Timely prompts no coincidence

If you have ever thought an advertiser is tracking every move you make, you’re not far off the mark (and you are the mark). That’s essentially the modus operandi of what’s known as ‘commerce media’, and it’s going to get a lot more intrusive.

Also known as ‘retail media’, the morphing of conventional retailing with media technology is changing the way advertising works, as well as shopping habits.

An early example of what’s happening can be found in the outrageously successful Chemist Warehouse chain, which was described last year by the Australian Financial Review as “the biggest media company you’ve never heard of”.

As well as having close to 600 retail outlets in its unique franchise arrangement with registered pharmacists, Chemist Warehouse makes some of its money by selling space in its television advertisements.

The business, which is listing on the stock exchange via the reverse takeover of Sigma Healthcare, was last November reported by the AFR to have generated $603.5 million in revenue from “marketing, advertising and other” which, the newspaper said was “an astonishing figure for a pharmacy chain”.

It was astonishing because the advertising revenue represented roughly 20 per cent of last year’s total group turnover of $3 billion.

The Chemist Warehouse media income also provided a peek into the world of commerce media, which will almost certainly become supercharged with the arrival of artificial intelligence.

A topic largely confined to discussions among advertising and media executives, the lid on commerce media is slowly being peeled back as it grows.

Jonathan Yantz, a senior executive with M&C Saatchi in America, said in a recent interview that commerce media made it easy to connect brands and consumers.

“Brands can tap into consumer interest by surfacing their products when consumers are browsing for inspiration or showing direct intent,” he said.

The commerce media discussion moved up a notch earlier this month when leading management consultancy McKinsey & Company said there were “sea changes … upending advertising”.

Marc Brodherson, a senior partner in McKinsey’s New York office, said he believed major changes were afoot.

“[By 2028], spending in retail and commerce media will be bigger than for all of global television and streaming advertising,” he said.

Mr Brodherson said the changes under way in advertising were accelerating as consumers spent their time differently and technology giants competed with traditional television advertising.

Young people spent more time watching short-form mobile videos (TikTok), he said, and big technology companies were launching advertising supported products for the most valuable space of all: live sports.

“But the biggest trend right now is the rise of e-commerce companies building advertising businesses by selling access to their consumers,” Mr Brodherson said in McKinsey’s latest quarterly report.

“We call this retail media or consumer media. This is a new way for advertisers to reach consumers.”

He said retail media was expanding to players such as rideshare and delivery companies, which knew users’ locations and could put relevant advertisements in their apps at the right time.

“Hotel chains are doing it, credit card companies and banks are looking at it, and airlines have the potential to get into it,” Mr Brodherson said.

“They have screens on planes and in apps, and physical media such as billboards and in-flight magazine, on the air bridge, or on the plane.”

He said advertisers could know an ad appeared and whether it did or did not lead to a purchase.

“It’s super-charged, highly performative media. It effectively collapses the marketing tunnel from awareness, to consideration, to purchase, into a single step,” Mr Brodherson said.

“Media and social platforms are also experimenting with this, collapsing the tunnel the other way by turning their content into shoppable media, in which the audience can make purchases inside the content they are consuming.”

He said the commerce media revolution posed challenges for advertisers.

“In the past, a traditional brand doing a lot of brand advertising could call four television networks, three newspapers and maybe a little radio and premium digital publishing and be done,” Mr Brodherson said.

“Now there is much more complexity to manage, figuring out how a whole new category of advertising fits in, how to measure ad effectiveness and how to budget and plan.

“There’s more opportunity, too. These changes allow small and local businesses into this new advertising ecosystem. They might not spend a million dollars on a television campaign but a few thousand to create a video ad, maybe with the help of generative AI, and hyper-target it.”