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Finally in the Spotlight Commerce Media
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00:00So commerce media has become one of, if not the most important, secular trend in advertising.
00:07It has the potential to generate over $1.3 trillion worth of enterprise value in the U.S. alone
00:14and create a paradigm shift in digital advertising not seen since the days, or the early days of programmatic.
00:21My name is Quinton George. I'm a partner at McKinsey, based in San Francisco,
00:28and I lead our commerce media practice, and this certainly is a topic that we've been involved in for the
00:33last couple of years.
00:35And so today I'm joined by two companies representing different parts of the value chain.
00:41First, we have Duncan Pater, who's the CEO of Essential, and you operate Flywheel, a leading commerce media platform.
00:49And then representing the buy side, Antoine Bord, who's the global VP of e-commerce at Donon,
00:56and an active buyer of commerce media services.
01:05And so why we're excited about this trend is because we believe it's a powerful evolution in marketing and media
01:13optimization.
01:14You know, for the last 80 years, media has been optimized predominantly based on impression delivery, right?
01:22Did I reach the audience that I said I was going to reach?
01:25What commerce media promises is to change that by allowing you to connect impressions to SKU-level sales,
01:34both in-store as well as online.
01:37And so this allows retailers and commerce players to build powerful businesses built on their first-party data,
01:44and it also allows them simultaneously to deliver exceptionally relevant experiences to their customers.
01:57So a few contributing reasons that you can see up there that puts commerce media in the spotlight now.
02:02The first is, you know, the dramatic rise that we've seen in e-commerce.
02:06As you see, the first six months we've done enough, we've done more activity than the 10 years before.
02:15And that has increased the signal of action, behavior, and intent that consumers give us.
02:20The second one is around the closed-loop capabilities because retailers and savvy retailers have jumped on this opportunity
02:27and built really powerful and successful businesses around that based on the closed-loop capabilities.
02:34And then, obviously, from the third one, Antoine, buyers like yourself has really been attracted to the strong return on
02:43ad spend
02:44for the types of endemic advertisers you represent.
02:48And then, you know, with the deprecation of third-party cookies, and we'll talk a little bit about this in
02:53a minute,
02:53it's going to create a really powerful first-party ecosystem against that.
03:02So looking forward, you know, we've seen 25 retail media networks in the U.S. launch alone over the last
03:1118 months,
03:12and at least half of scaled retail is committing to have similar types of businesses in the near future.
03:20Explosive growth with a 32% compound annual growth rate in digital media spend,
03:26and a projected over $100 billion worth of spending in retail media networks by 2024.
03:36So with that as a setup, Duncan, you come from a rich background of data and media.
03:45Where does commerce media fit into the broader marketing ecosystem?
03:50Well, firstly, thanks for having me here today, Quintin, and it's great to be here.
03:55What I'd say is that, number one, it's the most powerful sales channel that has ever existed.
04:03And so for any brand, the creation of this capability is a massive step forward,
04:09and people, you know, for the next 10 years is going to create a huge opportunity for brands
04:15to be able to daily manage their sales of their products to consumers
04:20in a way that they've only ever dreamt of in the past.
04:23So in that respect, this is genuinely a real transformation.
04:27It's going to drive very hard, very quickly.
04:29I mean, just to give you some stats,
04:32around 20% of total consumer products today are sold through this channel worldwide.
04:37Of that, you can expect that to be 41% by 2026.
04:42So you're already talking about almost half the business going in through this channel.
04:47That's driven on big swings around the world.
04:50So if you look at sort of penetration rates, you know, as a percentage.
04:55U.S. 29%, you know, Germany 33%, China 80%.
05:01China lead the world on this channel, and it's where we spend a lot of our time.
05:08UK 38%, France 24%.
05:11So you can see there's very different adoption.
05:13But as a platform and as a channel, you can see this...
05:17It's not low adoption. It's opportunity for growth.
05:19Yeah, massive opportunity for growth.
05:21And if you look at the growth, if you take the view on growth, you know,
05:26this is the only real retail sales growth that's going to be coming through for the next 10 years.
05:32The challenge, of course, being, and we can touch on it, and Antoine will, you know, talk about this,
05:38you know, over 92% of that sales today is delivered through six platforms.
05:45Yeah.
05:46So there's a lot of, you know, it might be 25 that have entered the network,
05:51but the reality is, you know, today, if you are an expert on those top six,
05:56you are massively missing out.
05:58So Antoine, you've worked across a bunch of different CPG brands during your career.
06:06How has the rise of e-commerce and data impacted the way that you practice your craft that you go
06:11to market?
