Why Retail Media Is Eyeing CTV

Retail Media CTV Ad Spending Will Soar 335.5% This Year

Linear TV has long been the cornerstone of home entertainment and advertising. However, viewers are increasingly turning to streaming platforms that offer more control and choice over what they watch and when. This migration has resulted in a steep decline in traditional TV viewership and ad spending. 

The numbers back this up. Linear TV advertising spending peaked in 2018 ($72.8 billion) and has been on a downward trend since ($59 billion this year). And maybe even more telling, linear TV upfront deals are down 4.5% year-over-year. There’s still a place for linear TV, but it’s for specific programming that consumers feel the need to tune in to and not time-shift. It’s primarily during live events, with news and sports making up a big part of that. 

As linear television continues to lose ground, connected TV (CTV) is stepping into the spotlight, offering unprecedented opportunities for targeted advertising, personalized content, and interactivity that would have dazzled the mad men of yesteryear. You’re saying there are TV ads people can ‘click’ on for more information or even buy a product? Wow!

CTV ad spending is projected to grow rapidly, surpassing many traditional channels. While most of this surge in CTV spending is dictated by the migration of offline eyeballs to digital video, this shift is not just about quantity but quality. CTV allows for more precise targeting and data-driven insights, making each ad dollar work harder. 

Linear TV marketers expect some wastage, a portion of advertising spend that never reaches the intended audience. This inefficiency is often due to ads being broadcast to a broad audience, so some portion of that audience will be outside their target. For example, if a brand aims to reach males between 18 and 24, even programming with a high percentage of that age/gender may only represent 20-30% of that audience. An incredibly high composition for a TV demographic would be 40% — at a very premium cost — even when more than half of those ads would miss the mark.

For linear TV, wastage is an accepted cost of doing business. But in CTV, the goal is zero wastage. With granular targeting capabilities, every ad should reach the desired audience. And it’s not just the old Nielsen age/gender blocks. CTV marketers can apply advanced targeting to reach people via almost any consumer data point: product purchases, behavioral signals, geographic location, and even specific interests or browsing behaviors. This level of data precision allows advertisers to tailor their messages more effectively, enhancing engagement and reducing the wastage associated with non-targeted advertising.

But there’s the rub. It requires good, quality data to power it. 

And, just as CTV advertising is rising, the available data is shrinking. 

For CTV to truly advance, it needs a consistent, trusted data stream. 

Enter retail media, which is at the forefront of this revolution. Its integration with CTV is setting the stage for a new era in digital advertising. 

Retail Media as a catalyst for CTV

In the late 2000s, the emerging programmatic display marketer showed tremendous promise but required data to fuel it. Before consumer privacy restrictions, the third-party data market was like the Wild West. 

It was virtually a gold rush for data vendors. 

Data providers sold a range of information, from basic demographics like age, gender, and income to detailed behavioral data, including browsing histories, purchase patterns, and GPS tracking. Companies also collected psychographic profiles to predict behaviors based on personality traits and values. Data aggregators combined multiple sources to create enriched datasets that could forecast consumer intent, such as the likelihood to buy a car or invest in real estate, based on online activities and financial data. Data was plentiful, and many successful ad campaigns followed.

Fast-forward to today, when data isn’t so easy to find. There’s signal loss from users blocking cookies, not opting into tracking, ad blockers, and government regulations. And even if there are great data sources still available, there’s no telling if they will be future-proofed from further restrictions. 

But retail media advertising is having its moment, and it’s all fueled by data. Retail media networks (RMNs) collect and utilize their first-person shopper data to precisely match relevant ads to consumers. Retail media enables advertisers to target audiences more precisely than ever before. 

Even during the programmatic data boom, we knew that purchase data was the gold standard of targeting data. Sure, if you’re a luxury car brand, it makes sense to target users who watch luxury car videos, research luxury car features, and search for luxury car prices. You think you’re targeting an in-market luxury car buyer, but the reality is that they drive a family mini-van. Purchase data, on the other hand, rarely leads you astray. I once heard someone say on this topic that you are more like what you buy than even what you think you are. 

Beyond the data, retail media also offers large inventory pools to run CTV ads and gives marketers back the mass-marketing awareness vehicle it’s losing with linear TV. Not only do online stores have tens of millions of monthly visitors generating desktop and mobile traffic for ads, but now these purchase signals — elevated now to commerce data —  are being used across the web, targeting consumers everywhere: retailer-owned properties (like Amazon’s Twitch), off-site social media, social partners, and across the open web. 

Some have even described retail media’s future as “a layer” across the web for product companies to eventually apply commerce data to every ad buy. Even non-product companies (called non-endemic advertisers) are getting in on the action, using commerce data to target consumers based on their purchase habits. For example, for shoppers looking for child-related products, car manufacturers could target families or new parents with advertisements for family-friendly vehicles.

On top of these benefits, integrating retail media data with CTV advertising platforms also helps solve some of marketing’s biggest challenges of measuring ad performance. Because retail media networks are private, closed ecosystems with logged-in users, advertisers can now see whether an ad was viewed and whether it influenced a purchase. This closed-loop measurement is invaluable for optimizing ad spend and understanding consumer behavior in real time. Omnichannel retailers — with both ecommerce and brick-and-mortar locations — are even beginning to tackle a long-standing holy grail for marketers to understand the online impact of offline sales. 

Audiences are ready

The marriage between the two hottest stars in marketing, CTV and retail media, has just begun to blossom. But the initial results are promising.

Not only are brands ready, but so are audiences. Video, with its sight/sound/motion, is by far the medium of choice for today’s generations. A recent survey conducted by Skai involving 1,000 U.S. adults explored whether CTV viewers would be willing to interact with interactive advertisements on Prime Video. 

When asked if they would engage with different ad features, the responses were overwhelmingly positive:

• Watch a product video. 86.5% of viewers would consider watching short product videos similar to those on Amazon product pages.
• Save for later. 89.0% might add the product to an Amazon wishlist with a single click.
• Review prices and options. 90.9% of viewers are open to reviewing prices and options to learn more about the product.
• Buy now. 78.5% of the audience would consider making an immediate purchase with just one click.

This is a significant change from linear TV advertising, where commercial breaks usually meant grabbing some food, using the bathroom, or flipping to another channel. 

eMarketer forecasts that US retail media CTV ad spending will soar 335.5% this year! However, if audiences engage and buy via these ads, there’s no telling how high the ceiling could be.