- A new report from ad network GroupM says retail media will be worth $100 billion by the end of 2022.
- But retailers need to entice ad dollars from brands that don’t sell e-commerce products.
- Retailers also need to make sure people keep buying online, despite an e-commerce slowdown.
WPP’s ad buying unit GroupM is extremely bullish about the growth of e-commerce advertising, predicting in a new report that it will grow 15% year-over-year to $101 billion this year, and that it will reach $160 billion by 2027.
GroupM’s forecast is significantly higher than a previous estimate from Boston Consulting Group that predicted retail media won’t tip $100 billion until 2026.
While Amazon has long dominated e-commerce advertising budgets, GroupM’s figures include the growing number of retailers selling ads including Walmart, Best Buy, Kroger, and Instacart.
E-commerce advertising will represent 18% of global digital ad spend, according to GroupM.
But in order for these projections to come true, retailers have to overcome some key challenges to keep their ad businesses growing.
Retailers need ad dollars from big brands that don’t sell products on their platforms
Retailers like Amazon and Walmart make the most money selling ads to brands that sell products on their websites. These brands set aside ad money as part of large shopper marketing deals with retailers.
But to continue growing their ad businesses, these retailers must get ad dollars from brands that don’t sell their products on e-commerce sites. These so-called non-endemic brands include insurance companies, automotive brands, and movie studios, according to the report.
To hook these types of advertisers, retailers will need to develop more sophisticated ad products that go beyond search ads, according to the report. An automaker, for example, could use a retailer’s data to target ads for people who recently bought ice scrapers.
Retailers must prove that their data is unique
The challenge for retailers is proving that their shopping data is differentiated, according to the GroupM report. Retailers compete with publishers and platforms to prove that their data can drive sales for advertisers.
Many retailers, like Kroger and Walmart, use their data to target and measure ads placed on websites that they don’t own.
But GroupM warns that separating their data to power ads on other properties “risks commoditization.” This could make advertisers less interested in buying ads from a retailer. However, GroupM added that retailers with loyalty programs that can accurately trace sales are best positioned to run offsite ads for advertisers.
E-commerce activity is slowing down, and retailers need to make sure consumers keep buying online
Retailers will need to keep customers shopping online to grab ad budgets.
But after 2020’s pandemic-induced e-commerce surge, GroupM’s report warns that the value of goods sold online is creeping down. This metric, called gross merchandise value, measures the health of e-commerce companies.
In 2020, GMV grew 60% year-over-year for the top 20 retailers, but dipped to 21% year-over-year in 2021, according to the report. “We estimate that this number will decelerate meaningfully in 2022 as life in many countries returns to incorporate more offline activities, as supply chain shortages continue to limit the availability of certain goods and as high inflation maintains its grip on many large economies,” the report says.