Good piece in Fast Company about the degree to which Amazon and Walmart are doing battle over ad revenue, which is worth billions of dollars to their bottom lines.
According to the story, "The behemoth retail rivals are not outliers in pushing this strategy. To the contrary, they appear to be the vanguard of snowballing trend: According to Marketing Brew, 9 of the 10 largest retailers in the U.S. (including Kroger, Target, Walgreens, and Home Depot) now operate their own 'media networks.' This development hasn’t, until recently, attracted as much mainstream attention as one might assume. But in addition to being yet more evidence of the inescapable reach of advertising, it raises some interesting questions about plopping advertising into the consumer/retailer relationship."
For the record, Amazon "reported ad revenue of $31 billion in 2021, and by one estimate could hit $40 billion this year … Walmart brought in about $2.1 billion revenue from advertising last year, so it’s definitely playing catch-up. But its reported 30% uptick in ad revenue last quarter was a bit of good news in an otherwise lackluster period."
Here are the bottom lines, as defined by Fast Company:
"As it happens, the rise of retail media ad networks is now intersecting with a softening of the digital ad market, brought on by a combination of macro-economic factors, and more secular shifts in the online-ad business resulting from Apple tightening the ability to track user behavior across the Web. Facebook, for instance, just posted a 36% drop in profit from last year, citing ad-market woes. A recession is bound to affect ad budgets across the board. But tighter tracking rules might make the data that retailers amass even more valuable to advertisers.
"Either way, this business is only lately coming into more public view. And one fair question is whether you want the retailers you frequent to track and monetize your shopping habits. Another is whether the increasingly commonplace practice of privileging 'sponsored' product results in e-commerce site searches might ultimately undermine consumers’ relationship with an online retailer."
- KC's View:
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Beyond the fact that the revenue pie may shrink along with the economy - a point we've made here before - I think the observation that shoppers may find a barrage of advertising less than pleasing is a valid one.
To the degree that these ads become more about the retailers making a grab for more bucks, and less about being specific and helpful to the consumer's needs and wants, this trend could backfire. Retailers should be vigilant, and ask themselves at every juncture, Will customers perceive this as being good for them?
