Retail Media RTB: An $8B Opportunity for Google, Microsoft, and Criteo

Retail media search is fast emerging as a game-changer in digital advertising, offering an $8 billion revenue potential for key players like Google, Microsoft, and Criteo. While Google and Microsoft are just starting to explore their paths into retail media, Criteo's established presence in the space positions it uniquely in a rapidly evolving ecosystem.

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Google's and Microsoft's untapped opportunity

Initially, retail media seemed too small to matter for tech giants. Then, it became a fragmented battlefield of walled gardens. Meanwhile, Google and Microsoft prioritized other pursuits - AI, cloud, robotics, and quantum computing.

Search has always been the golden goose for Google, funding unprofitable business units. But, search revenue growth has slowed, while retail media search will grow at more than 20% annually (Source: eMarketer Forecast, March 2024). In about 5 years, retail media search is poised to surpass traditional search outside walled gardens.

The numbers speak for themselves (Source: Internal Pentaleap Analysis, November 2024) -  

• $50B in non-Amazon and ex-China retail media market size by 2026 (Source: Activate, eMarketer, GroupM, Madison & Wall).
• $40B onsite, with 50% programmatic penetration.
• $20B in programmatic media revenue.
• $8B potential ad revenue (40% margin after traffic acquisition costs).

Google and Microsoft have every reason to act—but neither has a dedicated retail media product today.

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Why they're well-positioned to win

Both companies already manage extensive brand advertising ecosystems, with product feeds and bidding campaigns running on Google Shopping and Microsoft's equivalent. Extending into retail media search would be a natural evolution.

Brands already investing in Sponsored Products are likely advertising with Google and Microsoft. They could leverage their existing platforms to:

1. ‍Allow targeting of RMNs: Enable advertisers to target retail media networks (RMNs) like the search partner network, extending reach across retailer platforms. ‍
2. Simplify campaign activation: Integrate retail media networks into existing ad platforms, allowing advertisers to manage campaigns seamlessly.

The missing link? Retail media-specific RTB standards and new ad-serving technologies like Pentaleap that allow retailers to send ad requests to these platforms in real time. Sponsored products could then appear seamlessly on retailer websites without complex API integrations.

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The role of IAB and OpenRTB in shaping retail media

The Interactive Advertising Bureau (IAB), alongside its IAB Tech Lab, is tailoring OpenRTB specifications to meet the needs of retail media. OpenRTB enables real-time bidding, allowing ads to be auctioned in milliseconds as a webpage load. This standardization enhances efficiency and ensures ad relevancy while helping brands and retailers align on the shopper experience.

Jeffrey Bustos, vice president at IAB, highlighted this effort in his recent article, Democratizing Retail Media Through OpenRTB. Bustos explained how OpenRTB is being adapted to the unique needs of retail media, balancing the technical demands of programmatic buying with the relevance and personalization shoppers expect (Source: Jeffrey Bustos, IAB Tech Lab, 4/22/2024).

Pentaleap's Head of Product, Mark Burton, who is part of the IAB working group, expressed enthusiasm for these developments:

"We're already living with RTB on CVS, Staples, and others. Now, we're thrilled to see this become an industry standard that prioritizes ad relevancy and reshapes retail media."

Hillary Slattery, senior director of programmatic product at IAB Tech Lab, added:

"The refinements to OpenRTB are tailored to account for retail-specific nuances, ensuring ads align with both consumer interests and retailer constraints."

These efforts include updates to the Native API, helping retailers balance relevancy and personalization with scalable programmatic solutions. By aligning ad placement with consumer needs and retailer product offerings, these updates aim to standardize and simplify retail media buying, creating new demand and better yield for all stakeholders.

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A new frenemy dynamic in retail media

The growing adoption of SaaS-based sell-side platforms and retail media RTB standards is creating an intriguing dynamic between established players and new entrants.

Criteo, a key incumbent in retail media, is leveraging its Commerce Max DSP to cement its position on the demand side. As Megan Clarken, Criteo's outgoing CEO, noted during the company's investor update on November 18, 2024:

"Our brands have increased to 3,100, and our activated media spend reached $1.5 billion on a trailing 12-month basis."

Commerce Max saw a 32% growth in Q3 2024, with $130 million in agency spending in the U.S. alone.

Interestingly, Criteo is collaborating with Microsoft to grant access to its retail network, helping brands address fragmentation. However, with the new retail media RTB standards opening up the space, Microsoft and Google may bypass Criteo's systems, gaining direct access to retailer-side inventory and improving their margins.

This creates a "frenemy" relationship: Criteo helps Microsoft and, eventually, Google enter the retail media space by granting access to its retailer network, but at the same time, they'll begin competing directly for advertiser and national agency budgets.

For Criteo, the stakes are massive. An $8 billion opportunity represents the future of its business, while for Google and Microsoft, it's just a "nice-to-have." Similarly, The Trade Desk, which dominates offsite display advertising, has yet to enter the onsite market. While its strengths lie in display, it may struggle to capture Sponsored Products - critical as they account for 70-90% of onsite retail media monetization.

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Challenges in democratizing retail media

The democratization of retailer-side ad inventory will depend on sell-side platforms (SSPs) with thin take rates, making retail media scalable and accessible.

However, challenges persist:

• Category leaders' hesitation: Retailers who dominate their vertical such as Walmart or The Home Depot may be reluctant to open their ad inventory to intermediaries. By maintaining direct relationships with brands, these category leaders can control pricing, visibility, and partnerships more effectively. This reluctance could limit the reach and adoption of middleman solutions in high-value verticals.
• Convenience comes at a cost: While SSPs provide brands with a centralized way to manage campaigns across multiple retailers, they charge a fee for their services. This creates a trade-off for brands, who must balance the convenience of streamlined operations with the added expense of using these platforms.
• Different stock pools: Brands often manage separate stock pools for different retailers and rely on Sponsored Products strategically to address inventory challenges, such as moving excess stock or boosting visibility for underperforming SKUs. Networked solutions often fail to offer this level of precision, reducing their utility for brands with complex inventory needs.

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What's Next?

With retail media RTB standards and RTB-ready ad servers like Pentaleap on the horizon, the groundwork is being laid for Google, Microsoft, and Criteo to shape the future of retail media as early as 2025.

The question isn't if they will act but how big they'll play and how OpenRTB standards will redefine the relationships between these key players.

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