advertising and media executives note that retail media networks are now central to conversations at conferences such as the Cannes Lions advertising festival and other gatherings, and are often a highlight on earnings conference calls.

“[Retail media networks] “There has to be a balance between targeting and privacy and compliance, and I think that’s where the money really starts to move,” said Tim Hurd, vice president of media activation at Goodway Group. “I think that’s the key. Retailers have that data.”

The rise in retail media advertising comes against the backdrop of major changes in the media landscape: pay-TV customer numbers and traditional TV viewership (non-sports) continue to decline as viewers move to streaming.

While digital and streaming ad buying is recovering, traditional TV is still lagging behind, as was evident in the media giants’ first-quarter earnings reports. Comcast NBCUniversal and Warner Bros. Discovery.

Disney saw first-quarter ad revenue declines at its traditional cable networks and Hulu, despite gains at cable’s top-tier ESPN. Warner Bros. Discovery reported a decline in ad revenue. Paramount Global While the Super Bowl broadcast brought in an expected boost in revenue, NBCUniversal’s domestic ad revenues remained flat, but the legacy media giant’s streaming ad revenues did grow.

Beyond marquee TV events like the Super Bowl and other live sports broadcasts, advertisers are strategizing across multiple areas, splitting their spend across TV, social media, e-commerce and digital, said Goodway Group’s Hurd.

“Traditional TV advertising is still in decline,” said Kate Scott-Dawkins, global president of business intelligence at GroupM, noting that over the past decade ad revenue has shifted from print and radio to TV and now digital.

Scott Dawkins, citing GroupM data, said U.S. retail media revenue will grow from less than $1 billion a decade ago to $42 billion this year and $129.4 billion globally, but noted that brand advertising budgets may not shift directly from traditional TV to in-store advertising.

But it’s also possible that traditional TV revenue will shift to smart TVs, based on the data retailers can provide about customer spending habits, she added.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.