Both ecommerce and the associated media offerings around the retail sector have grown exponentially over the last two years. Now consulting firm McKinsey has said that the sector should be viewed as one, bringing brand advertisers, retailers and media companies under one ‘commerce media’ banner.
Takeaways
Traditional advertising has, for decades, been built on the idea of targeting defined audience groups. Success was seen in terms of reaching the audience targeted. Now, according to Quentin George, partner at McKinsey’s commerce media practice, advertising impressions are being connected with specific sales. George said:
The change here is, I can now connect an impression with a SKU level sale — not with a [checkout] basket, not with a credit card, but with a direct sale. And that is incredibly transformative for the industry.
According to the consultant, the sector could be worth an additional $1.3 trillion in media revenues. The total value comprises:
$820 billion for retailers developing media businesses
$280 billion for advertisers in higher returns on ad spending
$160 billion for ad-tech providers
$50 billion for publishers from new advertising opportunities
$5 billion for marketing and media buying agencies
Commerce media growth
The growth seen in the commerce media sector is largely incremental and driven by consumer packaged goods (CPG) advertisers. McKinsey’s surveys indicate that about 70% report of CPG retailers report that their advertising in retail media brings better performance than what they can get elsewhere.
Growth is expected to continue as long as performance holds up. Associate partner at McKinsey, Jon Flugstad said:
There’s no certain threshold or number that they’ll spend — if you’re driving performance they will keep shifting toward you.
Megan Pagliuca of the Omnicom Media Group agrees; she said that more advertising investment will go to places where you can measure against direct sales.This explains why Omnicom announced four separate ecommerce-related partnerships during the Cannes Lions festival this year.
Commerce media challenges
McKinsey says that, as companies approach the commerce media opportunity, they must keep the customer as their ‘North Star’. Consumers want personalized experiences and advertising that is useful and, with meaningful data on unique, hard-to-reach audiences, retailers can help advertisers enhance their consumers’ experience.
The consultancy points out that the disruption caused by the rise of commerce media is likely to bring challenges directly to traditional publishers – as third-party cookies disappear, competiton from data-rich retailers will increase.
To compete, McKinsey suggests publishers need to help facilitate ecommerce, and notes the potential to innovate in several ways.
Become more like retailers – build ecommerce capabilities or create marketplaces to understand consumer behavior.
Engage lower in the funnel – incorporate live-commerce elements such as hosted livestream shopping, to attract audiences with specific purchase intent.
Partner with retail-media networks – utilize their ad inventory and supply content to boost engagement and drive purchases.
The consultancy says, very soon, customers will expect to be able to complete purchases within the context of online content.
Companies that forge strategic partnerships to deliver these experiences could reap substantial rewards. They will also help shift advertising’s mission from audience delivery to the acceleration of business growth.
