Retail media has become the fastest-growing marketing channel in recent years, but if the category is not regulated, emerging networksThe opportunity to divide up a market of over one hundred billion US dollarsmay be in jeopardy. As brands become increasingly reluctant to buy in a fragmented ecosystem due to inconsistent transaction, measurement, and reporting methods, calls for standardization have grown in recent months.

Experts believe that true industry standardization is difficult to achieve and unlikely to gain support from key players who dominate retail media practices. On the other hand, without some level playing field, smaller platforms will face a reckoning in proving their value as a few giants consume more market share.

Industry anxiety in the 'trough of disillusionment'

The most powerful driver of standardization is not regulators, but the publisher side. At the Cannes Lions International Festival of Creativity in June, Albertsons' retail media division, Albertsons Media Collective, proposed a framework focusing on common practices for product features, performance measurement, third-party verification, and network capabilities, and it was endorsed by Omnicom Media Group and Unilever. The grocery chain described the lack of standardization asa survival crisis for all retail media networks。

"To ensure the survival of the industry, we must unite toward a greater goal." — Kristi Argyilan, Senior Vice President of Retail Media at Albertsons

Despite the grand rhetoric, the underlying anxiety is well-founded. Albertsons cited a January study by the Association of National Advertisers (ANA) showing that many of its member marketersreluctantly buy retail media. Inaccurate measurement, being seen as a 'tax' imposed by retailers, and the fragmented state have led 42% of advertisers to question their investment.

Nich Weinheimer, Executive Vice President of Strategy at Skai, noted: "Both publishers and brands are asking more: What can this investment bring? CMOs will question why they continue to support 30% annual growth in retail media." Nii Ahene, Chief Strategy Officer at Tinuiti, added: "When buying banner or TV ads, one unit can be placed in multiple places, but retail media completely lacks that capability."

Despite the dissatisfaction, retail media remains a giant in the advertising market. GroupM forecasts the category's revenue will grow 9.8% this year to$125.7 billion, and it will surpass TV advertising within a decade. Retail media networks are major beneficiaries of cookie deprecation, as brands shift to targeting methods that rely on retailers' first-party transaction data.

Weinheimer said brands may have entered the 'trough of disillusionment' in the retail media hype cycle in the second half of 2022, as economic weakness hit budgets. The standardization movement shows publishers are seriously responding to potential impacts. "More pressure has been transmitted upstream to publishers, i.e., the retail media networks themselves."

Who benefits from standardization?

Albertsons' standardization stance has drawn skepticism. It essentially asks competitors to adopt its framework, despite having an advisory board and committing to support IAB-led initiatives. Albertsons is merging with Kroger, whose retail media network is more mature. Some believe this is a brand-building strategy to stand out among the many networks.

Andrew Covato, founder of Growth by Science, said: "What they are promoting is what advertisers need, and if they control the standards, it can benefit them; this is almost strategic positioning." But retail media networks tend to favor a walled garden model, like Google and Facebook. Albertsons said the guidelines need to be stress-tested and feasible before finalization, but did not respond to whether it proactively invited other networks to join and how many have signed up.

Russ Dieringer, founder of Stratably, questioned: "Walled gardens are unwilling to compare results with each other; how is retail media different? I haven't seen a convincing argument."

The elephant in the room: Amazon

Albertsons is not the only driver. IPG launched a cross-channel management solution in July, and this fall the IAB will release measurement standards developed with the Media Rating Council. Weinheimer believes: "Players that can cross walled gardens will play a key role in standardization."

Experts believe standardization may benefit small and medium-sized networks, such as regional retailers like Meijer and HEB, by compensating for their scale disadvantage. Greg Stevens, founder of Turbyne, said: "If measurement is more credible, retail media will attract more funding faster. Mid-tier regional retailers benefit the most."

What cannot be avoided in the discussion is Amazon, which controls over70% of the US market share. Q2 ad sales grew 22% year-over-year to$10.7 billion, more than three times Walmart's total for all of 2022, which was second place. Dieringer noted: "The challenge with any standardization effort is that Amazon doesn't participate and doesn't need to, because it is far ahead. If Amazon is absent, only about 15% of the market can be standardized, and it requires cooperation from all other participants."

A battle for survival?

The unclear prospects for standardization suggest retail media may contract. Although overall spending is healthy, the number of networks that benefit may decrease. This year, Gap has paused retail media investment, becoming the industry's first notable failure case. Even if standardization is widely adopted, the sustainability of the industry remains in question. Brands have limited budgets and prefer networks with high purchase-intent traffic.

Dieringer concluded: "Can all networks reach agreement and follow standards? There will be winners and losers; that is the real challenge."