Is Retail Media Blurring Brand and Performance Advertising?

Retail media is helping to end the artificial separation of brand and performance advertising, according to an IAB analyst, but major brands have their doubts about the efficacy of this channel as regards brand building. 

Brand and performance come together

Speaking at the recent DMEXCO conference, Daniel Knapp, chief economist at the trade organisation’s European branch, outlined research that used an LLM to read earnings call transcripts from more than 1,000 advertisers over several quarters, to assess what they were talking about to investors when it comes to advertising.

The main themes repeat across nearly all of them, he reported: branding, digital data, targeting, AI and outcomes.

• Apart from branding, these are all things associated with retail media, Knapp suggested, “but the most important thing is that the mentions of branding and data and targeting are not separate.”
• “Think brand advertising and performance advertising, but they’re mentioned together. So this artificial separation of the two is coming to an end,” he argued, adding that retail media is one of the channels facilitating it.
• Marketers are shifting budgets to retail media, with the bulk of that coming from linear TV, Knapp noted, before adding: “We think of television and retail media as still separate channels, but maybe we should stop doing this comparison and see the two as becoming ever more tightly integrated.”

But advertisers have issues

At the same event, Susanne Demmerling, retail and digital media manager at Nestlé Deutschland, explained to a panel of retail media owners why she remained unconvinced by their sales pitch.

• The lack of a cross-platform booking process (there are some 113 different retail media networks across Europe) makes it impossible to optimise spending.
• The ad products available are lower funnel, and, while measurement of short-term results is quite advanced, she sees “a huge gap when it comes to [independent] proof of brand-building and media impact”.
• When retailers talk about moving up the funnel, she added, then advertisers are going to compare them with the wider media landscape and “I really have a lot more options out there”.

Context 

In 2023, retail media in Europe grew almost four times as fast as the overall ad market (22% vs 6%) and is forecast to hit €31bn by 2028.

Retail media search today is nearly 20% of the entire search revenues in Europe. Sponsored product ads are currently fuelling retail media growth but within the next three to four years, as retailers reach the limits of inventory, they will diversify into other areas like display advertising and business intelligence.