Andreas Reiffen, CEO at Pentaleap on The $10B Question: How to Create a Better Retail Media Ecosystem?

In this Q&A based on a recent episode of FMCG Guys, Daniel Torres sat down with our very own Andreas Reiffen to explore how we’re leading retail media towards an open, efficient retail media ecosystem. Whether you're a retailer who is frustrated with your current media network tech stack, or looking for ways to optimize onsite growth, this conversation is packed with valuable insights.

Stay tuned and you’ll learn:

• How to enhance ad relevancy and increase click-through rates with a supply-side tech approach.
• Why a modular, non-exclusive system can provide retailers more flexibility and better ROI.
• Strategies for balancing on-site and off-site monetization to overcome growth ceilings.
• Real-world examples of how top retailers like Home Depot and Staples use Pentaleap’s technology.
• The importance of prioritizing relevancy before scaling inventory for better performance.

How Pentaleap Got Started

Q: I'd like to hear more about Pentaleap and why you've decided to spin that business out of Crealytics.

Andreas: We started with a tech-enabled agency business and ran performance marketing campaigns with budgets of 50 to 100 million for large advertisers. At some point, we began building retail media capabilities and tech on the measurement side, which really took off for us. We started a few years ago, and now we're seeing rapid growth and broad adoption of our platform. The different pieces of Crealytics have different dynamics: the retail media side is a pure tech business with high growth rates and a totally different investment rationale compared to the mature, highly profitable agency business.

Q: How did you start the company, and how have you grown the business to what it is now?

Andreas: We launched Crealytics 15 years ago with the idea to build a pure SaaS business around search. At some point, we realized it would be hard to keep up with Google's pace and always be one step ahead. So, we shifted to an agency model, which became highly successful. We had clients like ASOS, Farfetch, and later Revolve. Around 2015, we noticed a shift towards a product advertising format with Google Shopping. When Criteo acquired HookLogic, we realized that this trend would extend into a retail environment. That's when we decided to build a programmatic SSP and DSP model to democratize the space and reduce market friction. It took a while for retail media to catch on, but now it's growing rapidly.

Q: It's worth riding the retail media wave because, arguably a year ago it might have been a fad, but now it's clearly here to stay, right?

Andreas: Yes, we were surprised by how much traction it got in the last couple of years. Initially, we knew it was an opportunity, but we didn't expect factors like privacy and cookie deprecation to align so perfectly. We also didn't anticipate so much excitement and pull from the brand side. There is a double impact: a pull effect from brands eager to access first-party data and push their offerings at the point of sale, and a push from retailers who want to sell advertising due to margin pressure. These combined factors have led to the massive explosion of retail media.

Q: Where does the name “Pentaleap” come from?

Andreas: Our first client was Staples. When they switched to our platform, they saw a 5X increase in ad revenues immediately. So, this 5X leap inspired the name “Pentaleap.”

What Are the Biggest Retail Media Challenges Today?

Q: Could you explain the supply-side vs demand-side of media for us?

Andreas: Let's start with how retail media has worked so far. It began as an ad network-driven approach where a retailer would choose a single provider with a full tech stack covering the supply side, like ad serving and auction tech, and a campaign manager for the demand side.  

The demand would then flow through a single provider and sales force to that retailer. The downside of that model is it doesn’t scale well. As a retailer, you’re committing to one tech stack, which creates a lot of friction. In contrast, the programmatic industry allows for working with a multitude of SSPs and ad exchanges, with hundreds or thousands of DSPs delivering demand, resulting in less friction.

Retail media hasn't been very efficient. For example, Amazon holds around 38% of the US market share, but its share in retail media is 75-78%. The others are underrepresented, and we need a more democratized ecosystem. This means as a retailer, you should be able to choose multiple ad server companies and work with anyone to funnel in demand. For brands, this fragmentation means they have to deal with many different sellers and platforms, which is cumbersome. A more seamless world would allow brands to choose a favorite DSP or campaign manager tool and get access to any retailer.

Q: So exclusive contracts on the retailer side are just detrimental to the industry's growth?

Andreas: Yes, and we will see a more seamless, democratized approach going forward. That's what Pentaleap stands for, and that's what we're trying to establish.

Q: Why is Amazon so dominant--with 75% of retail media spend?

Andreas: There’s no simple answer, but one factor is size. Amazon should have around 38% of retail media in proportion to their market share, but they have nearly double that. Amazon's size means there's no way around it for brands; it will play a major role in any channel mix.

Whether you like Amazon's sponsored products or not, the reality is people still find what they’re looking for, similar to how Google and Meta have scaled up ad inventory while keeping users satisfied. Many other platforms struggle with this balance.  

Often, what we see in the market—and part of our value proposition—is that users don’t click on sponsored products as much as they do on organic ones.  

Retailers can make ad revenues from sponsored products, but they may damage their conversion rates and retail margins, which can outweigh the benefits.

