EP48 – Rise of the Ad Networks | With Dean Harris, Co-op Media Network

Hello, I'm Viv, and I'm Colin, your personal therapist in the world of retail media. Tom Media Therapy is brought to you by Gracinco, the marketing and commerce consultancy. And this episode is called The Rise of the Retail Media Had Networks, and it sounds a little bit a bit terminator like I think, Colin, are you ready for the rise of the retail media and networks? Yes, we should have some sort of music in the background just to kind of scare everybody at the same time. But this whole idea of ad networks, we too media networks come together, has been around since, well, basically, the dawn of retail media networks has been a lot of talk, and as we shall find on this podcast, I'm not convinced, I'm not convinced that this is a thing that where it's going to really happen. And why are we talking about this, if what's the trigger here? Well, before we dive in, that's introduced our specific estate. It is not Arnold Schwarzenegger as the terminator. It is close relative, Dean Harris, head of Co-op Media Network, friend of the pod. Hello, Dean. Hi, everyone, I think I've got very little in common with Arnold Schwarzenegger, but I'll do my best in the gym. I don't know. You're on the podcast before, and you're our very first guest to be back. So I'll be back. If you said that last time, it would have been a perfect answer to that. No, just for, not I run that nose, because we have an international audience. You are a co-op media network, as the UK's first convenience retail media network that taps into both online shopping and the millions of journeys from shoppers at what is it now? Two and a half thousand convenience stores across the UK. Yeah. Two thousand, four hundred a thing right now, seven and a half million members. Yeah. Pretty cool. Okay. So the story we're here to talk about is around the, what should we call them, aggregators, the super networks, but before we dive in with the rise of the consolidators, just to take our kind of crazy, sort of Schwarzenegger thing through the limit. But before we dive into the story, we should say that co-op media network is delivered in partnership with threefold, which is a business owned by SMG that we're going to talk about in this story. And very disappointing, there has been no bundle of cash that has been passed across the table at this point in time. There is still time for that to happen, Dean, either from you or from SMG if we say nice things about them. Well, but I've not heard anything about that, but if it's on the table, we'll talk later. All right. Okay. Let's get serious. So I'm sure there's two networks launching in the UK. The first is what's called a connected, well, from connected commerce company SMG has launched something called RMX by plan apps. So it's the UK's first exchange platform designed to connect retail media ecosystem, essentially it's unifying all the retailers within SMG, starting with digital screens with the aim to scale that across other ad inventory. It's been developed in partnership with E-PAM. So that's number one. Number two is Dunhumbi Network Alliance. So that's launched with Tesco, BNQ, John Lewis, WayTros. And their view is that what we're trying to do is address retail media, fragmentation so that we can be more friendly, more seamless, more efficient, that you can buy media across a whole host of those retailers in a scalable way. So that's the news hook that people have seen so far. Dean, why is this happening right now? If you think these aggregate platforms are essentially a solution to the retail media's industry's fragmentation problem, right? But if you reflect on why fragmentation is a growing problem and that these two platforms are launching now in the context of some of their industry movements, I think what we're seeing is the change in dynamics to the retail media industry. And I think Dunhumbi and SMG saw it happen a few years ago, to Collins earlier point. And they are acting on it now in preparation for this change. And what they saw happening was a mix of advertiser side challenges. So one is their expectations arising, their resources are falling. So they essentially want to do more with less. And retailers have responded first to the do more, so better media capabilities, better data capabilities, sophistication. And now more recently to the with less, which essentially means less friction, ease, speed, connectivity. But what RMN's cancel for is the industry wide fragmentation between each of their world gardens. And I think that's going to lead to advertisers and these platforms solving it for them because ultimately consolidation is going to hit the market. Hmm, consolidation sounds like they're all going to come together, it's all going to be one happy family. And I've got to say, I don't think that's really the case of a fact I don't even, I'm not even sure that these are what these guys are trying to do because consolidation sounds like company A who's like company B is going to come together and they're going to merge operations. I'm not sure that's ideal for either the