Ian Simpson, Sarah Marzano, Kiri Masters, Andrew Lipsman & Debra Aho Williamson: RM Executive Brief

Ian (00:00)

first of all welcome everyone back up here. Andrew literally ran from a cab in here seven minutes ago. So thank you for planning to have that little glitch happening. There you go. Andrew. as I said at the outset, our goal here is to

Focus on what's happening right now is almost an executive brief of what's going on in the in the industry. We have four amazing people here, two of whom have introduced themselves to you and two of whom have not. So I'm gonna hand you the mic, Debbie, and ask you to say hello, introduce yourself, and then we'll go to Kiri and then we'll jump right in.

Deb (00:36)

All right. Well hi everybody, I'm Deborah Aho Williamson and I'm in a room where there's a few familiar faces because I was an Emarketer analyst for 19 years. I am now independent. I have my own business called Sonata Insights. I also write a newsletter called the AI Ad Economy. judging by the name of my newsletter, yes, I do cover AI now as as as an advertising medium, as a consumer phenomenon. a little bit like a vegan at a barbecue here because I

I am the AI person here and I'm in a room full of retail media experts which is crazy. I'm learning so much from all of you and I will continue to learn so much from all of you. But you know the question that I focus on and the one that I spend most of my time researching and thinking about and writing about is what happens when an AI platform sees a user's intent before the retailer ever sees it?

great example. Today, this morning I woke up, my eye was red, puffy, swollen. I was like

I have an eye infection. What am I going to do? So I went to ChatGPT and I said, hey, you know, this is what's going on with my eye. Should I see, you know, what should I do? And ChatGPT knew that I was in Cannes because I'd had other conversations and said, There's, you know, there's a pharmacist down the road. You should go to a French pharmacy because the pharmacist can actually see you and talk to you. So that's what I did. And even gave me a French translation of what to say about what was wrong with my eye. And I go to the counter and the pharmacist looks at the one sentence that ChatGPT.

he gave me and then brings me two products which I bought. And this is what I'm talking about when I say consumer intent and how the signals of intent sometimes don't ever get to other destinations where we're used to. So that's what I follow. That's what I pay attention to and I'm really happy to be here.

Kiri (02:22)

Thanks. my name's Kerry Masters. I write a newsletter and podcast called Retail Media Breakfast Club.

And besides all of the announcements that there's you know you're gonna hear a million of them at Cannes this week, but I like to focus on the four sort of stakeholders in the ecosystem. We have the retailers running the networks, we have the brands who are advertising there, we have the agencies who work with both the brands and retailers, and the technology firms that power the networks and help brands with media buying. And going around the

horn There's very few people that have had experience in all four of those areas, and I find that they're not always well understood. What are the incentives? What are the challenges? What are the hopes, dreams, and fears of all these different players? Because we all need to work together to develop this ecosystem of retail media. And so generally I focus on what are the incentives and issues between this cast of characters, like a Spanish telenova,

but there's always a little bit of drama and intrigue. So that's you know that that's my cover in my in my space.

Ian (03:37)

Kiri once put in her podcast, if you want to talk to me, bring the tea. Spill the tea. Which I thought was great. I think it's very interesting that we are all here from a retail media perspective. There's obviously the specter of AI that hangs over everything. But I also noticed that Andrew and Sarah in your talks while you cover AI, you really spoke much more about organizational

readiness and how you know we are in an industry that is in the process of maturing. We meet people from different ad sales teams from different retail media companies and they're all at a different stage of growth but no one is done. No one's maturing. So you you talked a lot about the the need to

To close these major gaps. And Kiri, you've also talked about internal demons at RMNs and that they're that they're lurking in the background. So I thought we would start by doing something, by by talking about that. I think that that is kind of the state of the art right now, is what's happening on the in the organization. So Kiri, I'm to start with you. We've done a series recently on the demons that are happening, that are, that are lurking around in retail media networks, and I thought you could take a moment and expand.

