Retail media remains underfunded due to budgeting silos, and if brands want to see faster progress, they must recognize the potential of retail media and organize their budgets in a more flexible way, argues Acadias Jared Belsky.

Marketers and agencies both seem frustrated with “Retail Media Island”. For the industry to evolve, and brands and clients to get the best return on their investment, definitions of media, performance, and retail media must blur more to allow for money to seek its best return versus being stuck arbitrarily in silos.

For the most part, clients tend to have budgets locked into three basic buckets. Typically, those buckets are referred to as Performance Media, Brand Media and Retail Media. Performance media typically being Search and Paid social. Brand media being Linear or CTV or Audio and the like. Retail media being Amazon and Walmart. Even writing these to help explain and create common grounding makes me realize how arcane these definitions are. 

Not only are budgets often broken up into silos, but also the organizational design tends to reflect this. In 90% of the brands I speak to, “retail media” is owned by either the sales/trade/shopper group, or the e-commerce group, or maybe a retail media expert center of excellence. None of these are bad answers nor bad solutions. I get how they came about, and I appreciate that in many situations this makes sense. But, this would not be an interesting article if there was no tension right?

My thesis is that a great deal of money is trapped in places artificially, while all the while, retail media remains underfunded, because it’s on an island. 

It might be instructive for readers to understand how this plays out in the real world:

Brand X sees a great ROAS (return on ad spend) in Amazon but can’t get more funding, even though it’s a 30% better return than Paid Social (such as Meta). Why? Because, it’s on retail island along with its budget and its leaders. That budget was created before the year started and is fixed. 

Or, maybe it’s a situation where Brand X wants to test Walmart or Instacart or Chewy (ie the longer tail of retail media), but cannot get the testing budget approved. Meanwhile, at that same company, there are millions of dollars being wasted on bad programmatic inventory. ANA research recently showed that 42% of programmatic supply is not high quality. How can this make sense? It does not. It is an artificial problem that the industry has created via budgeting silos.

For a last example, maybe we see that Brand X wants to give Amazon’s DSP a shot, but is told that is not possible because the center of excellence in media already uses a preferred DSP and they are told they don’t need another DSP. Meanwhile, you well know the Amazon DSP is unique, with its own unique reach, data sets and the power of AMC. Why does this happen? Because of...yeah, you guessed it ...retail island.

Well, my prediction is that retail island will not be an island much longer. I see smart and courageous marketers reorganizing to create omni-channel marketing organizations, with one budget pool where the money flows to wherever the best return is. On the Brave Commerce Podcast, Julie Bowerman, CMO of Kellogg Company gave an inspiring interview about how she proudly broke these silos, unifying the budget and team into one omnimarketing team. I think we will see a lot of CMOs do this. 

There are three other interesting solutions to see faster progress and the crushing of budgeting silos:

  1. Companies with spends that are larger than $10m should have some sort of head of media that spans across all media, and is looking at their portfolio in totality. That person would therefore trade in and out of different channels, regardless of naming convention, working with their media agency (if they have one) to ensure every first and last dollar chases the best return.
  2. Brands would recognize that performance is a confusing name. All brands should be looking for “accountability” in their investment. Brands should also understand that even within a channel, there can be multiple funnel goals. Let’s take Amazon, you could be using Amazon Video for brand awareness, while using sponsored search for lower funnel, while using new-to-brand targeting for mid-funnel goals. The point is that we have to stop confusing platform with channel with KPI. They are fluid.
  3. All brands should do zero-based budgeting to start each year. Everyone must re-prove the right investment for their channel or they lose it. Too many brands just do it “roll over” style, which is not modern.

The industry is grossly underestimating how fast retail media is going to grow because money is literally artificially locked up in buckets due to faulty org design created in 2005. The good news is that these walls and silos are crashing down. 

2024 and 2025 will be when we see “retail media island” come closer to mainland digital advertising. This will happen in several ways. First, we will see more budget fluidity with retail media and digital media budgets starting to be planned together. Second, we will see more RFPs demanding that retail, performance, and overall media come together because of pressures on budgets and fees. Third, we will see organizationally the retail media and marketplaces teams come closer to broader marketing teams, versus being tucked into sales organizations. Fourth, we will see brands and agencies finally realize they need to organize better here and have true expertise to compete in a very tough market. 

Cheers to fewer islands.