Episode 103: Andrew Lipsman on retail media trends, Walmart, and more

Summary

Marketecture Podcast: Episode 103 Summary

Title: Marketecture: Get Smart. Fast.
Host/Authors: Ari Paparo and Eric Franchi, Marketecture Media, Inc.
Guest: Andrew Lipsman, Independent Analyst
Release Date: December 20, 2024
Episode Focus: Retail Media Trends, Walmart Strategies, TV Advertising Innovations, and More

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1. Introduction to Andrew Lipsman

Ari Paparo and Eric Franchi welcome Andrew Lipsman, an independent analyst with extensive experience in digital media, advertising, and commerce, formerly associated with eMarketer, comScore, and MPD. Andrew currently runs a Substack focused exclusively on retail media, offering deep insights into the evolving landscape of commerce and advertising.

Notable Quote:
Ari Paparo [03:08]: "I described you as sort of an expert analyst on retail media, commerce media. Is that fair about what you've been working on?"

Andrew Lipsman [03:16]: "I think that's fair. I've been in all forms of digital media, advertising and commerce for quite some time, but those things intersected pretty nicely in retail media."

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2. The Current State of Retail Media

Andrew outlines a robust growth trajectory for retail media, highlighting a 20% year-over-year increase predominantly driven by Amazon (75% market share) and Walmart (10%). He notes that while Amazon continues to solidify its dominance with consistent growth, Walmart has outpaced expectations with a near 30% growth rate.

Notable Quote:
Andrew Lipsman [03:51]: "The state of retail media overall is really strong. It continues to grow 20%, give or take, year over year... Amazon is just more penetrated, more saturated than other platforms."

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3. Amazon vs. Walmart: Market Share and Growth

Andrew emphasizes the disproportionate market share of Amazon in retail media compared to its presence in overall e-commerce (40%). He credits Amazon's decade-long head start and relentless investment in proving return on ad spend as key factors behind its leading position.

Notable Quote:
Andrew Lipsman [04:32]: "Amazon, 75% in retail media, but about 40% in e-commerce."

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4. Opportunities and Challenges for Smaller Retailers

Discussing the "long tail" of retail media, Andrew explains that smaller and regional retailers can monetize their inventory but should avoid becoming walled gardens. Instead, aggregation platforms like Instacart can provide the necessary scaffolding for these retailers to effectively participate in retail media without bearing the full burden of infrastructure.

Notable Quote:
Andrew Lipsman [06:04]: "Most C stores should probably get aggregated and you can do buys across all of that media. It should be a nice little additional incremental revenue stream at a nice margin."

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5. Aggregation Solutions for Retail Media Networks (RMNs)

Andrew highlights the emergence of ecosystem RMNs that aggregate inventory from various small retailers, facilitating easier media buys for brands. He mentions companies like Critio, which focus on aggregating demand and optimizing inventory across multiple retail fronts.

Notable Quote:
Andrew Lipsman [07:19]: "There are actually surprisingly more walled garden opportunities than you might think. That begins with all the big players in grocery... you have to be up to at least 20 and maybe 30 viable players in this game."

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6. Walmart's Strategic Move: The Vizio Deal and Performance TV

A significant portion of the discussion centers on Walmart's acquisition of Vizio, which Andrew deems a "game changer." By integrating Vizio's CTV capabilities, Walmart aims to emulate Amazon's retail media flywheel, combining media ads with commerce to create a closed-loop system that could revolutionize TV advertising into a performance-driven medium.

Notable Quote:
Andrew Lipsman [09:47]: "They have to do it through partnership or acquire inventory. So Vizio was a way to buy its way into CTV... we're entering the era of performance TV."

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7. Attribution and Branding in Television Advertising

The conversation delves into the balance between performance metrics and branding in TV advertising. Andrew expresses concern that a focus solely on performance could undermine the branding benefits traditionally associated with TV, emphasizing the need for a holistic approach.

Notable Quote:
Andrew Lipsman [10:43]: "I worry that once we put the performance blinders on, we lose sight of the branding effects."

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8. Retail Media Integration with Social Platforms

Andrew discusses the convergence of retail media with social media platforms, noting that the combination of robust first-party purchase data and the vast reach of social platforms leads to highly effective targeted advertising. Partnerships between RMNs and social media giants are becoming increasingly valuable.