Kiri (05:00)

This underscores a lot what Sarah talked about in her session, which is you know, we have the product of AI and the economy and tariffs and these external threats, but what about the things inside of a retail media network that are holding us back? So the organizational alignment, where does it sit? Who does it report to? I really think that where retail media sits in an organization dictates what it can be. You want to be brand focused and brand aligned and win

That brand budget, where are we reporting to in the organization? Because that actually dictates how much we're focused on performance, how much we're focused on next year's growth, how much we're focused on merchant alignment if it reports into the merchant. So question of organization alignment: who funds it? Where do the profits go? There's different models for where do the profits go. in the instance of club retailers, it goes back into the member experience in other retailers,

it might go back to the you know directly to the bottom line. And who builds the technology internally as well? So within some retailers, because retail media is a profit center and it's technologically forward and there's so much demands on it being a forward-looking part of the company, they're funding a lot of infrastructure that the rest of the company is using around CRMs and data portability, data privacy and things like that.

So retail media is being asked to do so many different things, not just produce revenue for the organization. And that makes it tricky to look at the whole industry across this very diverse cohort that we have, because they're all built different

beliefs.

Ian (06:41)

It's funny because when a few years ago the story was about brands not being aligned for retail media, that like retail media was trade and you had the trade folks of all of the relationships with retailers and how that has had to shift and now it's sort of coming back to the RMNs and having to shift kind of mid-cycle. and Sarah, you said in yours equally, organizational readiness is emerging as the biggest challenge. And you know, all of your slides were pretty jarring on that front.

You had this bubble chart with like these with Walmart and Amazon is like gigantic. But I think it's worthwhile, especially for everybody here, to focus on that ball that you had that was the 60 plus others. Because I'm sure that there's a lot of best practice and a lot of bad ideas coming from those sixty plus. And I wonder if you have spent any time really unpacking those or you can talk about what those kinds of things are if you're not the biggest one in the room.

Sarah (07:38)

Yeah, and I think it is necessary to sort of make the point in terms of the way growth is unfolding across the retail media landscape to group that long tail together. but at the same time I acknowledge it's unfair to categorize them as a monolith because they're made up of very diverse sort of array of players and you have a lot of best practices emerging. I think what's really fascinating is that a lot of the retailers that fall into that long tail are the ones who aren't gonna hit really scaled massive growth by using the first version of the retail media playbook, right? I agree with Andrew

And I said so in my presentation that there is a reason to keep optimizing your on-site experience and keep filling that demand and making sure that you're balancing advertising with user experience and there's a reason to chase after that margin-rich revenue that's going to offset the bottom line for your e-commerce business. But a lot of the retailers that occupy that bubble of the the long tail are the ones who are gonna have to figure out how to activate their physical stores.

how to activate their off-site data to to sort of better reflect the s size and scope of their consumer data assets. And I think we're seeing some really exciting areas of innovation from a really diverse set of players. Like the things that come to mind are players like Best Buy, who have this deep category expertise in a category that is higher consideration, right? And the way that they're turning their stores into media platforms where brands can tell stories.

It's a great example of something that's the right fit for a retailer like them, You've got Dollar General, which has more than 20,000 stores, which is insane from a store count perspective.

And you've got them leaning into in-store audio, right? Which makes a lot of sense given the size and the small format of their stores. And you've got players like Albertson who are sort of

On this dual path, to add a lot of transparency to measurement methodology, in an effort to further

the entire industry as well as getting really innovative and playing with episodic creative content that's gonna air in their stores that they're doing in partnership with a CPG brand. So a lot of great best practices. I think what's going to be really crucial for the long tail is the comfort of departing from that fixed blueprint for that phase one and thinking through like what is going to reflect my unique retailer offering and how do I infuse media into that.

