To Get Incremental Spend in Q4, RMNs Need to Automate

Amazon.com is the undisputed ruler of retail media, taking up 40 percent of total ad spend in the category with an 18 percent year-over-year growth in its ad revenue in 2024. Big-box retailers like Walmart, Target, and Best Buy, along with top grocers including Albertsons and Kroger, have captured meaningful ad dollars with their retail media businesses, leading to many more retailers (and nonretailers) jumping in with nascent offerings of their own.

However, many of these networks are hitting a spend ceiling. Why? Advertisers aren’t clear on where they should place their bets.

Commerce and retail media networks (RMNs) promise virtuous closed-loop media products with the magical combination of rich permissioned personally identifiable information (PII), omnichannel behavioral signals and, most importantly, transactional data. However, none provide the same level of insight and automation as Amazon.

Advertisers are begging for more transparency and better insights, but old technology and manual processes plague nearly every RMN. At the recent IAB Connected Commerce Show there was a lot of talk about the need for internal alignment across trade/shopper/co-op and RMN operations to achieve a unified offering for brands. With artificial intelligence and a well integrated tech stack, that can change fast, creating a jump-ball situation for retailers that make the move.

RMNs Held Back by Old Tech and Manual Processes

Retail media was born in the 2000s in the shopper marketing divisions of many legacy retailers. Merchandising teams earned new dollars from brands with early internet marketing tactics and everyone was excited about the potential for this new high-margin line of business.

And then Amazon got wise and reinvented the category by virtue of its digital-native position and aggressive investment ethos. Amazon’s dominance comes from its sophisticated data targeting and adoption of programmatic advertising, while legacy retailers are hampered, in part, by their traditional co-op model, which is still a mash-up of offline and online advertising that’s largely manual and cobbled together with outdated systems. Co-op’s legacy looms large over many RMNs, which also end up using a lot of managed service to fill gaps left by older technology.

This causes two problems:

1. An inability to scale: Audience targeted advertising is complex and requires a lot of detailed ad operations, measurement and reporting. There aren’t enough people in the world to satisfy advertiser demand. Without automated systems, this work takes up all of the media team’s time.
2. Lack of insights for advertisers: If advertisers don’t know what they're getting and what value it’s delivering, it’s hard for them to spend more. A team of analysts can only deliver so many reports by hand, so the top advertisers get white-glove treatment, while the majority of revenue comes from the long tail of advertisers who are left with static reports that come too slowly.

Without an understanding of the incremental lift they could get by adding budget to retail media campaigns, advertisers are choosing to invest elsewhere where the performance is far more clear and accessible. If they can get a better and quicker understanding of performance from Amazon, or by working directly with Meta or Google, they have little incentive to spend more with other RMNs.

Better, Faster Measurement Will Empower Brands to Enthusiastically Spend More

Advertisers are used to platforms like Amazon, Google, Meta, and The Trade Desk, and they want the same level of automation and insight in commerce media.

If retailers can launch a media network, they should be invested in bringing their entire program up-to-date, using better infrastructure to track advertising and collect shopper data — two things that many programs can only handle manually. Furthermore, retailers can start to scale exponentially with better measurement that taps into that data and delivers insights that prove to manufacturers the value of increased advertising investment.

The good news is that with innovations in AI, RMNs have an opportunity to catch up to their better-funded and more established competitors or they risk being stuck in co-op backwater before time runs out to build a sustainable business.

Some retailers are responding to advertiser demand by integrating with Amazon’s tech. Macy’s recently announced that advertisers can buy sponsored placements on its website directly on the Amazon platform. Regional players are making similar bets by choosing to join forces with noncompetitive peers through specialist networks like Rippl and Swiftly.  While partnerships like this can immediately boost a retailer’s ability to automate and report, it reduces their control over their own program significantly. Being lumped into a larger Amazon media buy can also dilute the unique value of a particular RMN and reduce the connection the retailer has with its customer.

Other retailers are investing in building their own retail media tech stack to control their own destiny. This includes a combination of data management capabilities, including warehouses, ID graphs and cleanrooms. Turnkey platforms including Criteo, Kevel, and Koddi are providing broad on-site and off-site solutions, while a growing number of point solutions are available to more mature product teams.

Advertisers need more than access to audiences and ad serving; they need to know if their campaigns are delivering outcomes. One promising insights option for RMNs that want to maintain control is to tap into AI agents to increase the scale and efficiency of their measurement and insights program. AI agents can be used to perform incremental lift and marketing mix modeling to help manufacturers see the big picture of how much they should be spending with different retail partners. For some retailers, there will be an uncomfortable reset period as better measurement exposes untracked extra spend. However, retailers will be set up to be more competitive and able to grow in the long run.

Co-op programs are still multichannel, including print and in-store, but they, too, need to be brought into the new world of data-driven retail media or they risk holding retailers back. Using automation and accurate, insightful measurement to tell a better story is what’s working for Amazon, and it’s what other RMNs can benefit from, too.

Paramount for all retail media teams is the need for a mindset shift from services to product delivery. Intelligent automation is the key to delivering the value that advertisers require to unlock bigger budgets and retail media’s next phase of growth.

John Sharry is head of commerce media and retail sales at Newton Research, a multi-agent system capable of handling complex marketing analytics tasks end-to-end.