Notable Quote:
Andrew Lipsman [16:30]: "We're entering into an era where we'll start to be able to attribute a lot of that [retail sales]. So I just think about the types of businesses that will be created out of that and it's... pretty considerable."

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9. In-Store Media Opportunities and Challenges

The potential for in-store media advertising is vast, with retailers like Walmart seeing millions of monthly visitors. However, Andrew notes that the U.S. is lagging behind regions like Asia and Europe, where in-store media is more mature. He emphasizes the need for infrastructure and measurement tools to unlock this market.

Notable Quote:
Andrew Lipsman [19:00]: "We need measurement and all the things that support new ad markets. But these are scaled audiences, they're huge."

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10. Addressing Fraud in Advertising Diligence

The episode shifts focus to the critical issue of fraud within the advertising sector, referencing the Ozy Media scandal. Andrew advises investors to conduct thorough due diligence, emphasizing the importance of verifying metrics and seeking direct confirmations from credible sources to avoid falling victim to fraudulent schemes.

Notable Quote:
Andrew Lipsman [32:08]: "Every time you see something where the numbers don't seem to match the reality in front of your face, just start asking questions."

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11. Applovin's Expansion and Controversies

A significant discussion point is Applovin's aggressive expansion into e-commerce advertising and the strategic debates surrounding potential acquisitions, such as Snap. The hosts explore theories about Applovin's success, including data aggregation and attribution strategies, while Andrew cautions against investing in opaque systems without transparency.

Notable Quote:
Andrew Lipsman [39:18]: "Why you can't see where the ads actually run... you have to know what site and if they're hiding it from you, there's a reason they're hiding it."

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12. Innovations in Retail Media Technology

Andrew praises companies like Maloco for their innovative approaches to retail media, utilizing machine learning to optimize on-site advertising inventory. He underscores the value of outsourcing technical capabilities for RMNs to focus on leveraging existing data effectively.

Notable Quote:
Andrew Lipsman [41:32]: "There's so much unoptimized inventory... that's the easy money for most RMNs and they're not getting it today."

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Conclusion and Future Outlook

Ari and Eric wrap up the conversation by acknowledging the transformative trends in retail media, from performance-driven TV advertising to the integration of in-store and social media platforms. They express optimism about the evolving landscape and the critical role of data and technology in shaping the future of advertising.

Notable Quote:
Ari Paparo [43:25]: "This is a great show. Thank you so much, Andrew, for being here."

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Key Takeaways

• Dominance of Amazon and Walmart: Amazon leads retail media with 75% market share, followed by Walmart at 10%, both exhibiting strong growth rates.

• Opportunities for Small Retailers: Aggregation platforms are essential for enabling smaller retailers to effectively participate in retail media without extensive infrastructure.

• Performance TV: Walmart's acquisition of Vizio signals a shift towards performance-oriented TV advertising, leveraging data-driven attribution.

• Integration with Social Media: The synergy between retail media and social platforms enhances targeted advertising effectiveness through robust first-party data.

• In-Store Media Potential: Despite existing challenges, in-store media represents a significant growth area, particularly with the right infrastructure and measurement tools.

• Fraud Vigilance: Rigorous due diligence is imperative to prevent investment in fraudulent advertising ventures, as highlighted by recent industry scandals.

• Applovin's Strategic Moves: While Applovin shows promising growth in e-commerce advertising, transparency and ethical practices remain critical concerns for investors.

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This episode of the Marketecture Podcast provides a comprehensive exploration of the current and future trends in retail media, emphasizing the critical interplay between big players like Amazon and Walmart, emerging opportunities for smaller retailers through aggregation, and the evolving dynamics of advertising in both digital and physical storefronts. Andrew Lipsman's expert insights offer valuable guidance for industry professionals navigating this complex landscape.