Ian (09:46)

So I have this kind of teed up for later, but just because of what you said now, it feels like

As retail media matures, the relationship between the retailer and the brand has to mature as well and has to drive you can't just say we're gonna put a moving video in the store. You have to think about what the campaign is and the relationship of the retailer and the brand to the campaign, and even think about like the growth of the category. So are you guys seeing good examples of that growth happening?

Sarah (10:20)

I would say that one of the mistakes retail media made early on is by not acknowledging that it was an industry that exists only because of the strength of the retail assets under it, right? When I first started covering the space, I didn't see a lot of folks on the media side of the business striving to understand how does the retailer work with our brands today, right? What do those relationships look like? What do those goals look like? How do our merchant category teams view and define success, right?

And and we got away with it for a little while when we were just setting up shop on retailer.com, right? You can do a lot with a little, right? But when you're looking to move into physical stores, when you're looking to scale, when you're looking to court more advertisers, you have to start thinking about the way the retail side works. And I think what's been exciting for me over the past few months is I feel like this has gone from sort of a niche conversation into something that's more mainstream where there's this broad recognition that media has to fit better into the retail organization in order to better

bolster that relationship with brands that already exists.

Kiri (11:18)

I would say that just like there are silos within retail media within retailers, there are silos within brands, and there are silos within agencies. And in the brand the brand spend world, a lot of that that advertising spend is dictated or managed by agencies. And agencies have the same organizational silos that all of the other players do as well. I've heard from some brands talking about

They have very ambitious ideas for retail media. But when it comes down to the media plan that's being built by the agency, there is a single line and it says retail media. Like retail media is just one thing, and it's not, as it's being shared, you know, with there are there are different incarnations of retail media, but it's still often thought of as this monolithic sort of line item on a media plan.

Ian (12:12)

I thought it was interesting looking at your two decks, Andrew and Sarah, that Andrew you had this scalability index. I know you guys didn't coordinate that. So the fact that we're both you're both looking at these kind of things,

I think what you said is that that index is the potential to scale, not the future, not the expectation to scale. And so I'm wondering if you can like talk about that number. Is that a number that retail media companies should be thinking about in the future? Or is it something that you can that you can use to hold on to and to and to maybe like build upon so that you don't fall behind?

Andrew (12:48)

There's a rubric there, so I think it's a way of cross comparing and understanding how You are across these dimensions that determine scalability and there are some really big ones and it's very easy to gloss over the detail of it, but Dollar General has a 20,000 store footprint like

They obviously rate five on that dimension of physical store footprint, right? You have, and that's one of the most important, I have heavily weighted that one because I think it's a big determining in the future. Marketplace. Marketplace is where the money at. Like, we don't talk about this enough. Like, this is what Amazon was built on. This is why Walmart is scaling so much. this is the foundation for a huge long tail of advertisers. And that's why, you know, I look at like a lot of, after the first few, you get to a

of RMNs that I would say are kind of in their adolescence and they will do things that amaze you. They are very unique beings and they're very cool in many respects and they need to mature in certain ways. A couple examples just this past year though that I love is you have some already among the stronger retail media networks like Bass, Filo's and Ulta. They all implemented marketplaces. Well it's like perfect for that right and so I think you're already starting to see in public discussions or earnings,

that this is starting to fuel some other growth. Like we just need to literally look at all the pieces that you can block and tackle on and some RMNs might not have it. you're a Walgreens or a CVS guess what? You're probably not gonna have an e-commerce business to speak of and so that might not be something that's gonna be a strength but you do have a huge physical Store footprint So you just gotta look across all these dimensions, be realistic about what you have and what you don't have and look at the gaps and say, what should I be doing better?

that I'm not today and then focus on that. And that's part of why I push back on AI because I just think it's a distraction. There's so much stuff sitting right in front of them for the taping that they already have a foundation for. I'm not saying that you take your, you know, don't look at what's ahead, but I hate seeing jumping to something that hasn't even manifested yet when you've got something like a marketplace business that could add billions.

I hope.

