Retail Media Standardization Race Heats Up: What's at Stake?

Retail media has become the fastest-growing marketing channel in recent years, but if the category does not clean up its act, the emerging networkopportunity to carve up a market worth over $100 billioncould be in jeopardy. As brands become increasingly reluctant buyers in a fragmented ecosystem due to inconsistent transaction, measurement, and campaign reporting methods, calls for standardization have gained traction in recent months.

Experts believe true industry standardization is difficult to achieve and unlikely to gain support from the players most influential in shaping retail media's actual practices. On the other hand, without some level playing field, smaller platforms face a reckoning in proving their value as a few giants gobble up more market share.

"From the publisher and brand side, the question is increasingly: What does this investment bring me?" said Nich Weinheimer, executive vice president of strategy at Skai (formerly Kenshoo). "CMOs are asking why they should continue to support 30% year-over-year growth in retail media investment."

'Trough of disillusionment'

The biggest push for standardization is coming not from oversight bodies or regulators, but from publishers. At the Cannes Lions International Festival of Creativity in June, Albertsons' retail media arm, Albertsons Media Collective, proposed a framework aimed at bringing greater uniformity to the industry, focusing on common practices around product features, performance measurement, third-party verification, and network capabilities. The proposal was endorsed by Omnicom Media Group and Unilever, and the grocery chain described the lack of standardization asa survival issue for all retail media networks。

"To ensure the industry survives, we must unite for a greater purpose," Kristi Argyilan, senior vice president of retail media at Albertsons, said in the announcement.

Despite the grand rhetoric, the anxiety behind it is well-founded. Albertsons cited a January study by the Association of National Advertisers showing that many marketer members of the industry group nowreluctantly buy retail media。

According to ANA data, the lack of accurate performance measurement methods, the growing sentiment that retail media buying is a "tax" imposed by retailers rather than a benefit, and the overall fragmented state have prompted 42% of advertisers to question their investment in the space.

"When I buy banner ads, TV, or streaming ads, I can create one unit and place it in many different places," said Nii Ahene, chief strategy officer at Tinuiti. "But retail media doesn't have that capability at all."

That said, retail media networks remain giants in a sluggish ad market. GroupM forecasts the category willgrow 9.8% to $125.7 billion in revenue this year, and will surpass TV ad sales within a decade. Retail media networks are a major beneficiary of cookie deprecation, which has pushed brands to seek targeting methods that rely on the vast first-party transaction data retailers possess.

However, the deteriorating sentiment today could have long-term consequences. Weinheimer said brands may haveentered the 'trough of disillusionment' in the retail media hype cyclein the second half of 2022 as economic weakness hit marketing budgets. The standardization movement shows publishers are taking the potential impact on their profits seriously.

"More pressure has moved upstream to publishers, namely the retail media networks themselves," Weinheimer said.

Who benefits from standardization?

Although Albertsons has identified clear pressure in the industry, its standardization stance has drawn some skepticism. Albertsons is essentially asking competitors to adopt its framework for how the industry operates, even though it has an advisory council overseeing the development process and has pledged support for key initiatives led by the Interactive Advertising Bureau (IAB), the trade organization focused on digital marketing best practices.

Albertsons is also in the process of merging with Kroger, whoseretail media network is one of the most mature and sophisticated. Some see Albertsons' move as essentially a brand-building strategy to make its retail media offering stand out among the many networks still refining their positioning and value propositions.

"They're pushing what they know advertisers will want," said Andrew Covato, founder and managing director of Growth by Science. "If you control the standards, you can make them favorable to yourself. My feeling is it's almost a strategic positioning."

Even if Albertsons' proposal is flawless on paper, retail media networks have trended toward closed approaches, common in the digital media world dominated by walled gardens like Google and Facebook. The large-scale buy-in needed to make a unified framework work is seen by many as a pipe dream.

Albertsons said its guidelines will only be finalized after being fully stress-tested and broadly feasible at the execution level. Albertsons Media Collective did not respond to requests for comment on whether it has proactively reached out to other retail media networks to join its standardization push and how many networks have signed on to its initiative.

"Walled gardens don't want to compare results with each other, so how is retail media different?" said Russ Dieringer, founder and CEO of research firm Stratably. "I haven't seen a compelling argument yet."

The elephant in the room

Albertsons is not the only one advocating for retail media to clean up its act. IPG launched anew solution in July to help clients manage investments across channels. As brands navigate dozens of networks, a market of technology intermediaries serving similar purposes is booming. In the fall, the IAB will release retail media measurement standards, co-overseen with the Media Rating Council, for public comment.

"Anyone who can cross the walled gardens will play a key role in influencing standardization," Weinheimer said. "That's not affected by the competitive layer among publishers."

Some experts believe standardization could benefit smaller and mid-sized retail media networks that lack the knowledge or scale to implement their own closed-loop ecosystems. Comparable benchmarking against larger competitors could be a more concrete way to demonstrate value, but it doesn't address the risks of overcrowding and commoditization on the product side.

"If media measurement is more credible, the retail media industry will attract more money faster," Greg Stevens, founder and president of Turbyne, said in an email. The company just came out of stealth mode.

"Mid-tier regional retailers like Meijer or HEB benefit the most because the simpler the process, the more they can compensate for their scale disadvantage compared to larger players," Stevens added.

The "elephant in the room" in the discussion is Amazon, which is functionally in a class of its own. Analysts note the e-commerce giantcontrols more than 70% of the U.S. market share, and retail media is most prevalent in the U.S.

Amazon'sad sales grew 22% year-over-year to $10.7 billion in Q2, which ismore than three times the full-year 2022 revenue of Walmart, the second-largest retail media network. Although Amazon has yet to perfect its physical store strategy,in-store advertising is just beginningto become a significant part of retail media discussions. In other words, setting retail media standards without Amazon is like standardizing search marketing without considering Google.

"The challenge with any standardization effort is that Amazon is not participating, and it doesn't need to because it's so far ahead," Dieringer said. "If Amazon doesn't participate, then you're only standardizing about 15% of the market, assuming everyone else agrees."

A fight for survival?

The ambiguity of standardization—clearly some change is needed, but the mechanism is unclear—provides another sign that retail media may soon contract. Although spending flowing into the channel remains healthy across various metrics, the number of networks actually benefiting may shrink. This year has already seenGap scale back its retail media investment, marking the first notable failure in a space that appears to be thriving amid the downturn.

Even if standardization is widely adopted, whether the industry's current state is sustainable remains an open question. Brands ultimately have limited budgets and advertising approaches, and since networks functionally serve the same purpose, they are more likely to choose networks that attract the highest purchase-intent traffic.

"Can all these media networks agree on any standardization and follow it?" Dieringer said. "There will be winners and losers. That will be a real challenge."