The only solution is to make ads more relevant and personalized. In the last few years, we’ve seen Amazon lead, and Walmart has developed strong capabilities too.

Q: In the last three years, we've seen many other retailers create their own retail media networks, right?

Andreas: Yes, Walmart has caught up quite a bit. They've built in-house tech and followed a similar playbook. Also, if we look at Google's playbook, you see a trend where the cost per click (CPC) has decreased annually, except during COVID, while ad revenues have grown. They achieve this by expanding ad inventory. Walmart is on a similar track but still has a significant disadvantage in e-commerce compared to Amazon.

Other retailers, particularly in Europe, have started their own retail media networks, but they’re realizing it's not as easy as it seems. It looked like low-hanging fruit, but copying Amazon’s model won't scale or close the gap. We need more syndication or a frictionless industry similar to programmatic. Brands dislike fragmentation, while retailers want money from brands they have relationships with. This desire for one-to-one relationships doesn’t work for brands, so there needs to be a way for them to access budgets more efficiently.

Q: Google and Microsoft haven’t come up much in retail media conversations I've had. What's their role in this?

Andreas: It’s an interesting situation. Google tried to make an impact in onsite retail media tech but never quite succeeded. As search within retail media walled gardens grows, and search on Google properties slows, it would make sense to target that inventory. With more programmatic tech, accessing retailer-side inventory will be much easier. Our product, for example, comes with APIs, so anyone with demand can connect easily. This change has been slow due to power dynamics, but it's evolving just like it did in programmatic display.

Q: Can you define the current state of brands and retailers in this scenario?

Andreas: Many brands and retailers are unhappy today. Brands find it tedious to manage, lacking transparency, and complain about "relationship taxes." Retailers feel that ads damage user experience, are distracting, and there’s frustration about fee structures. There's a general sense of frustration that I believe will accelerate the shift towards a more streamlined and efficient process.

How is Pentaleap Solving These Challenges?

Q: How do you envision Pentaleap making a difference in the current scenario?

Andreas: We offer a non-exclusive solution that works alongside existing ad servers or sponsored product providers. There are three major use cases:

1. The Home Depot: They use our APIs to manage a full-funnel offering while retaining control over their front-end and brand positioning. Our Fluid Ad Server focuses on delivering relevant ads to help users find what they’re looking for and this provides superior returns on ad spend. We don't touch the demand side — it’s purely a supply-side solution.
2. A large U.S. pharmacy: They use another sponsored product provider, and we handle only the ad serving. Our Fluid Ad Server ensures that the ads displayed are highly relevant, determining placement, ranking, and the number of ads to maximize conversions and user satisfaction.
3. Staples: This is the most comprehensive use case. They use our supply-side tech for ad serving, manage private markets with our Campaign Manager, and integrate network demand from major retail media networks. They connect other demand sources using our APIs, making it compatible with various DSP tools like Flywheel, Pacvue, or Skai. Additionally, they use our sales support as an extension of their team, to sell retail media, including offsite and email.

In short, our system is modular: retailers can choose to do ad serving, add multiple demand sources, use our Campaign Manager, and get sales support — but it's all optional. It's a menu of technologies and services they can select from based on what adds value to their setup.

In Staples' case, they leverage relationships with vendors and brands through our private market tools while also tapping into national agency budgets in a network. This dual approach lets them balance direct and network demand seamlessly, adjusting as needed without committing to a single strategy.

It’s not a one-size-fits-all solution, but specialized in specific areas. Retailers can integrate our solution where it fits alongside other solutions.

Q:  What key advice would you give a retailer frustrated with their retail media network?

Andreas: Many retailers feel they've hit a ceiling with on-site monetization, especially with sponsored products. While off-site advertising sounds promising because of the unlimited potential traffic, it comes with lower margins and weaker conversion rates. It doesn't deliver the same return on ad spend, and quickly hits its own ceiling.

Looking at Amazon, for example, 75% of their ad revenue comes from sponsored products. This shows that if you want to grow, you need to fix your on-site sponsored products. The challenge is limited site traffic, which can't be easily scaled up.

The solution is to generate more paid clicks by making ads more relevant, which can significantly increase click-through rates. On our platform, we typically see a 3x increase in paid clicks just by improving ad relevancy. This also proves that sponsored ads can perform as well as organic listings.

With this proof, you can justify expanding inventory — moving from showing just 4 sponsored product tiles to 16 or more. This expansion can quadruple paid clicks. So, with a 3x increase in relevancy and another 4x from inventory expansion, you achieve substantial growth.

However, this isn’t easy. Many companies face pushback from data-driven people who argue that expansion without relevancy does more harm than good. That's why you should focus on relevancy first, then scale. This is a proven approach we've successfully replicated…

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Curious to hear more? Listen to the rest of the conversation in the full podcast episode:

Andreas Reiffen, CEO at Pentaleap on The $10B Question: How to Create a Better Retail Media Ecosystem?

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