Ian (15:10)

So, I wanna I wanna I wanna pick up on what you just said, Andrew, and and and shift to you, Debbie, because you focus so much on the advertising side of AI, and I think you know AI is as I said earlier, interestingly like something that we haven't discussed that much.

today, but it's such a big part of the conversation generally. And you recently wrote something to the effect of actually I'm quoting so it's exactly to the effect of the industry categories that are investing first, this is about Chat GPT ads, and strongest are among the ones that are the most vulnerable to the shift in discovery patterns that AI platforms are creating. And you were writing that

as a result of noting that retail seems to be the one of the one of the largest advertisers to date within Chat GPT. So what what signals do you think all this early Chat GPT advertising is what is is are are sending with regard to that experimentation?

Deb (16:09)

Yeah, so a little bit of context around that. So Ian graciously gave me access to some sensor tower data that looked at advertisers

use and impressions on Chat GPT. And one of the findings I so I wrote a piece in my Substack a couple weeks ago, which by the way is now the fourth best performing of the all of my pieces in the past six months. So big plug for that. But I think there's a lot of hunger for data about what's happening with Chat GPT. And one of the big findings was that forty percent almost forty percent of ad impressions we we saw or sensor tower saw in the first couple few months were from retailers. And so that was by far the largest

Category of advertisers on ChatGPT. And then within that, Best Buy was the top advertiser in that time period. And I think I want to go back to what you said about Best Buy a little bit ago, which is, you know, where are the other opportunities that these companies can look to to leverage? When I looked at the data from Sensor Tower a little bit more detail, we can see like what the headlines of the ads are and what the what they're advertising. And so a query that I got after I published was, well, what are

what was these were these ads for the retailer like brand ads like was Best Buy like advertising Best Buy? No, I mean any I looked at as many ads as I possibly could and and the headlines and they're all product ads. They were literally all product ads. I did not see a single brand ad for Best Buy. And so I see that as an opportunity because someone pointed out to me in response to my piece on LinkedIn that perhaps this is could be spending by the advertiser.

Best Buy's advertisers or Best Buy's retail media advertisers being placed into Chat GPT. Now I'm not sure if that's really the case, but that does represent an interesting opportunity for companies like Best Buy to partner with these organizations to have a new place that you could consider off-site advertising. And I find that really, really fascinating.

Ian (18:06)

Yes. Retail media is expanding.

Deb (18:10)

"Frienemies!"

Kiri (18:29)

Even

Amazon has started advertising in Chat GPT as of recently and they've shut down nearly every other sort of alignment in the past.

Ian (18:37)

I should.

I think, Andrew, when we talk about the threat of AI, there is often a discussion around like what is what is what are we talking about when it comes to agentic? Because agentic commerce, as we've already heard, can mean everything from better search all the way to you know a bot going out and buying something for you. So no, there's a huge there's a huge spectrum there of how people use AI and what agentic commerce might really mean. And I'm wondering if you can

you know, take apart those nuances a little bit. I know we're running out of time, but I just wonder if you could sort of as you talk about AI not being a threat, which I know is something that we feel very strongly about, do you see that differently in that in that in that continuum of what agentic commerce could be?

Andrew (19:25)

AI will get integrated into everything and what I think we're talking about when we talk about agentic commerce is not agentic at all. I call it advanced search or AI assisted shopping. We don't need to, I know agentic sounds like a cool term, but like it actually means something which is autonomous decision making and there is this idea that we're gonna outsource our shopping to an agent that's gonna do all this stuff for us and that's why I focus back on the middle of the funnel.

That's what humans do. We need to build confidence in a purchase. So we're going to do that. We've done it through a million channels already. It's not changing, it's just evolving in the way that it happens. And again, there will be some efficiencies. It's not like AI isn't an evolution, but it's not a revolution.

