Retail media’s rise increasingly reliant on offsite programmatic media, report finds

Dive Brief:

Advertiser spending on retail media networks in the U.S. is forecast to jump 30% this year, with growth largely coming from offsite programmatic media, according to a new report from Advertiser Perceptions.
Offsite programmatic retail media will rake in $20 billion in 2024, the researcher said, leapfrogging the $7.5 billion in spending seen in 2023. Demand is being driven by a wider array of streaming services and publishers that offer programmatic advertising.
Retail media as a category is expected to hit $81.6 billion in ad spending by 2025 to represent nearly a quarter (23.5%) of the total U.S. digital advertising market. The upward trajectory comes as questions around programmatic transparency are again on the rise.

Dive Insight:

Retail media continues to ascend as one of digital marketing’s fastest-growing channels. The red-hot segment, which gathered its early momentum from on-site search and display advertising and the promise of creating an alternative to cookies, is extending its tendrils into the offsite programmatic arena, priming retail media networks for greater scale and revenue generation in the years ahead. With that scale comes increased complexity, and some marketers may question whether their offsite programmatic buys are delivering on quality amid rising concerns around transparency in the open web ecosystem.

A few factors are supporting the groundswell for offsite programmatic retail media. Many retailers are pushing into channels like connected TV and streaming to diversify options for advertising partners and better execute full-funnel campaigns. At the same time, more streaming services and digital platforms that were once ad-free are welcoming the monetization opportunity to improve profitability.

Mature retail media networks are additionally bumping up against the problem of on-site advertising overload. Only so many surfaces can be blanketed with brand messages before the user experience is deprecated and shoppers are put off.

“As ad auctions on retailers’ own properties become saturated, brands will look to utilize retailers’ data to power their buys outside of retailers’ digital walls,” said Eric Haggstrom, director of business intelligence and head of forecasting for Advertiser Perceptions, in a statement attached to the report. “Media and ad tech companies need to form relationships with retail media platforms or risk missing out on one of the few large and quickly growing segments of the digital advertising market.”

Advertiser Perceptions based its findings on financial reports from more than 100 publicly traded companies, insights from media buyers and government research. Pinning down the full scope of retail media can be difficult as retailers for the most part do not publicly break out revenues derived from the segment. A broader assessment of programmatic by the researcher found that ad spending on mobile and desktop will be more moderate.

While offsite programmatic appears to be a boon for retail media networks, it’s also a channel that is under greater scrutiny. A recent analysis from Adalytics alleged that retail media networks are a culprit in transacting on Made for Advertising (MFA) websites, essentially low-quality click-bait farms that rarely attract organic reader interest. Brands that rely on retail media networks, typically consumer packaged goods, have pushed for more standardization in the industry to improve measurement and transparency.

MFAs — a term that is still being debated within the industry — can carry high costs for advertisers and produce worse environmental outcomes. The Association of National Advertisers, a trade body, last summer revealed that MFA publishers commanded 15% of programmatic ad spend.