Retail media: are backroom deals muddying the marketplace in adland’s fastest-growing sector?
For decades dealing with big retailers has been a cage fight; brands have to bung money here, there and everywhere to be listed let alone given a prominent display.
The age-old altercation now has a new dimension: retail media. On the one hand marketers love it because they think it gets them as close as they can be to consumers plus access to retail media’s first party data – walled gardens in effect.
On the other, according to this piece in Ad Age, some think they’re being ripped off as the media agencies with big retail accounts are required to promise large amounts of other-client spend to the retailers’ respective media operations (justified or not.) This has emerged in the wake of Amazon’s recent decision to divide its global media between OMG in the US and WPP elsewhere.
For the record, Omnicom says it does no such thing; WPP, so far, has declined to comment. Amazon says: “We conducted an extensive, thorough and objective review to find the right agency partners. In that process, we evaluated agencies’ ability to reach our customers based on their marketplace expertise, media planning experience, media pricing, measurement abilities and account management across all geographic regions. Any suggestion otherwise is false and misleading.”
This comes at the same time as a renewed focus on what agencies call (not wholly transparently) “principal-based” trading. That is, buying media on their own account and flogging it on. Broking, in other words.
Sean Corcoran, former US CEO of Interpublic’s Mediahub, told Ad Age: “The retail media world, and really the broader media marketplace, is now riddled with backroom deals and principal buying models that are leading to a muddled marketplace where many brands are losing out‚ and they don’t even know it.”
Simon Francis of consultancy Flock Associates said: “Some of the retail clients are saying to their media agencies, ‘You are our partners, but if you expect to keep our retail media accounts we expect you to invest heavily into our retail media network. So the media network commits heavily into their clients RMN and then has to somewhat artificially move other clients’ money to it.”
There are also reports of holding company teams revising client media plans for benefit of the holding company – that is, where they make the most money.
Media has always been a murky old business and we shouldn’t be surprised at such developments with retail media forecast to take 20% of all media spend imminently. Ad holding companies are currently struggling to make any money at all. There probably won’t be a definitive resolution until one of these deals lands in court. At least the lawyers will profit from it.
This is a much bigger issue than anyone realises.
Retailers are requiring CPG firms to “invest” mandatory % amounts of sales (as a “prebate”) which those retailers then categorize on top-line as Media Revenue. These amounts, as you imply, used to be called shopper marketing or MDF funds. that accounting-wise were deducted from a retailers invoice, and effectively lowered a retailers Cost of Goods. This is how they continue to suggest retail “margins” haven’t changed. The base cost is higher, as are total revenues.
And, btw, those monies were generally not a part of any agency media budget. So now everyone is transforming what used to be promotional pricing, selling in as MSRP, while Retailers recognize the promo discount as media Revenues, and reward Agencies that now manage the money via Principal Media buying deals. Oh, and let’s not forget all the AdTech providers that are getting their license revenues, transactional slices and volume cuts.
Consumers (and Politicians) don’t understand why grocery prices are so expensive. Well, this Adtech/RetailMedia shell game is a far more impactful reason than simple inflation.
Yes, we can blame all the tech folks that scrambled when web Cookies started crumbling and the retailers that scrambled to keep revenues flowing during COVID. They left their cozy gigs at Amazon and Microsoft to become Retail CMO’s and RMN execs, nesting at retailers who are now filled to the brim with 22-year old Account Exec’s selling lame mobile display ads and unregulated coupon-ish e-clips into mobile-driven personalization platforms, promising Amazonian DTC ad effects at the retail store. Just wait until the ad fraud world wakes up and notices this ocean awash in ignorant fools.
Find us one, just ONE, serious CPG executive saying Retail Media works. You can’t. Because it doesn’t work. CPG’ers miss the days of Shopper Marketing promos and slotting allowances where at least they sold through enough incremental product to get displays and make their bonus.