No doubt local businesses are competing with Amazon for local dollars along with businesses with larger budgets! The only savior for local businesses is media marketing consistency in other attractive dayparts then prime for TV and drivetime for radio advertising! Philip Jay LeNoble, Ph.D.

Spending On Retail Media Networks Begins to Decline

• by Sarah Mahoney , Staff Writer @mahoney_sarah, 4 hours ago

 

 

 
Walmart Connect continues to gain shares at the expense of Amazon.

It seems hard to overestimate the growth of retail media networks, with EMarketer’s latest tally coming in at $54.48 billion this year. That puts the channel at No. 4, surpassed only by search ($90.73 billion), social ($86.75 billion) and TV ($58.99 billion.) But new research from Keen Decision Systems says a shift is underway. While retail media networks accounted for 19% of the total media budget in 2023, that declined to 13% in 2024 -- a 33% decrease. 

Amazon, long the leader, still rules with a 42% share, but is seeing the largest declines, down 24% year-over-year. Walmart has been the biggest gainer, with a 20% share. 

Justin Jefferson, Keen’s senior director of analytics and insights, tells Retail Insider what’s driving the shifts.

Retail Insider: MediaPost has been dutifully reporting on the growthquake in retail media networks. Now you’re saying a decrease is coming?

Justin Jefferson: If we take a step back, the long-term trajectory is still up. But we have seen a slowdown in growth, not in the overall budget but in the mix of which retailers are getting the most [traction]. Amazon has, by far and away, been the biggest player.

Retail Insider: Since Amazon started with a 100% share, it can only lose?

Jefferson: Yes. The question is, to what extent can the other retailers eat at that share? People are diversifying away from Amazon because there are so many options, and they've also started to realize that the incrementality and the profitability aren't always there. Historically, the lift you're getting off Amazon has been fairly minimal. People have been overspending on Amazon, which naturally warrants diversifying into other platforms.

Retail Insider: Your research notes Walmart’s share is now 20%, which represents a 60% increase, and Instacart now has a 14% share, which is up 22%. Kroger, with a 5% share, and Target, with 4%, are also up. What’s driving their growth compared to the dozens of retailer networks they compete with?

Jefferson: Walmart has made significant investments to build out Walmart Connect, expanding its scope and scale. It acquired Vizio and has done partnerships with The Trade Desk and with LiveRamp. It has an immense amount of first-party data and has been able to leverage that to enable offsite advertising. That’s been a big part of the growth – not just what we see on the website, on the app and in stores, but partnering and expansion that has grown the network.

Amazon's done much of that, too, trying to move more up the funnel.

Retail Insider: How so?

Jefferson: Let’s say someone is online and searching for Oreos. Maybe you’re a competitive snack brand and want to pursue that customer. Or you are Oreo and want to protect your space. You don’t want another brand to come up. That was the first focus of retail media networks: How do we best capture demand at the bottom of the funnel, where people are so close to purchase?

But now, it’s starting to be considered earlier, more top of funnel, as display and video move offsite.

Retail Insider: Stop there, please. Many people are confused by what “offsite” means for retail media. Explain it to me like I am 5.

Jefferson: Yes. Most people still think about retail media as serving me ads when I'm on that retailer's website or their app and that some type of search triggers the ad I see.

There’s only a certain amount of inventory at that search level, so more advertisers simply mean they have to spend more, and there’s a higher cost per click. And searches aren’t growing that much.

So networks have started to say, “Okay, how do we increase the ad inventory? Because I have consumers’ first-party data, I know they are a prime customer for X brand. How else can I get this ad in front of them?”

They’ve done that by partnering with other networks leveraging that first-party data. So now they can get in front of that consumer even when they're not shopping on Kroger or Walmart.com.

And there’s a lot more ad inventory at the top of the funnel, which drives awareness to enable more long-term demand, eventually leading to more searches. So, everyone has been moving up the funnel, especially Walmart.

Retail Insider: Back to the dominant players. Doesn’t there have to be a shakeout? Beyond Amazon and Walmart, which networks will dominate?

Jefferson: I don’t see a shakeout so much as a rebalancing effect. We will see Instacart, Target and Kroger begin to gain more share at the expense of Amazon and Walmart. I don’t think that will happen overnight, but the share percentages will be a lot more balanced than they are now.

Retail Insider: Amazon isn’t the kind of company that likes to lose share, let alone see ad revenue decline. What is it doing to prevent that?

 Justin Jefferson: Build out its network as much as possible, to go more top of funnel. The search side on Amazon has been saturated and very competitive for a long time, and it's only becoming more so. Cost per click is going up, and the overall efficiency advertisers can achieve has gone down.

If you've got one market that's saturated and capped out, you have to develop another market. That’s why it is developing the video and display side of the business. By building out the non-search side, Amazon can keep the net ad dollars going up.

Retail Insider: What about all those other retailers that have said, “Hey, we have eyeballs too. Our customers are special. We can play this game, too.”

Jefferson: Yes, they are all asking how to monetize those eyeballs. And so many have started networks. However, it comes with a significant investment, and they will have to prove the value and impact to advertisers over time. That requires more tech and larger teams.

There are two options. They can either build the network and try to manage the ad programs themselves  -- or sell the inventory to a player like Walmart. Google has been doing this for a long time with their Google Display Network.

Retailers have to ask themselves if they can benefit more by setting up their own program or by selling their inventory to others. Initially, everyone wanted to jump in and build. Now, more are realizing how difficult and expensive of a process that can be. Over time, many will say it’s not worth it.