Retail media ad revenue forecast to surpass TV by 2028

The game changer has been the shift in the digital privacy landscape

LONDON (Reuters) – The value of global advertising revenue from retailer-owned e-commerce sites is growing so fast that the medium, known as retail media, is forecast to exceed television revenue by 2028.

GroupM, the world's biggest media buyer, said it expects advertising revenue from retail media channels will grow 9.9 per cent to reach $125.7 billion in 2023 and will surpass television revenue in 2028, when it will represent 15.4pc of total ad revenue.

WPP owned GroupM's 2023 Global Mid-Year Forecast report said retail media is the third fastest growing advertising channel this year behind digital out of home (OOH) screens and connected TV (CTV). However, those two channels are a fraction of the size of retail media.

The report, published on Monday, echoes an earlier forecast from market research firm eMarketer.

Retailers from Amazon, Walmart and Target to grocers such as Carrefour, Ahold Delhaize, Tesco and Sainsbury's are working aggressively to attract big advertisers to their websites.

For retailers, getting consumer brands who sell products through their websites to pay for advertising is a double win - they earn from every product sold and make money from the ad.

Reflecting the premium that major consumer goods companies are prepared to pay for prominent positioning on retailers' sites, profit margins for retailers from retail media can be as much as 90pc - crucial income when returns from their main business line have been hit by the accelerating cost of living.

For the brands, increased use of digital channels by shoppers during the pandemic made retail media more attractive.

It also gives advertisers an option to diversify ad spending beyond Alphabet's Google and Facebook-owner Meta Platforms, the two largest digital ad sellers, known in the industry as the "duopoly”.

However, the game changer has been the shift in the digital privacy landscape, such as the European Union's General Data Protection Regulation (GDPR), which prompted major internet players to suppress the collection of personal data.

This has had the effect of increasing the value of data that retailers gather themselves that can be used to help target brands' advertising and closely measure its effectiveness, so-called first-party data.

OPPORTUNITY

Amazon is the pioneer in retail media, disclosing $11.6 billion in revenue from its ad business in the fourth quarter, while Walmart's retail media business, Walmart Connect, has grown rapidly, with sales rising nearly 30pc to $2.7bn in its fiscal year ended Jan 31.

While US players have led the development of retail media networks, European retailers are wising up to the opportunity.

Dutch grocer Ahold Delhaize has hit "roughly half" its goal to grow revenue from businesses beyond grocery stores to 1 billion euros by 2025, an effort focused on selling ads on its supermarkets' websites and monetising insights on consumer data, CEO Frans Muller told Reuters.

Sainsbury's, Britain's second biggest supermarket group, has created Nectar360, which combines its loyalty scheme with marketing services. Already working with 700 brands, it expects more than 90 million pounds ($113 million) of additional profit from the business by 2026.

"More and more brands are using Nectar360, to improve their return on ad spend and grow their business," Mark Given, Sainsbury's chief marketing officer told Reuters, highlighting the "significant opportunity".

Consultants McKinsey say retail media networks in the UK grocery sector alone have the potential to generate 1 billion pounds of profit in about two years.

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