06:12Well, I guess the rise of e-commerce and media in general has had massive impact in the way the
06:19brands start interacting with consumers.
06:21And I think the Danone brands, we're not necessarily brands who sell directly to consumers.
06:26So we don't have this direct connection.
06:28But versus the offline world where consumers were sort of seeing our products on shelf,
06:35now we have the ability to get some insights, information, real-time on how our consumers are behaving,
06:41what kind of reaction they're getting,
06:44and how they're really adapting their behaviors towards our different brands and products.
06:49So for us, getting those insights in how they search products, offline and online,
06:54how content makes them react,
06:56how those insights are also poured into research, innovation,
07:01to really craft our future innovation.
07:03This is a loop, you know, which we didn't have before.
07:08Of course, we had market research, but I guess now it's nearly real time.
07:11So for us, this shift has been drastic, of course, in the past three years.
07:17And retailers are playing an active role into that.
07:20So that's why those media networks for us,
07:23and by the way, it's not only media as you said it,
07:26it's really insights and powerful learning for our consumers.
07:30Correct.
07:30And look, the clarity of the signal, I'm also sure you were excited by it
07:33because it's not sample data.
07:36This is respondent-level data.
07:39So, Duncan, so you guys acquired Flywheel in, was it 2018?
07:47That raised quite a few eyebrows.
07:49People thought that was a non-intuitive move.
07:52Can you talk to us about how that came about?
07:55Yeah, so look, I've spent 30 years building technology data platforms around this sector.
08:02You know, if you think about sort of prior versions that have been involved in,
08:06you could see how the granularity of information and your ability to action it,
08:11if you can really build platforms to do it, is just so much more dramatic.
08:15So in 2014, we took, you know, we really honed in on marketplaces,
08:20and if you go back and look in history, actually 2014 was a period where people didn't believe in Amazon,
08:25actually.
08:26They were believing in direct-to-consumer,
08:28and every brand in the world was building out direct-to-consumer capabilities for themselves.
08:34We took, through studying, looking at the market, the data we'd got,
08:39we backed that for two reasons.
08:42We believed the network effects of marketplaces and the benefits of consumers would win in the long term.
08:48And the second element that we bet on, which was probably more profound,
08:53was that we, through all my 15 years before that, I'd spent around consumer privacy,
08:57that what was definitely going to happen in the next, to now and going forward, by the way,
09:03is that unless you can access the consumer through someone's platform,
09:08who can get massive-scale first-party data, you won't be able to do the future.
09:14And that was our two bets.
09:15Building a bet that goes to the right side of the marketplaces,
09:19where we could leverage all of that first-party data for our customers
09:24with a level of visibility that no brand has ever been able to get before.
09:29That was what we backed.
09:30So we made a play.
09:32We took a bet.
09:32It was a pretty big bet.
09:34You know, as I mentioned earlier, we've spent about a billion dollars so far
09:37building out our tech platform that drives retail around the world,
09:42and it's played out for us so far.
09:44It certainly sounds so.
09:46So, Antoine, you have a global remit,
09:49so you get to see and you get to buy from, you know,
09:54any number of retail media networks.
09:57At least from our reckoning, they don't sound like they're all the same.
10:01So maybe you can just give us some perspective on what are the winners doing better,
10:07and what are the laggards, what do they need to do
10:11to really be able to capture more of the spend that you have?
10:14That's an interesting one because, as you said,
10:17Amazon was a very early adopter on that,
10:19and they moved on very early because they're a very data-driven
10:22and media-driven company,
10:24and a lot of their revenues comes from that source.
10:29Now, retailers have understood that they were lagging behind,
10:33so now they're catching up.
10:35The only caveat to that is that a lot of retailers
10:38have started to sell media possibilities and capabilities
10:42to brands like us to make up for profit losses, you know?
10:47And this is where, at the start,
10:49we were feeling that we were not in a win-win game
10:52where, you know, I'm just trying to sell your service,
10:55but I don't really know how to extract the added value to it
10:59versus some agencies which were helping us.
11:02Now the game is starting to change
11:03because they understand that they need to go one step further.
11:06So I would say that initially we're investing
11:09maybe 80% of our media on the Amazon capabilities.
11:13It's also a question of where can you invest, you know?
11:18It's real estate.
11:19At the end, today, we are investing
11:22probably six, seven different types of platforms,
11:25also aggregators.
11:26We go beyond the Kroger, the Walmart,
11:28the Amazons of the world, you know,
11:29the Criteos of the world also are playing an active game into that.