Transcript

[Ari Paparo]

This podcast is brought to you by Azerion. Azerion is one of the world's leading full stack digital advertising partners for 300 plus agencies at 2,500 plus brands. Their proprietary platform called Azerion Infinity seamlessly integrates the capabilities of owned and operated dsp, ssp, DMP and ad server technology to drive incremental performance, value and efficiency across the full marketing funnel. At Azerion they offer custom audience activation, leveraging cookie identity data and contextual signals to gauge users across digital ctv, olv dooh audio in game channels everywhere else. Choose between direct or PMP activation, leveraging world class trading teams to deliver top of plan results or alternatively access audiences through a data connected PMP as a market leader in the sell side curation category. That's Azerion, the sponsor of this podcast. Welcome to the marketecture podcast. I'm Ari Paparo, I'm joined by Eric Franchi and our guest today is Andrew Lipsman. He is an independent Analyst, formerly at eMarketer, at comScore, at MPD and now he runs a substack that's focused entirely on retail media. So he has a lot of really interesting insights about retail media. You can find him@media adsandcommerce substack.com or you can just Google Andrew Lipsman, it'd probably be easier. So Eric, what are you looking to hear from Andrew? A few things.

[Eric Franchi]

So Andrew is really deep in this stuff so I want to just kind of get his take on the ecosystem broadly like the role of Amazon versus Walmart versus this long tail that is developing and like what's the opportunity? I want to hear him talk about TV and I want to hear him talk about the in store opportunity because there's just like so many interesting things in retail media and like there's it's increasingly fragmented and I think he's got a good 30,000 foot view on all of it.

[Ari Paparo]

And then we have the news this week we have a lot of Washington D.C. news which was never fun. And the Aussie media guy finally is going to jail. So that's fun in terms of some housekeeping. So next week is Christmas, we're not going to record an episode. We will be back with our year end predictions and all that good stuff. Probably like the 30th or so sometime right before New Year's we'll probably drop that. So look forward to it. And then I'll be in. Cesar Will you be a ces?

[Eric Franchi]

Eric I'll be a ces.

[Ari Paparo]

Should people like text you and get on your calendar. You know, probably 5 million little startups want to meet with you, right?

[Eric Franchi]

My calendar is absolutely full, but yeah, hit me up if you got something interesting to say. I'll always make room.

[Ari Paparo]

How do you get your attention? You, like, got to see you at the crab stable or something.

[Eric Franchi]

Now the best way to get to me is to hit up Ari Papara.

[Ari Paparo]

No, that is not true. Because that is the most common way to get to you. But it's not the best. It's very inefficient. A lot of loss in that channel.

[Eric Franchi]

DMs are always open, folks. DM0 is open.

[Ari Paparo]

All right, let's get going with Andrew Lipsman.

[Eric Franchi]

Let's do it.

[Ari Paparo]

Andrew Lipsman, thank you for being here. We're excited to hear from you.

[Andrew Lipsman]

Hey, thanks for having me, guys.

[Ari Paparo]

I described you as sort of an expert analyst on retail media, commerce media. Is that, is that fair about what you've been working on?

[Andrew Lipsman]

I think that's fair. I've been in all forms of digital media, advertising and commerce for quite some time, but those things intersected pretty nicely in retail media. I saw what was happening with Amazon about five years ago, picked up the ball on it, and obviously it's grown into a pretty big thing at this point.

[Ari Paparo]

Do you care for the term retail media versus commerce media or you don't care?

[Andrew Lipsman]

I'm all in on retail media. Commerce media has a place, but to me, I distinguish it in being the other forms of commerce, like travel, financial. But you know, to me that the epicenter is always going to be retail.

[Ari Paparo]

Okay, so what's going on? What's the state of retail media right now?

[Andrew Lipsman]

The state of retail media overall is really strong. It continues to grow 20%, give or take, year over year. But that's heavily driven by Amazon, which is like 75% of the market, and Walmart, which is about another 10%. So whatever they're doing is what the overall market's going to be doing. Walmart's been growing at, you know, close to 30% lately. So they're, they're really firing on all cylinders. And Amazon continues to grow up around 20%. Everyone else, it's, it's really a mixed bag. And actually, I would say within the last year, more mediocre stories or signs of flat growth or even some negative growth than I've heard in the past.

[Ari Paparo]

How close are those percentages to their market share in E commerce?

[Andrew Lipsman]

Disproportionate. Amazon, 75% in retail media, but about 40% in e commerce.

[Ari Paparo]

Right. So why are they doing so well?

[Andrew Lipsman]

Well, I mean they've got a 10 year head start on everyone else for the most part. And this is how big platforms work when, when you know you can prove return on ad spend with a very long tailed advertisers, they keep investing and investing until they can't do it anymore or it doesn't make sense anymore. So Amazon is just more penetrated, more saturated than other platforms. But I would say a lot of other retailers have the same potential relative to their scale.

