Are Mega-Retailers a Threat to Agency New Business?

After seeing Amazon’s success, retailers like Walmart and Target are taking advantage of their unique access to first-party customer data, creating data-driven media businesses positioned as competitors to Google and Facebook’s digital ad platforms (AdAge, Reuters).

How has Adland responded to this new development?

Adweek raised the question of whether retailers are the new agencies. Taking more of a “Chicken Little approach,” Martech Advisor suggested that “Advertising agencies will have much to worry about if the trend Walmart has started catches on among retail brands. Agencies will need to up their game and provide exceptional value to retain existing clients and continue acquiring big names.”

What gives? Should you be concerned?

threat to agency new business

“There are so many changes going on in the landscape; everybody is playing in everybody else’s space. You’ve got retailers acting like content creators, content creators acting like platforms.”

— Scott Donaton, global chief creative and content officer at Digitas, via AdAge

It’s not enough that consultancies have encroached on advertising agencies’ traditional turf. Now publishers like Conde Nast are offering services in competition with agencies. Brands continue to take work in-house. And to top it all off, some of those in-house agencies are providing services to other brands. When the in-house agencies are associated with brands as large as Target and Walmart, attention is warranted. But “worry”? Before we ring the alarm, let’s take a step back and understand what we are looking at.

With the GDPR, CCPA, and other laws set to regulate third-party data brokers, access to first-party data has become very desirable for brands (AdAge). Aside from compliance, mega-retailers’ first-party data holds the potential for greater precision and effectiveness, because it contains more detail about shopper engagement across the customer lifecycle, both on and offline.

About Target’s in-house media network, Roundel:

According to Business Insider, “Target now partners with nearly 1,000 clients across categories. The bulk of its partners are CPG brands like beauty and food and beverage, but its portfolio also includes clients from financial services, insurance, automotive, and travel.”

Roundel positions themselves as “a modern media company that proves an age-old truth: People love a brand that knows what they like.” According to their site, they aim to make media work “in everyone’s best interest,” by “making it more meaningful” for all parties (consumers, brands, and agencies).

Roundel creates content, offers media placement, and other advertising-related services for their clients— including agencies and brands, even those that aren’t sold in Target stores (Adweek). (Yes, Roundel serves agencies too). Roundel’s website lists its services as: Programmatic, Data, Insights, Placement + Optimization, and Measurement.

Brands who choose Roundel will have access to both on-site and in-store advertising for Target’s properties. They will also “be able to buy across 150 "brand-safe" partner channels, including a curated list of publisher sites as well as other digital channels spanning web, mobile, and social,” according to Business Insider.

About Walmart Media Group:

“Walmart is the third-largest online retailer in the country, trailing only Amazon and eBay, according to eMarketer,” (CNBC). Now Walmart is monetizing the wealth of data they control from hundreds of millions of customers’ interactions across their online and offline properties.

Earlier this year, Walmart ended its engagement with WPP Group’s Triad and brought their website ad sales and related analytics work in-house. By removing Triad as the gatekeeper, and acquiring ad-tech startup Polymorph Labs, Walmart strengthened its position to brands, paving the way for them to self-manage their marketing campaigns with Walmart (AdAge).

Positioning themselves “at the intersection of content and commerce,” Walmart Media Group claims “the ability to bridge the physical-digital divide at scale is unique to Walmart and provides our partners with an unprecedented understanding of true marketing ROI.” On its website, Walmart heavily leverages its direct access to “hundreds of millions of consumers” at “every point along their purchase journey.”

Offering access to shoppers on Walmart.com, Pinterest, Facebook, Google, and across the web, Walmart also says it can help brands and agencies “reach shoppers with the highest propensity to purchase your products,” by predicting purchase intent through behaviors. According to their website, Walmart Media Group’s services include Search, Display, and Video, with closed-loop measurement.

Like Roundel, Walmart gives brands the option of targeting shoppers on and off their flagship properties, which for Walmart means access to private marketplaces and ad exchanges (Martech Advisor). According to Marketing Dive, Walmart also offers “a growing stable of original and library content, along with new products like shoppable in-stream ads, through its streaming platform Vudu.”

How do people describe Roundel and Walmart Media Group?

What’s the industry chatter about Target and Walmart’s in-house agencies? Are they perceived as agencies? Do they consider themselves to be agencies? Whether they consider themselves to be agencies (or are perceived to be agencies) may reveal something about whether they intend to compete with agencies—but not necessarily.

Here are some of the ways they’ve been described:

“Tiny ad business...[that] could be bigger” (Walmart CEO Doug McMillon, per The Wall Street Journal, in International Business Times)
“Nascent advertising business” (Reuters)
“Ad tech platform” (AdAge)
“Emerging force in digital advertising” (AdAge)
“In-house advertising company” (AdAge)
“Nascent ad platform” (AdAge)
“Advertising business” (Business Insider)
“Data-driven media business” (Business Insider)
“Competitive ad platforms” (Business Insider)
“Modern media company” (Roundel)
“In-house media company” (Target)
“Media group” (Walmart Media Group)
“Relic retailers with aspirations in the ad business” (AdAge)

It seems Roundel and Walmart Media Group aren’t positioning themselves as competitors to agencies as much as they are to ad platforms—so far, anyway. Will they ultimately expand their offerings to meet clients' needs as they move forward (and lose the “nascent” and “tiny” references)? Only time will tell—but if their retail strategy is any indication (what don’t they sell?) that would be a reasonable expectation.

Are mega-retailers a threat to your agency?

The potential threat posed by mega-retailers’ advertising arms depends in large part on your agency’s niche. For example, do you specialize in CPG brands? How much of your agency’s business comes from ads on platforms like Google, Facebook, and Amazon? Would you be hurt if ad spend was redirected to Target and Walmart from those platforms? The greater your agency’s overlap with services offered by Roundel and Walmart Media Group, the greater the potential impact.

The key is to be proactive. Remember that every challenge, every change, presents a new opportunity. For example, if your agency is too big to be a “small agency,” you can still use the small agency trend to your advantage. Clients taking too much work in-house? Change the way you do business to make it work for your agency. Clients ghosting your agency? Get better at client relationships. Wasting too much time and money on RFPs? Get better at qualifying. You get the picture. There is a counterbalance for every “problem.”

The questions to consider here are:

Where is there overlap between your offerings or target clients and those of Roundel and Walmart Media Group?
Can your agency take advantage of Walmart and Target’s new offerings?
Can you offer greater value to your clients by familiarizing yourself with these new ad platforms?
Do you need to think about shifting gears or differentiating your agency in response to what these or other competitors are doing?

Are Walmart and Target coming for your clients?

Probably not anytime soon. But if not them, someone else will. In the current environment, competition comes from every corner. And if you’re smart, you’ll be prepared. In the meantime, Walmart and Target may have a lot to offer your agency in the way of serving up more effective campaigns to your clients and providing alternatives to Google, Facebook, and Amazon.

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