buy side or the sell side. Maybe it's not consolidation, maybe it's more curation and by curation I mean create a portfolio of RMN's. So you at the minute agencies advertisers will with a suite of RMN's and they're in a list and now they're going to have to find roles that require less effort. And I think ultimately there's going to be three end states for RMN's. You're going to have what I call your rocks, which are your scaled war gardens, your default, your base in most plans, huge audiences, huge scale online offline, first party data. Then in second, you're going to have what I call the pebbles, which are the specialist differentiated networks, the catalysts, the cherry on the cakes, the things that can offer above and beyond what those in the base plan, those rocks can offer. And then lastly, you're going to have what I call the sand, which is your low cost extensions to those audiences that are done through aggregates, to that long tail of retail media networks joined together where you can easily extend the reach of your campaigns. And there's potentially a fourth unsustainable route, which is the squeezed middle, which is those that are quite reluctant to aggregate, but don't have the differentiation and don't have the scale. And you could argue that some RMN's are already there in the industry of the way it's going where they're struggling to get agency attention. They're struggling to get repeat purchase, they're knocking on the doors, they're struggling to sell their screens in the performance world, in the digital out of home world. And that's a hard state to be in, because you essentially get forced down or you have to over invest to move up. Colin loves the squeeze middle, just the one I mentioned that right now. I realised when we're talking about this, we need a new name because when we normally talk about retail media networks, of course, we're talking about one retailer working with either agencies or lots of buy-side suppliers. I think we should, this reminds me a bit of the US super PACs in politics. I think we should call these super RMN's, like, do you guys have any, we could call them aggregators, but that makes me think of AdTech, like super RMN, so we've got any good ideas for names. Well, how about the name? Of course, it's coming together called super clusters, that's probably it. Dean, any ideas? Super cluster. Well, why not the terminator theme, like T5000's, RMN5000's, yeah. We've got to got that already, right? The plan apps plan is RMX, which does sound really cool. I remember plan apps, it was so cool, like 10 years back, I used to work a little bit with SMG and capture, capture our plan apps, and it was so cool, they were basically just taking every single campaign that run as a right for your category in this retailer. We can tell you whether a floor vinyl is going to get you this amount of ROI or not. And now look how far it's come into this super mega T5000 aggregation theme. It's so cool. Essentially, aren't we all doing all this because we're running out of inventory and the expectations for revenue in retail media networks are just essentially doubling every year, right? Where is this growth going to come from? I mean, it's, it growth doesn't come through consolidation. I'd put, there's three, but three areas that I think, retail media networks, try and pursue. You've got your bedrock, which is your trade and shopper, and I position those two together, even though the retail media network usually goes after one side of that, because you need to manage both, so you don't cannibalize, and you are essentially a commercial catalyst. And then the retail media growth came from the performance budgets, didn't it? People used to buy and paid search, paid social, programmatic web, fast, easy, operatable, connective, comparable, and then the other budget is the brand budget. And that's where you might get your first party dated nowadays in CTV, or your digital out of home for your screens, or you're an intelligence partner that fuels annual planning processes. And what we're seeing with the aggregators platforms come in is that middle performance budget, where you need to be slick, frictionless, fast, easy, comparable, the platform based by that's used to talent buying through platforms in that way. Well, one of the things that reminds me a little bit of is that if you call it the aggregator piece is that where you're trying to make it compete with a Facebook Facebook or a good matter, I should say, in the Google. So, you can see how that would really work on a performance side. And to a certain extent, that's the sort of the pitch that on Limitile have as well, which is you can buy across markets, you can buy across different banners as well. So, I can see the appeal of it, but does this really add up enough scale? I mean, I mean, obviously I'm pro everybody getting together, increasing the market and making it easier for advertisers to buy rather than kind of them have to make these choices. But if I look at the done homebie once, we've got Tesco in one place, B&Q, we got John Lewis and we got Waitrose. Some of those, one