Ian (20:13)

Fair enough. I wanna Kiri come back to you because kind of on the same point, you've mentioned that search, if it's advanced search, is also dark search and what dark search is is a dark spot in you know the in the world of commerce. So can you dig in on that a bit more before you have to run to the next

Kiri (20:34)

Yeah, so a a lot of the time when we start a query in an LLM and get referred over to a retailer, which is the majority of how AI assistant search is happen AI assistant shopping is happening today, a lot of the time that referral to a retailer is arriving without any referral tags or indication that that came from an AI assistant. And so a lot of the data that we've seen about referrals to retailer websites is likely

Under counting that traffic because it doesn't, it looks like direct traffic. And so this is a big challenge because retailers are seeing direct traffic surge and not necessarily recognizing that that is coming from AI. So there's a couple of challenges with this dark search phenomenon. You could say, well, you know, people watch an ad on TV and look for a product that we've seen, we don't know where that came from necessarily.

is people are making these decisions in

An AI assistant without any interaction from the brand or from the retailer. And that is what happened in the past is I hear about a

I go and look for more information about it, often from a retailer. I click around, I look around, and I'm getting information directly from that retailer or from the brand. But this time the decision's being made inside of that AI assistant, and before that person ever arrives on a

retailer.com. So that is that is the major challenge with dark search that I think is you know concerning for retail.

Andrew (22:10)

It's not totally dark though. It might be dark from an analytics perspective, but if you're looking at sensor tower data, right, panel based data, you can see what visit Precedes that visit. So it's not truly dark. You can reconcile multiple data sources to get a view so you're not totally missing it. You might not have the granularity of the referral. You don't have that UTM referral so you know every term, but I think you can at least get a holistic perspective of how much it's influence.

Ian (22:39)

Just a general change allude to the

Andrew (22:40)

when you think dark circles, you sort of.

Ian (22:43)

fact that we don't know what the authenticated income was that drove.

Andrew (22:47)

out the

result.

Kiri (22:50)

Yeah.

Andrew (22:50)

I typed it, it took me to a place, we don't

Ian (22:53)

It searched something.

Andrew (22:55)

know if that source that it went to was actually.

Kiri (22:58)

Yeah, exactly. Don't know that it necessarily came from an AI conversation and what was in that what was part of that conversation what was happening in that conversation. The other thing that's happening is this LLM referred traffic is going directly to a product detail page fifty-five percent of the time compared to organic traffic that goes directly to a product detail page twenty percent of the time and that data's from Shopify this year. So the behavior once someone lands on a retailer from those sources

It's coming to a different place. There's not a lot of data to show what they do after that point. But if they're going straight to a product detail page, we don't know if they're going back to the home page, seeing all the ads on the home page, doing a keyword search and seeing the search results that come after a keyword search. So at the very least, this is something that retailers need to be tracking is from those referrals, if you can see where it came from, then how does that behaviour look different from AI referral?

traffic versus from social, from search.

Sarah (24:02)

I think what's interesting is there's more precedent to this than it feels like maybe there is, right? Because retailers have been grappling with imprecise purchase journeys for a really long time, right? We do a massive path to purchase study every year at e marketer. We know how important word of mouth from friends and family are for both product discovery and also making a decision. Like talk about something where there are no signals to understand what shapes that. We also know how important the physical store is for discovering or considering products, even when the purchase ends up happening on an e commerce website.

Website, and we also know that lower funnel entry points is something that has been skyrocketing ever since you've been able to like swipe up on social media, right? And so I just want to give retailers a little bit more credit for adapting to some of these signals and the fragmented

Kiri (24:43)

He said really.

Sarah (24:45)

ways that consumers discover and consider their products and sort of point out that I think retailers sort of as first movers in terms of advertising in these environments, for me, sort of supports that, right? Retailers are used to customers evolving and changing the way they make a decision to make a purchase, right? And they're used.

to say how do we show up in this environment? How do we make sure we're top of mind?

Ian (25:06)

The hour has grown late. Thank you all for being part of this. I hope you learned something. We're gonna hand off to our next session. Thank you.