Amazon, Walmart, Target, and Instacart are among a growing number of retailers betting on the growth of e-commerce and hoping that advertising can offset retail’s thin margins. They’re pitching advertisers on data that shows what people buy and when they shop. And they’re hiring to build adtech and relationships with advertisers.
Amazon dominates retail media
Amazon has become the third-biggest digital advertising company behind Google and Facebook and dominates how brands spend e-commerce ad dollars. Amazon netted $31 billion in advertising in 2021 — up from $21 billion in the same period in 2020. This growth has led Walmart, Instacart, Walgreens and other retailers to build their own platforms to grab a slice of the ad pie.
Walmart and other big-box retailers Walmart, Kroger, and other big-box stores are trying to copy Amazon’s advertising business by pitching their shopper data, which could benefit small brands who often struggle to outbid big advertisers on Amazon.
But each retailer has custom ad buying, targeting, and measurement, making it hard for advertisers to manage ad campaigns across all of them.
Instacart and other grocery delivery companies
Instacart Grocery delivery companies like Instacart and Gopuff are getting into the ad business to offset food delivery’s slim margins, and they’re hiring accordingly.
Instacart pulled in hundreds of millions of dollars in advertising last year, and revenue from the operation could top $1 billion in 2022. DoorDash, to name another, is similarly trying to build an ad business while trying to stay on top of the food delivery wars.
Shopify, Uber, and other retail media sellers
The retail media ad business stampede has extended to other companies, from Ulta to Shopify. Shopify, which lets merchants sell products online, has plans to roll out a tool called Shopify Audiences, and let advertisers use its data to target ads on Facebook and Google, according to retail and advertising sources familiar with its plans. Ulta Beauty is rolling out an advertising arm to sell ads on its own platform, publisher sites, and social networks.
Retail media is driving M&A
Growth in e-commerce advertising has been a boon for companies that manage advertisers’ spending on the likes of Amazon and Walmart as well as adtech firms that help retailers build ad businesses. E-commerce M&A soared 50% between 2019 and 2020, showing the demand for companies that help merchants sell on third-party marketplaces, according to Pitchbook data via JEGI Clarity. Private equity firms like KKR and Blackstone have been particularly active, pouring money into warehouses and e-commerce holding companies.