11:32So the whole landscape in how we invest in media
11:36is also changing
11:37and the relationship that we're having with our retailers
11:41is also shifting.
11:42Instead of discussing only trade-term negotiations,
11:46you know, I'd rather say
11:47instead of compensating for a price increase
11:50that I'm going to have on my products,
11:52I'd rather reinvest this money into media
11:55because I know this is going to drive sales.
11:56I don't want to give you money back
11:58just to give you money back, you know?
11:59This is the kind of discussions
12:01that we're having with our retailers currently.
12:03And so, Duncan, your platform represents
12:07fairly substantial spend on Amazon.
12:12What advice do you have
12:13or what are the criteria
12:14for these other retail media networks
12:18for them to be competitive
12:20and get more of the total marketing spend?
12:24Yeah, so, you know, Chris,
12:25when we were chatting earlier,
12:26but I think that the principle is
12:27is that this isn't a media play.
12:31This is a retail sales play
12:33where media is part of the mix.
12:35So our platform helps brands optimize sales
12:38all the way through from sort of,
12:39I suppose, farm to plate
12:41in the digital commerce ecosystem.
12:43That's what the game's about.
12:45Media's just one part of that mix.
12:47And so for us and for our brands
12:50to be hugely effective in optimizing
12:52for both the platform,
12:54i.e. the retailer and the brand,
12:57is more granular information,
12:59more and more direct information on consumers,
13:03you know, developments and the sophistication
13:05of things like Amazon's marketing cloud,
13:08which we're a massive user on.
13:10and so we can get to unbelievable granular data
13:13about what's happening with our customers
13:15for those products,
13:16with those consumers,
13:17how we influence it,
13:18what we're willing to pay for,
13:20what we're not willing to pay for,
13:21and whether that's driving profitable sales
13:23for our client.
13:25And I think, you know,
13:26if you look at where the other retail networks
13:28are sort of, you know,
13:30some significant difference behind,
13:32now we're delighted they're coming into the market,
13:34but, you know,
13:35they've got a lot of catching up to do
13:37because at the moment, you know,
13:38if they're using an aggregator,
13:40then they're not optimizing sales,
13:42they're simply selling media.
13:43Of course.
13:43That's not a great outcome.
13:46Of course.
13:46And look, it seems like you'd be attracted
13:49not just to performance,
13:51but to the quality of those insights
13:53because you can do other things with them
13:56if you understand which attributes
13:58drive performance for certain segments.
14:00That allows you to do, you know,
14:02a better investment elsewhere,
14:04maybe change creative.
14:05Absolutely.
14:06I think, I mean, performance, of course,
14:07is important.
14:08Return on ad spend is going to be super important.
14:10Now, the uniqueness of the audience
14:12is going to be also something which is key.
14:14How unique the audience is
14:16because what a consumer that goes on Amazon
14:19might be different than on Kroger,
14:21might be different than Walmart.
14:22So it's interesting for us.
14:23And this is probably how those platforms
14:26will start differentiating themselves.
14:28What kind of audience they can offer to me.
14:30And then you need to look at it
14:32into a more an omni-channel approach.
14:35You know, it's a full funnel.
14:36It's not only about conversion and sales.
14:39It's about brand awareness.
14:40It's about how do I connect with my consumer
14:42very early on, offline, online.
14:45How do I also trigger sales
14:47outside of the platform?
14:49For instance, I mean, people,
14:50they go on Walmarts
14:51and they look at ratings and reviews on Amazon.
14:54So, I mean, this connection between online
14:56and offline is important.
14:57And here again, we're not only using
15:00those media, retail media networks.
15:02You can also use, you know, digital TV, outdoor.
15:05I mean, everything is interconnected today.
15:07Well, look, I'm glad you brought that up
15:08because two questions spring to mind.
15:11The first is, you know, there's so much,
15:14so many pools of money
15:16that can fund retail media
15:17or commerce media buys.
15:20You obviously have Shopper,
15:22you've got trade, you've got brand.
15:24As a brand, how do you think through that?
15:29Because the early initial funding for this
15:34has been Shopper that's been converted
15:36from, you know, call it traditional inserts
15:39to sponsored listings.
15:41There is more sophisticated things afoot.
15:44Yeah, that's a very good one
15:45and it comes back to
15:45how do you drive change within an organization?
15:48You know, Danone is a 100 plus year old company.
15:50How do you change those mindsets?
15:53And here again, I mean,
15:54we're not going to create additional budgets everywhere,
15:56but this is where you need to pull in resources internally
15:59from marketing, from digital, from shopper, from sales,
16:03and put all those guys together
16:05to make them understand that, you know,
16:07part of their budget needs to be probably relocated.