[Ari Paparo]

Does it really matter the market share or is really the question of how much of an individual retailer is margin comes from this source and how that's growing relative to the margin from their traditional business?

[Andrew Lipsman]

Yeah, I mean that's a big part of the equation. So for the marketplace businesses, they generally are going to have healthier margins than most brick and mortar retailers. So the margin profile of ads obviously so much stronger, but it's maybe less accretive there. But for brick and mortar retailers you only have to generate an incremental 1, 2, maybe 3% of revenue before it becomes really meaningful. And in fact Walmart has started to nod to Walmart Connect as being a big driver of their expanding margins in the last few quarters.

[Ari Paparo]

If you're a Walmart, this is, you know, a total game changer opportunity. But if you're like a small retailer, like a Wawa or something like that, isn't every dollar of retail media helpful or is there some problem where you're so small that buyers aren't going to be willing to play ball?

[Andrew Lipsman]

I think there's a very long tail and mid tail that is, I would say they have inventory that is useful and they should monetize, but they should not expect to be a walled garden retail media network. They shouldn't be the front door. If you're a C store, for example, most C stores should probably get aggregated and you can do buys across all of that media. It should be a nice little additional incremental revenue stream at a nice margin, but it's not going to be a game changer for most of those businesses.

[Ari Paparo]

What are the options for aggregation are there? If I had a convenience store, a regional convenience store and I wanted to get some retail media, how would I do that?

[Andrew Lipsman]

Yeah, I mean there's some players sniffing around the space. There's what I call ecosystem rmns. So where you have a lot of retailers that independently aren't big enough to really monetize on their own or be a walled garden regional groceries kind of the big Prize you have a player like Instacart, for example, that's trying to come in and be the scaffolding for all of those players. Help them monetize and obviously take their cut. C stores. There's a couple of players who are also trying to aggregate. They have to act as the data spine and then obviously aggregate all that inventory and make it easy for the brands to buy.

[Ari Paparo]

Did you have any names? Like is Critio a player here or is Critio more hard goods?

[Andrew Lipsman]

Critio definitely aggregates demand and that sort of remains to be seen what part of the ecosystem they'll focus on aggregating.

[Ari Paparo]

What about niche retailers? So let's. Or if not niche, concentrated ones, like if you're Dick's Sporting Goods, you know, those, those brands probably feel that that retailer is very important to them, even if they're not the largest in the world. Isn't that a viable opportunity for both sides?

[Andrew Lipsman]

100%. I mean, I think there's. There's been this idea that there's too many retail media networks and, you know, there's going to have to be this huge consolidation. I will say there are actually surprisingly more walled garden opportunities than you might think. That begins with all the big players in grocery. You're easily at half a dozen or eight. Then all the category leaders. So Dick's Best Buy, Home Depot, all of these are players that are very, very relevant and should be the front door for buys within advertisers in their category. You got the commerce intermediaries like Instacart, DoorDash, Uber. It's actually not hard to get up to at least 20 and maybe 30 viable players in this game and then the rest, you know, ultimately kind of become that dumb inventory.

[Ari Paparo]

Right. Or maybe they glom on to one of their competitors. Maybe a local sporting goods could participate in Dick's Marketplace in some way.

[Andrew Lipsman]

Yeah, and that's an opportunity for some of these category leaders is is they can then become this scaffolding for everyone else. So it'll be interesting to see if some of them go in that direction.

[Ari Paparo]

But what are the challenges these retailers have? Like, a lot of them aren't staffed to do this sort of thing. So what are you seeing in the marketplace?

[Andrew Lipsman]

They are not media companies. And so it's not a core competency. The organizations live and breathe retail and many cases don't get media. The ones who are getting it and building nice organizations at this point have been at it for quite some time and had stumbles along the way. I mean, Walmart Connect, like I said, is doing great now, but they were stumbling for years before they started to figure it out. So I think every RMN really has to go through that process. And then talent, I mean there is, there is a scarcity of talent to staff all these. You have a lot of RMNs right now that frankly don't really have very many media and advertising people today. So I think some of them are going to have a tougher road than others.

[Ari Paparo]

While you were on Walmart, the Vizio deal closed, I think last week. What's your take?

