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3 collaboration strategies for digital retail media success

3 collaboration strategies for digital retail media success
Opinion

In a rapidly growing segment, media owners need to form key alliances, retailers should act like media owners and advertisers require strong governance.


Digital retail media captured almost everyone’s attention in 2024 and it’s hardly a controversial prediction to say the same will be true in 2025.

But what are the key steps that media owners, retailers and advertisers can take now to position themselves for success?

A wise person once said: “Every business that aggregates an audience eventually starts selling advertising.”

This was true 450 years ago, when newspapers first started carrying advertising, and it’s even more true today.

Media owners — content creators — now face fierce competition for advertising spend, not just from physical and online retailers such as Tesco, Boots and Amazon, but wider online commerce platforms and services including Uber, Deliveroo and PayPal.

(Hence the growing popularity of “commerce media” — a term being adopted by Isba and others. However, here, I’ll use the more readily recognised “retail media”.)

Paid search on steroids

These retailers and commerce platforms have the advantage of first-party customer data, proximity to purchase, closed-loop attribution and reporting on effectiveness.

In the eyes of many FMCG advertisers, they effectively function like paid search on steroids. This, in turn, has driven rapid growth: the IAB recently estimated that 2025 digital retail media (both on-site and off-site) in the UK will be £4-5bn. For context, this is of a similar scale to the TV ad market in the UK.

There are of course many steps that media owners, retailers and advertisers should consider taking to respond to this rapid growth of retail media. To keep it simple, I’ll focus on three key messages — one for each group. In each case, collaboration will be key to success.

Media owners: ‘Mirror and match’

First, content creators need to “mirror and match” digital retail media where possible (eg. strong, accurate, certified, properly permissioned first-party data), while also emphasising the value of their relative strengths (eg. high-quality contextual environment, providing a proven way to build brands over many years).

And, crucially, media owners should look to form alliances by collaborating with retail media where it can be mutually beneficial — examples include ITV Matchmaker with Tesco and Boots, and Channel 4 with Nectar.

Dozen FMCG advertisers enter trial for ITV’s Matchmaker

Retailers: Act like media owners

Retailers, you should act like media owners.

£4-5bn estimated 2025 digital retail media spend in the UK is clearly significant — but around three-quarters is expected to be Amazon.

The remaining retailers need to acknowledge some limitations and the need for scale — lots of “mini walled gardens” won’t allow them to properly compete with Amazon (or Google or Meta).

Instead, retailers need to overcome their natural competitiveness to identify areas of mutually beneficial collaboration — for example, through consistent ad formats, definitions of impressions, attribution windows and simplified buying points.

Crucially, some form of (aggregated) data-sharing is likely to be required to allow agencies and advertisers to understand deduplicated reach and frequency across multiple retail media networks.

Established media owners in TV and other channels have long recognised the value in consistent measurement, shared data and simplified buying points — retailers will need to do the same. Encouragingly, the Isba retail media working group, with its Responsible Retail Media Framework, has set out a clear direction in this regard.

Channel 4 partners with Sainsbury’s Nectar 360

Collaboration of this sort would be welcomed by those developing retail media propositions at the retailers but might sometimes be a difficult message to convey internally given the history of intense competition in retail.

So the temptation for retailers might be to eschew the hard graft of collaboration and instead simply link sales of retail media to their purchases of goods from the advertisers. But this is only likely to result in rebadged trade marketing and promotions; it likely won’t allow retail media to tap into genuinely incremental brand marketing budgets in a meaningful way. Why?

To answer this, retailers need to understand the advertiser perspective inherent in the third key message.

Advertisers: Get governance right

Advertisers must get their governance correctly set up to identify and manage the sources of their retail media spend and to verify retailer media delivery and performance reporting.

Strong governance is a key aspect of managing all marketing spend and retail media is no exception. Indeed, given the complex and multilayered relationship that advertisers have with retailers, it’s arguably more important than ever.

Such governance includes separate, independent contracts that treat the retailer as a media owner, with associated media delivery obligations and advertiser audit rights.

If retail media is treated as an addendum to the main sales contract (where the retailer purchases goods from the advertiser), then accounting rules (in both Europe and the US) mean the advertiser should treat its retail media spend not as a marketing cost, but instead offset it against revenues received from the retailer.

Marketers will be understandably wary of shifting brand spend into retail media if it will result in a deduction in their company’s top-line revenues. So retailers wanting to tap into brand marketing budgets need to understand this advertiser perspective and collaborate with them to design strong, independent, well-governed contracts for retail media that are more likely to allow retail media spend to be treated by the advertiser as a marketing cost.

(To be precise, such independent contracts are a necessary but not sufficient condition to resolve the advertiser’s problem of how to avoid retail media spend being offset against revenues. Anyone wanting some free advice on the joy and complexity in accounting standards should message me directly!)

Collaboration is key to success

To summarise these three key messages: to succeed in retail media, media owners need to collaborate with retailers, which need to collaborate with each either and with advertisers.

On the theme of collaboration, the Isba working group and the team at MediaSense are imminently kicking off an industry-wide study into UK digital retail media that will bring together advertisers, agencies, tech vendors and retailers to explore how to improve governance and insight for the benefit of all.

Isba and MediaSense look forward to sharing key findings later this year.


Sam Tomlinson is chief client officer at MediaSense

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