Commerce Media: McKinsey's Quentin George Shares Update on Retailer Media Networks

What You Need to KnowMcKinsey is behind the creation of some of the world39s fastgrowing Retailer Media Networks which it predicts have an 820bn retailer valuation upside in the US market alone if they get it rightAdvertisers and brands have the next biggest quotenterprise valuationquot boost because of higher returns from their advertising budgets per GeorgeThe onus is now on media companies to link their audiences to retailer SKUs if they want to tap a 50bn opportunity US market forecastAgencies have a potential 5bn boost and AdTech 160bn in the US per McKinseyNews Corp will outline its plans in Australia next weekThe reason why we39re all getting so excited about commerce media is because it moves from audience or ad impression delivery to an SKUlevel sale Quentin George Partner McKinsey ampamp CoRetailer media or commerce media in McKinsey parlance is more disruptive to publishers and has more upside for consumer goods brands retailers and AdTech players than many admit or realize said USbased partner Quentin George who is in Australia to front News Corp39s strategic pitch to advertisers at its annual Decoded eventDetails on News Corp39s move to hitch itself to the commerce media boom is under wraps until next week but George was a coauthor of a McKinsey report last year Commerce Media The New Force Transforming Advertising in which it forecasts an eyepopping 13 trillion is at stake in company valuations in the US alone by 2026Retailers are set to be the main beneficiaries with 820bn in potential enterprise value gains 280bn for advertisers via higher returns from ad spend 50bn for publishers 5bn for ad agencies and 160bn for AdTech firms who can deliver proxy sales operations for retailers which don39t setup their own inhouse retailer media unitsMi339s 74page Retailer Media Next report last month covered the outlook for the Australian market and the key challenges that consumer goods brands want addressed namely measurement attribution and data sharing before the sector can realize its bullish macro forecastsStill McKinsey39s George said the midterm outlook for commerce media is quotmassively disruptive The reason why we39re all getting so excited about commerce media is because it moves from audience or ad impression delivery to an SKUlevel salequot George told Mi3 this week quotSo it39s not just marketing activity it39s business outcomes And when you can tie an impression to a SKUlevel sale you sit back and you go 39wait a minute how did we do it before39 Well we put the media in front of people who a media company told us to but what happened Is there any correlation between that and sales that I see We suspect so but we can39t really prove itquotLoop Don39t SprayGeorge said commerce media allowed retailers to carve out higher margins and revenues by approaching the likes of PampampG or Unilever to quotstop spraying money around the internetquot and tie their advertising impressions to SKU salesquotThe onus now is on media companies to prove to advertisers how their audiences demonstrably deliver results and I think the great ones are capable of itquot he said quotThere are certainly examples of forward leaning media companies that are working with retailers to say 39we want to create a vibrant ecosystem to tie those impressions and your advertising impression logs to SKUlevel And so the conversation and strategic opportunity remains there for a lot of publishers to do thatquotGeorge said retailers had the biggest enterprise valuation upside because they could match their customers with ad impression on their own assets websites ecom and instore and link more broadly to other publisher audiences that could close the loop to a transactionquotRetailers are going to want to partner with media companies to have access to their ad inventory and so publishers will be beneficiaries of that even secondarilyquot he said quotBut now publishers have got an intermediary between them and their customer which is the CPG consumer packaged goods brand And at some point CPGs are going to say 39I39ll still make sure that I ask that you39re on the media plan but it39s going to go through the retailer now or a handful of retailers now39quotAdTech Pay DirtPerhaps most surprising in McKinsey39s forecast on the sector upside from commerce media is the 160bn enterprise value opportunity for AdTech providers VC firms in AdTech will no doubt be quivering with delight George said AdTech could act as demand aggregators in commerce media although he ceded quotit remains to be seen how robust that number stays over time Right now the money flows through the system and there are a handful of intermediaries that have consolidated demand Let39s be realistic and suggest that not every single retailer even some of the ones at scale can afford the resources to stand up full sales forces to be able to go after this opportunity And so there are a number of AdTech providers that do more than just the plumbingquot he suggestedquotThey bring incremental demand They act as if they39re sales forces And so right now they have an opportunity to get incremental value out of that I suspect the reason for those numbers being that high is if you39re an AdTech company your multiple on your EBITDA is substantially higher than if you were a media company and substantially higher than if you39re a retail company And so just think about that in terms of getting many earnings multiples more for the same amount of revenue that flows throughquotIndeed George who at IPG Mediabrands was in the team that created Cadreon an early agency programmatic trading desk in 2008 said commerce media was currently in the nascent stages of what occurred in online automated advertising tradingBack then a lot of people got richquotI feel like this is the early days of programmatic meaning the value proposition is so clear it allows multiple sides of the equation to participate and it will reward winners and punish people or expose people who don39t take disproportionate valuequot he saidReprinted with permission from Australia39s Mi3 wwwmi3comau published March 16amp160 2023Click the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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Commerce Media: McKinsey's Quentin George Shares Update on Retailer Media Networks

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