[Andrew Lipsman]

Oh, biggest news story of the year in retail media. I think it was super smart strategically. They've been kind of modeling what Amazon has built. Amazon's built this unbelievable retail media flywheel based around media ads and commerce. And the one piece that retailers tend not to have is the media component. Right. And that really helps give you that scale. So they have to do it through partnership or acquire inventory. Amazon has more of its owned and operated inventory. Walmart doesn't quite have that yet. And so Vizio was a way to buy its way into ctv. They're obviously partnered with Disney and NBCU as well, but they have great data to be able to plug into high quality inventory. And when you bring that closed loop apparatus to, you know, traditional TV buys, I mean, I think it's going to completely transform TV. We're, we're entering the era of performance TV.

[Ari Paparo]

Do you think attribution's the key lever there?

[Andrew Lipsman]

100% right. Dollars follow attribution all the time. This is the story of digital and we've never seen, I think, the level of disruption like we're about to see. And for good and bad, one of the things is that dollars will follow those attribution metrics in tv in consumer goods, for example. What I worry about is TV really work from a branding standpoint. And I worry that once we put the performance blinders on, we lose sight of the branding effects. And I just think that's so critical to these upper funnel media.

[Ari Paparo]

One thing I made the point on this show probably a couple times, I'm wondering, your take is that Amazon obviously amazing assets, especially Fire tv, but Whole Foods doesn't fit very well because Whole Foods doesn't carry a lot of mainstream brands. Agree, disagree, agree.

[Andrew Lipsman]

I mean, Amazon Fresh, that concept was built, I think, primarily for the purposes of advertising. Bury those national brands so that they have that offline data to power their advertising apparatus and then see the attribution. That's why they had to have everything understood at The SKU level. And so they were also building in store media into those stores. Now those stores have stumbled and they've had to retool and figure it out. They haven't been able to scale like they wanted to. So what's their scale footprint today? It's Whole Foods. So they're actually doing a lot more in store advertising there. They're just limited in the number of brands.

[Ari Paparo]

Right.

[Andrew Lipsman]

They're not going to be advertising Coke.

[Ari Paparo]

Yeah. It seems like if they could wave a magic wand and have Publix or Safeway instead of Whole Foods, they'd be in much better position.

[Andrew Lipsman]

It would be a much smarter play. I agree.

[Eric Franchi]

We go back to TV for a second. You made an interesting point where it's like good and bad, if performance marketers figure out how to make TV work and start pouring money into it. As a, you know, maybe more for you, Ari, as a, as a programmatic purist, does this matter? Right. Like will the highest yield win? And maybe it will be brand, maybe it will be performance. Like what's, what's your take on that?

[Ari Paparo]

My take is there are some disadvantages to the brand side because the data feedback loop is so much slower. Right. So you would. You always have to have some measure of faith or estimation when you're trying to, you know, build a new brand or raise awareness. Might take weeks to figure out if it works. Whereas direct, you have much faster feedback loops.

[Eric Franchi]

Does that make measurement like MMM companies in that category that much more interesting in this new era? Does it make new metrics like attention we've been talking about, does it give some tailwinds to that?

[Ari Paparo]

Yeah, I want to hear Andrew's take, but my just quick take is that MMM is the slowest of all the measurement opportunities out there. You're talking about annual reviews in some cases. Right. So that sort of is related to the point I make.

[Andrew Lipsman]

Yeah, I mean, I just. The. The basic attribution window that we've had in digital advertising, it's got to be a little bit longer by default for TV because you can't transact right away. So it's going to probably be at least a week and, and longer in most cases. I think that mechanism alone, all the other things you mentioned are going to continue to be important now. One of the reasons I'm so optimistic on performance TV and why it's such a big market opportunity is TV has always been the domain of major national advertisers for the most part. We've never seen the SMBs partake in TV advertising in the past and I had this kind of light bulb moment a year or so ago. I was watching Amazon Free V for the first time. I was watching Jury Duty and I started to see a bunch of my ads were for like pet brands and specifically dog that have a dog. So I was like, oh, they're definitely targeting me as a dog owner. And then I started to get some ads for independent brands of dental dog chews. And I looked it up, I was like, they're not owned by Nestle Purina or any big marketer. And I realized all of a sudden this advertiser would never be advertising on tv. But they're being brought into the fold and especially with creative services and things that an Amazon can enable, I just think the threshold is much lower. And all of a sudden we're just going to see this massive long tail enter into tv. And tv like advertising?

