Dive Brief:

• Target’s revenue derived from advertising rose roughly 24% year over year to $649 million in 2024, according to an earnings statement. The retailer’s digital media business Roundel makes up the lion’s share of its ad segment.  
• Roundel delivered about $2 billion in value last year, according to executives, who expect the size of the business could double in the next five years. Target has recently moved its Roundel and social commerce teams closer together.
• In the Q4 period ended Feb. 1, Roundel’s revenue increased nearly 14% YoY to $190 million. Despite end-of-year performance that topped estimates, Target is facing a challenging 2025 amid heightened consumer sensitivity and a mounting trade war.  

Dive Insight:

Roundel helped drive “significant profitable growth” for Target across an otherwise challenging 2024, executives said when discussing the company’s latest earnings results. A robust Q4 showing reflects the larger role retail media is playing around the key holiday period. 

Target is optimistic its digital media unit can extend a hot streak by aligning more closely with other areas of business such as Target’s social commerce team, Plus third-party marketplace and Circle 360 membership program, the latter of which is nearing a year in operation. A continued windfall from ad sales may be crucial as the big-box store faces increased volatility in 2025, with the impact of tariffs expected to hit as soon as later this week. Target is also contending with a fresh consumer boycott due to its pullback on diversity, equity and inclusion initiatives. 

Advertisers have flocked to Roundel due to offerings like sponsored product ads placed on Target’s app and website, which saw 35% growth last year, as well as the quality of insights into Target customers, whom the retailer positions as more trend-conscious and discerning versus rivals. Walmart, Target’s chief competitor, has started to win over more high-income shoppers amid continued inflationary challenges.

“The richness of our guest base and the trust they have for our brand: This is why we’re seeing outsized growth,” said Cara Sylvester, chief guest experience officer at Target, during the earnings call. “It’s also why we have so much confidence in Roundel’s ability to scale for years to come. We continue to innovate and prove our value to existing partners who spend more with us every year.”

Roundel’s momentum has also been supported by welcoming a greater number of smaller advertisers into the fold. Its small business segment grew by more than 40% in the past year, aligning with how other retail media networks have tried to widen their advertiser pool in the quest for scale.