16:10How do you look at the consumer
16:11through his whole journey?
16:13Where do you need to put your money?
16:15Where do you get the more bang for your bucks?
16:17You know, if I were to put $1, where would I put it?
16:20And then it's a matter of, you know,
16:22taking some money maybe out of traditional TV,
16:24putting it back in your retail media.
16:26But if you don't train, and it's very important,
16:29or skill your people internally to understand
16:32that this shift is happening,
16:34the shift is happening faster outside than inside.
16:37Got it, got it.
16:39And so, you know, Duncan, if you start to look at that,
16:42you represent spend.
16:45And imagine, I think some people use commerce media
16:50as if it's a channel.
16:52If it is as a channel spend, where is it stealing share from?
16:57Is it stealing share from traditional media?
16:59Is it stealing share from search?
17:02Is it stealing share from display?
17:05Basically, all of the above.
17:07It is coming out of all of them.
17:10And it's coming out of all of them because for businesses,
17:12this is one of the few worlds where,
17:14all the way from top of funnel to bottom,
17:17if you really have the infrastructure and tech
17:19to pull the data together,
17:20you can 100% attribute what you're doing to outcomes.
17:23So you really can be very definitive about,
17:27you know, off-platform activity,
17:29you're managing through the DSP,
17:31all the way through into the actual platform and the sale.
17:35The sophistication of data the platforms are now giving you,
17:38if you can use it,
17:40you know, will allow you to absolutely attribute,
17:42and not just last-click attribute, by the way,
17:44because we look at our,
17:45when we do the analysis between last-click and actual attribution,
17:48you know, there's a lot of difference between,
17:51about 40% of DSP activity will drive a sale,
17:55for example, on-platform, right?
17:57So it's, but you've got to get into,
17:59you've got to be building, as Anton says,
18:00you've got to have a platforming capability
18:02where you can take data across every one of these sources,
18:06you can intermix it, and you can optimise it.
18:08You've got to do that real-time.
18:10So to have an impact on these marketplaces
18:12is not go off, figure it out, get a strategy,
18:16come back 90 days later,
18:18because you've missed it, right?
18:19The market, these marketplaces change every single day.
18:23So what you've got to imagine is
18:25you're building a capability where
18:27it's about algorithms competing with algorithms.
18:31You need, you know,
18:32you know, it's that famous, you know,
18:34the untouchables,
18:36you know, don't turn up to a gunfight with a knife.
18:38Well, you know, up until building this tech platform,
18:41every single one of our brands
18:43was turning up to a gunfight with a knife
18:45because they didn't have the same tooling
18:48and quality of algorithms that the marketplaces had.
18:51And what we're trying to do is just bring the balance
18:52so they can really get the value.
18:54So, you know, with these platforms
18:59clearly poised to take more of your spend
19:02because they have to earn that.
19:05What does this pose for the agency
19:09and specifically the media agency business?
19:11Is this a threat?
19:13Is this a frenemy?
19:14Is this a positive?
19:15It's an evolution of the market and industry.
19:18I guess agencies,
19:19it's true that we are starting to have
19:21as much discussion on media with our retailers
19:24than our agencies.
19:25Now, retailers,
19:27they're not necessarily fit for that,
19:30meaning that on their side,
19:31they also need to have the right partners
19:33to help them, you know,
19:35because there's a tech component to it
19:37which they don't necessarily have.
19:39So we're kind of seeing a new ecosystem
19:41of partners we're talking to.
19:43We see also our traditional media agency
19:46trying to catch up,
19:47buying out some capabilities on the markets
19:49because they need to.
19:50So I think this is kind of shifting
19:52and internally we are also asking ourselves
19:55where shouldn't we have like internal studios,
19:58you know,
19:58or internal capabilities or internal agencies?
20:01Because at the end of the day,
20:02we could also imagine
20:03if tomorrow those retail network media
20:05become self-service
20:06and we would be able directly
20:09to buy those data
20:10or to use this data.
20:12I would love to do it.
20:14You know, you cut the middleman for me,
20:15it's maybe more interesting.
20:17So I think there's still pieces in movements,
20:20but that's quite interesting
20:22but the media agencies that we're working on
20:24are really reflecting on that
20:26and I see that there's a lot of catch-ups
20:28still to do,
20:29but some of them are progressing pretty fast.
20:31Got it.
20:32So I want to switch topic a little bit
20:34to consumer privacy.