[Ari Paparo]

Yeah, absolutely.

[Eric Franchi]

It's an exciting time.

[Ari Paparo]

Both Eric and I have invested in that area as well. It's just the, the creative side has always been the challenge for TV advertisers. I mean think about all the cheesy, you know, cheesy commercials that the local cable spots would make. And that's an example of how the barrier to entry was for local advertisers, small advertisers. And AI goes a long way to solve those problems.

[Andrew Lipsman]

Yeah. I'm not a big fan of the potential of Gen AI to create great creative, but if you haven't ever been doing video creative and you just need something that passes a minimum bar, I think it can absolutely do that for some of these brands.

[Ari Paparo]

Yeah, I think that's right. And they could grow into larger budgets as well with real production values. So what's going on in social? How does social play into retail media? You know I as a TikTok user here and there, not a producer, but I look at it and there's so much crap being sold, there's so much stuff that's commercially oriented. Is that part of the equation here?

[Andrew Lipsman]

Yeah, I mean retail media is part of a bigger conversation around the convergence of media and commerce. And so we're seeing it on social platforms. I think where retail media plugs into social media. It's pretty interesting because one of the reasons why retail media is valuable is in most cases what people are shopping for and buying is it's the best data, the best first party data to use for targeting. And then obviously the platforms have the scale. So you bring those two things together. As long as you're reaching real inventory, you're going to get high performing media. So I think that's why you're seeing a lot of these RMN and social media platform partnerships.

[Ari Paparo]

Well, is it fair, I'm just thinking out loud here, is it fair to say that like a lot of commerce that happens in social media is like the TEMU kind of stuff like you know, direct to consumer, you know, dropship, stuff like that, but there's an opportunity for it to migrate to being real products that are fulfilled by traditional retailers.

[Andrew Lipsman]

Yeah, I mean we've seen the DTC trend for years so that's already been happening. I just think it can take a step up in terms of better qualifying audiences based on other mechanisms, other forms of targeting and we'll be able to understand better where the transaction happens. And so one of the things I think about a lot is some of the biggest companies today, Amazon, Google, Meta, they have these huge valuations and it's primarily derived from e commerce sales. There's the other 85% of retail sales that are happening in stores and they haven't really been well attributed yet. We're entering into an era, retail media is going to be at the center of it where we'll start to be able to attribute a lot of that. So I just think about the types of businesses that will be created out of that and, and it's, it's pretty considerable.

[Ari Paparo]

Well that's really bullish for the big tech companies because only you know, was it 10, 20% of all commerce in the US is, is E commerce. So if that went up to 70 or 80% or if they influence 70 or 80% that would make their businesses three or four times larger.

[Andrew Lipsman]

Yeah, but they, they also, their disadvantage in most cases is that they don't have that visibility, they don't own that data. They don't have the best data anymore. Right. Behavioral data was, was the dominant form in the last era. Commerce data is in the next era. So Amazon, yes, they're well positioned but Walmart, Kroger, all these huge retailers have enormous amounts of purchase data.

[Ari Paparo]

Right. You know this is a little off topic but any take on the Chick Fil a app that was reported to be developed that's all like, I don't.

[Andrew Lipsman]

Know, entertainment, you know, convergence of content and commerce. It's maybe it's a sign of things to come? I think probably not. I think they'll probably walk away from it soon. Problem with all these things is like it's hard to get people to consume content. There's so many choices and it has to be good. You know, Quibi was very.

[Ari Paparo]

Well, Quibi was a good idea. Quibi was a good idea.

[Andrew Lipsman]

It was more expensive and guess what? The content didn't, didn't pass muster. So they didn't get an audience.

[Ari Paparo]

I love Quibi. What's going on in the physical stores? What are the advantages to retail, to having physical stores and what are they doing?

[Andrew Lipsman]

Well, they have a huge opportunity sitting in front of them that they've been I would say poorly capitalizing on to date for in store retail media, in store digital ads. I mean to me this, it's like staring everyone in the face that this should be one of the best forms of advertising of all time, right? You have the potential for high quality media close to the point of purchase where most purchase happens. Why wouldn't brands want to invest there? It's getting off the ground very slowly. It's only a few hundred million dollars market. I don't see any reason why it shouldn't be tens of billions in the coming years. A lot of infrastructure needs to come in. We need measurement and all the things that support new ad markets. But these are scaled audiences, they're huge. Walmart gets 200 million people a month, target another 100 million. These are broadcast level audiences. And you know, TV dollars haven't had somewhere better to go for a long time. I think this is a place where some of those TV dollars should frankly move into.