can argue, are kind of like the other. Yeah. I think with the aggregator, you've got to understand, is the value on the demand side, on the buy side, in having a one-stop shop, a platform that has all the same buttons and all the same dials and all the same graphs. Is it that? Or is it where you can buy the same audiences within the same sector? So, I believe the value is more in the latter, where if you want a beer buyer, you go to one place and you can get the UK grocery markets beer buyers, right? And if you want a confection buyer, if you want a non-food or kiosk or anything like that, you've got one stop shop. Now, the interesting thing with the done homebie is it's a mix of sectors, right? Except for the Waitrose and Tesco thing, which does have competing grocers in the same network that have similar audiences that can be purchased. So that's the really interesting element that both those were up for being in the same place. Dean has just happened sort of in the past. Has there been lessons from the past that we can learn where a market goes beyond initial growth phase and then into maturity? Have you got any thoughts from the past? Yeah, so my belief is the demand side proposition is really clear, right? From advertisers, they want this aggregated touchpoint. From the supply side, because you need both for an aggregated platform to work, I think there'll be some hesitancy because of the past examples where this has happened in the media industry. And the one that springs to mind mostly is programmatic digital display. You had millions and millions of websites that initially were on the phone back in the day, trying to sell advertising inventory in the same way magazines used to. But in the end, there's just too many. So they were forced to aggregate together. But when they did that, they lost pricing control, they lost their differentiation and they lost the client relationships. Now, that might be a bit of tension that might prevent retail media networks jumping headfirst into these retail media networks unless it's into these aggregated platforms unless it's a strategic play to know we're not going to be a rock. We're not going to be a pebble. The best way to unlock value from our assets is to doing these platforms and efficiently release our inventory to the market. I am really excited about this, but I am slightly worried about those lessons from the path because I used to work for a grocery aggregator and our CPMs were 15 to 25 pounds CPM. And then programmatic came in and you could get the same type of shopper audiences, you know, with or without purchase intent for like £1. So the risk here is you describe a sort of Dunhumbi network media alliance. Whatever it's called, sounds something quite Star Warsy, really. The risk here is that if you got Waitrose and Tesco in the same platform and let's say Waitrose audiences are more expensive for that beer buyer, then Waitrose loses out. So I love the idea of complimentary retailers coming together. Well what happens when the super networks have to start competing for agency spend or direct spend? Do we have a race to the bottom line? We have a programmatic or by then do we have some other technology upending us? It's an interesting question because you can say the industry has got some dynamics that are totally different. But the one that I quite like in terms of observing it and some of the strategic choices are going to be made because we talked about those budgets of where growth comes from. And if you're not getting the advertisers attention, the agency's attention because you're not big enough or you're not different enough, you might still get incremental revenue from entering these aggregate platforms. So it might be low CPM, but it still might be incremental versus your other budgets. The challenge I think will be the ripple implications of that on your other models and your other budgets. So you're going to have your service managed service element to your shopper media money, your JBP money that you release. So how is it going to go where you've got low CPMs over here? And then your tenancy pricing rate card over here. So I think there'll be a bit of a strategic whack a mole that might happen if retailers don't think five steps ahead. You'll solve one problem and up top two others and you'll end up just hitting around facing loads of consequential challenges that you create for yourself. So I think there needs to be careful consideration about what doing one thing means for an existing model that you already have. But yeah, I totally agree it's going to be really exciting. It's obviously going to pan out. I think that aggregator platforms will have a role to play. The demand and the advertisers and the agencies want it and not enough retail media networks are going to fall above that line of where that curation happens. One of the things like when we're talking about it, you can even hear we're sort of speaking in sort of binary terms of it's all aggregators or it's all individuals and that can be quite like that. It's obviously you'll pick your spot, but I have to say I really agree with