Advertisers are increasing retail media spending as TV viewership declines

So-called retail media networks – advertising publishing platforms – that include e-commerce, retail and consumer companies such as Amazon, Walmart and Kroger, attract billions of dollars in advertising, the largest advertising group in the world.

According to eMarketer, global retail media advertising spending is expected to more than double, from $114.18 billion in 2023 to $233.89 billion in 2027. Retail media is expected to account for a larger percentage of advertising spending digital, which has begun to eclipse traditional media spending, growing from 18.9% of this segment in 2023 to 25.7% in 2027, according to eMarketer.

“What we’re hearing directly from brands is that they no longer wake up with a prescription to buy X amount of TV shows, X amount of social media and X amount of digital assets. They wake up every day trying to buy growth, trying to buy results for their businesses,” said Sean McCaffrey, president and CEO of GSTV, a mobile media network with more than 29,000 screens at retail fueling stations.

GSTV screens reach 115 million monthly viewers in 49 states.

Brands are “more open to where they can find their audience,” McCaffrey said.

“This is the new TV that delivers mass advertising,” said Mark Boidman, head of media and entertainment investment banking at Solomon Partners. “If you want to reach someone quickly, the best way to do it is in the store or in the app. …It’s a 360-degree approach.”

These types of ads bought through retail media networks are often found on in-store displays and screens, websites, mobile apps, streaming services, smart TVs and social media. Not only is this fertile ground for an advertiser to present their offering to consumers looking to spend, but it also provides a wealth of first-party data.

The amount of data retailers have on customers – from one-time buyers to loyalists – is extremely valuable to advertisers looking to optimize their exposure.

“If (brands) advertise through digital advertising, for example, and a customer a week later makes a transaction in a store or club, we can put it together for them and tell them that the ad really worked,” said Walmart CEO Doug McMillon. CNBC earlier this year. “This is our distinctive advantage.”

Walmart was a particularly big player. While this is still a new frontier for the retailer, advertising has boosted the giant’s profits in recent quarters. The company also recently agreed to buy TV maker Vizio in a bid to further boost its advertising business.

Among companies tracked by eMarketer, Amazon was recognized as the largest retail media network in the U.S., with approximately 75% of retail media advertising revenue. Other top chains by revenue include Walmart, Instacart, eBay and Etsy.

The shift to retail media comes as advertisers face changes in technological privacy that have led to limits on data collection.

Earlier this year, Google began modernizing the way it and other companies track users online, using cookies that track users’ online activity so advertisers can target them with relevant ads.

In January, Google began restricting cookies for 1% of Chrome users, with the goal of completely removing third-party cookies by the third quarter of this year. Advertisers are wondering how to make this change.

Advertising and media executives note that retail media chains now dominate conversations at conferences and other gatherings such as the Cannes Lions advertising festival. It is also often the most important element of earnings calls.

“(Retail media networks) strike a balance between targeting, privacy and compliance. I think that’s where the money really starts to move,” Tim Hurd, vice president of media activation at Goodway Group. “I think that’s key. Retailers have this kind of data.”

The growth in retail media advertising comes against a backdrop of major changes in the media landscape. Pay TV customer numbers and traditional TV (non-sports) viewership continue to decline as more viewers shift to streaming.

And while interest in digital and streaming advertising is growing, traditional television is still lagging behind. That much was clear in the first quarter earnings reports of media giants like NBCUniversal and Warner Bros. Discovery owned by Comcast.

Disney saw first-quarter advertising revenue decline across its traditional cable networks and Hulu, despite growth in cable crown ESPN; Warner Bros. Discovery saw a decline in advertising revenue; Paramount Global achieved expected growth from Super Bowl broadcast; and NBCUniversal’s domestic advertising revenues remained flat. However, streaming advertising revenues for legacy media giants have shown growth.

Beyond major TV moments like the Super Bowl and other live sporting events, advertisers are now strategizing on multiple fronts and splitting spend across TV, social media, e-commerce and digital, said Goodway Group’s Hurd.

“Advertising on linear TV continues to decline,” said Kate Scott-Dawkins, global president of business analytics for GroupM, noting that advertising revenues have shifted from print and radio to TV and now to digital over the past decade.

Retail media revenues have grown from less than $1 billion in the U.S. a decade ago to a projected $42 billion this year, or $129.4 billion globally, Scott-Dawkins said, citing GroupM data and noting that brands’ advertising budgets may not be directly shifted from traditional television to on-site retail advertising.

She added that traditional TV revenues may shift to smart TVs, but this will be driven by data on customers’ consumption habits that retailers can make available.

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