20:38I think most other parts of the value chain
20:41with what Google and Apple are doing
20:44are finding a very tough time to transition.
20:48what does commerce media,
20:50what does that bode for commerce media
20:52and how do we think smartly through this?
20:55Well, look, you know,
20:57the shift of privacy across the industry
20:59hasn't really kicked in yet.
21:01So I think that's the key thing to remember.
21:02It hasn't started.
21:03It's just sort of the early warm-up phase.
21:06And so as you see on the open internet,
21:08more and more of the privacy initiatives come in.
21:10and, you know,
21:11it's going to get harder and harder
21:13to see your way through in that world.
21:15So it then falls back to, you know,
21:17it's a really,
21:18you know, I look at this
21:19through a really simple question,
21:20which is, as an individual,
21:22who am I going to be happy
21:24to give my first party information to
21:26and know that, you know,
21:27I'm going to get a benefit from that?
21:29And it's quite simple.
21:30It's the company that's going to deliver
21:32those presents for my kid's birthday tomorrow.
21:34It's the company that's going to
21:35deliver that other product.
21:36You know, it's the people
21:37that you get a real transaction benefit from
21:39where they get the first party data.
21:42It's just a core part of the business they do.
21:44So right now in the United States,
21:47you know, we use it every day.
21:49You know, we can directly
21:50through the privacy platforms on Amazon,
21:55where we see it through the,
21:56you know, the stores
21:57and we're open up in the white rooms.
21:59You know, we can directly address
22:02175 million Americans
22:04with targeted activity for our brands.
22:07Now, there isn't another platform in existence
22:09that can do that.
22:10That's just Amazon.
22:11When you then handle Walmart,
22:13Kroger, Target, keep going,
22:16you know, you've got pretty much
22:17100% access to the US population
22:21with highly grained information
22:23about what they really are,
22:26what they really want.
22:27Honestly, for someone who's a complete data geek
22:31and still a programmer today,
22:32you have never, ever had as much visibility
22:35if you can get into it and see it.
22:38Exactly.
22:38Well, listen, let's close off
22:40with a question for both of you.
22:43If you were to look a year forward from now,
22:47what would you like to see the ecosystem
22:51crack and solve and have accomplished
22:55over the course of the next 12 months?
22:57Yeah, I guess for me,
22:59it's really a matter of
23:00how can they bring those specific audiences to us
23:04because I feel there's too many similarities today
23:07in what they're offering.
23:09So it's really, really,
23:10they're too close to each other.
23:11So for us, it's kind of hard to choose.
23:13So we're basically choosing
23:15and making our investment
23:16based on return on ad spend,
23:18which is not enough for me.
23:20and what kind of capabilities and service
23:22they could offer also to go one step beyond.
23:24I think this is a critical one.
23:26The security aspect is going to be a second element too.
23:29And I would see shift around that.
23:31And I don't know how retailers
23:32are going to play around that
23:33because at some point,
23:34consumers will probably want to take
23:37a bit of a piece of the value
23:38which is creating the chain.
23:40Asmita Dubey from L'Oreal yesterday was saying,
23:42how do you go from online to on-chain?
23:45With the blockchain,
23:46a consumer could say,
23:48well, the data of my behavior is mine.
23:51And I can value that
23:52and I can sell that to a brand.
23:53And I would see that happening in the future,
23:56I don't know, 12 months,
23:57but probably in the 24 months,
23:59I would see that happen.
23:59And you can see why commerce media
24:02and loyalty programs are so closely aligned.
24:05Final word for you, sir?
24:06Yeah, very simple,
24:07which is, look,
24:08we have a capability here
24:12that for any brand in the world
24:13empowers them to a way
24:15they've never been empowered before.
24:16but only if the marketplace is,
24:19you know,
24:19more of the companies lean in
24:20and build true marketplaces.
24:22And there is only actually
24:23six major proper marketplace providers
24:27with high quality data in the industry today.
24:29So we just need to see
24:31the others really step up.
24:32I mean, Walmart have really come in,
24:35you know,
24:35kind of really stepped up
24:36in the last 18 months,
24:37but we need to see more Walmarts
24:39for the power of everyone
24:40to be able to start
24:41to really get,
24:42you know,
24:43valued, loyal sales
24:45to customers
24:45of their brands
24:46where you remove
24:47a huge amount of wastage
24:49and the customers
24:51get much higher satisfaction.
24:53Perfect.
24:53Well, look,
24:54you've challenged the industry.
24:56Let's see what happens
24:57over the next 12 months,
24:58but a round of applause
25:00for our panelists.
25:01applause
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