Viva on this one. It makes a lot more sense if it's like a Tesco and a B&Q and say a nectar and wicks and various others where there's like this choice like that. But then you know, with every hit that CPM problem we mentioned earlier. But challenges, no matter what decision you're going to make, it's going to come with challenges. So if we, you're at the Colface Dean, so you probably have even more views on how this could pan out and what the sustainable end states could be and how that's going to have its really going to work both with our new announcements on mine, but also for the wider industry. Yeah, definitely. And I think it does come down to those end states. There's probably a fifth with the Dunhumbi interest in one. And if you think about Amazon releasing its retailer advertising service, you've got essentially a retailer providing media services to rival retailers, which is a strange module. So you could have five end states and one isn't sustainable. So you have got your scaled war gardens. You've got your differentiates specialists. You've got your aggregated. You've got your aggregator. So you could be a retailer. If you're big enough to actually aggregate like Dunhumbi, you could argue Tesco have. And then you've got that squeezed middle where you choose not to be an aggregator or to be aggregated. And you haven't quite got that difference or that scale to be invited to the VIP. Can I pull back to something that you said earlier Dean? Because I think sometimes we're like within the retail media networks or on the buy side or in the agency side. And you kind of think about how do I build this retail media network? How do I understand retail media? But when you said this is all about audiences, there is a bigger picture here. Everyone wants growth. But as you grow, you have to look to bigger budgets, agencies have those bigger budgets often. Now these networks are coming along looking for bigger budgets. And they're not thinking about inventory or channels. Like you said, they're thinking about audiences. So think about the opportunity to take a fashion retailer and a supermarket and create a sports nutrition audience statement. Think about the idea of like these networks having their cake and eating it. So on one hand, they'll have bigger audiences to get more money from the agencies and be a very attractive proposition to the big five whole coast. At the same time, they're competitors are now to the big five whole coast. They're a bit like Amazon, they can say come to us for all of your needs. So it's all in my mind. This is not about chasing inventory or revenue on its own. This is about forgetting channels, forgetting ad units. This is about the power of audiences. Does that make sense to you? Yeah, it sounds quite panacea, but I quite like I like to be dramatic. And if that's the goal, which is you can have connected insights, connected consumer experiences activated easily, measured comparably, confidence, trust, performance, you've got panacea within the industry. If everyone obviously wins, shoppers win, retailers win, advertisers win, and the facility in people in the middle also win. Well, Dean, you know, we're, we like to put the gun to our listeners heads. I started to our guests heads and I've decided to be dope. We've got a lot of retail media networks listening around the world. And they're kind of looking for some parallelism as one of their strategic choices and what they should do. So I'm putting a metaphorical go to your head and saying one of their choices and what should they do? I think we've always done that. speak from my own experiences. We've always done proposition before products. So a lot of people that went into retail media went in with a, I need to get a product live. I need to get this product live. I need to get this case. I need to put media and data products on the shelf. We always went through a, what's our proposition? And that should guide where we place our bets in what order to what degree? Where do we lead? Where do we compete? Where do we follow the herd? Some whiz with this in terms of aggregate a platform. Currently we've got confidence that we've got a point of difference. We're hearing it from our advertisers. We're seeing success at success out of a point of difference. So we think we have to acknowledge that we are not the biggest in market share, in sales share, in on-site traffic. But we've got a point of difference that can catalyze campaigns. So gun to my head, where do court want to land? I think we can land in that specialist role that makes a campaign work harder, makes it catalyze. But we've got to leave our ego at the door and know where we sit in the media plan. You hear that, Colin? No, he goes. Well, that kind of rules you out. That's for sure. This episode was proof that bigger is always better as you often say to me, Colin. So thanks very much for your time. Dean Harris from Colt Media, network. Thank you, Dean. No, I loved it. And I'll be back. Thanks. You will be in the-- Now, that's all we have time for for this episode. 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