[Eric Franchi]

What is the format that you think wins? Is it just TV ads on screens at the point of purchase? Like what, how are you thinking about it?

[Andrew Lipsman]

Not at all. It's short form attention. So you know, you're always going to want to have contextually relevant creative over time. But like what's the, what's the right creative? If you were just to repurpose something that already exists, it's probably something closer to TikTok ads, short form video, you know, eye catching, you know, put the brand front and center, make it quick and just create that momentary desire or awareness before they might actually purchase. Over time I think you'll be able to do much more creative things across multiple screens in the store that take full advantage of it. But I think there's a quicker path here to pretty effective creative store.

[Ari Paparo]

These are like end caps, you know, shop check out screens, things like that, all the above.

[Andrew Lipsman]

You can have them at the store entrance, you can have them deli counter, pharmacy, around the store periphery. And the funny thing is the US is so far behind the rest of the world. Go to Asia, Europe, you know, Tesco is A great example in uk they've got screens all over the place, really nicely executed and I think it, it's going to mature into a great business for them. You know the big retailers here, they haven't done it yet. Walmart, they're starting to talk more about in store media but their two primary placements right now are at the self checkout screen which is pretty late in the purchase process, and the TV wall which is kind of nice, maybe for non endemic advertisers, but if I'm a CPG brand, it's not the first place that I'd want to be buying ads.

[Ari Paparo]

Any thoughts on that disaster that I forget the name of the company? The disastrous thing with the screens that showed you what was in the. In the coolers.

[Andrew Lipsman]

Cooler screens. I worked there briefly.

[Ari Paparo]

Oh you did? Oh yes I did.

[Andrew Lipsman]

I remember getting there for a hot minute in 2021 and part of it was, you know, being attracted to the thesis of the potential of in store ads. I think the key learning out of that is it created a issue when, when you have a surface consumer experience. Consumer experience, yeah. And you can't disrupt that. For in retail, when you have an opaque surface in between the consumer and the product, it can create a problem. So big, big learning. There's lots of surfaces that won't disrupt the consumer experience and I think they'll do just fine.

[Ari Paparo]

Last question. I had an interesting conversation with Guy from Doordash at Advertising. We interviewed him and I thought it was interesting that they're committed to a CPA model and I think a lot of the other retail medias are more of a CPC model. Can you give us some thoughts on that? Am I right? Are there trends? How, how should we think about that?

[Andrew Lipsman]

Yeah, yeah. Everyone may have to try and have a different playbook. I think Doordash is unique enough and they have a certain set of advertisers that they're really strong with where, you know, these are local restaurant merchants and they're not used to spending ad dollars and so kind of makes sense for DoorDash to just de risk that for them with the CPA model. You know, they, they may have opportunities to provide different options. Most of the other retailers are going to kind of follow the same script. You don't want to be too unique or you just become harder to buy.

[Ari Paparo]

Right. But most commonly it's a CPC model.

[Andrew Lipsman]

Most commonly, yes.

[Ari Paparo]

Yeah. All right. On that. I think we're going to call it and take a break and we'll come back in a minute with the news of the week. A lot of interesting stuff going on in regulatory and in Washington D.C. so Andrew, thank you for sharing your retail media insights.

[Andrew Lipsman]

Thank you.

[Ari Paparo]

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[Eric Franchi]

And we're back. We got a bunch of news this week, actually a lot more than usual out of D.C. and the regulatory space as well as some stuff around Applovin, Apple, maybe a little bit more if we have time. Ari, you started off the week with a cryptic tweet saying something to the effect of there will be news. Yeah, I was all excited. And was that news delivered? Did you expect something around Google antitrust or something?

[Ari Paparo]

Yeah, so there's a lot of buzz I was expecting. It's Thursday, we're recording this so maybe by the time you hear this the news will be different. But a lot of folks are expecting both the US and European anti decisions to drop this week. You know, people don't pay enough attention to Europe because Europe just does whatever it wants. But the European Union has pretty much already found Google to be guilty. They don't use the word guilty but you know, there was findings that they were a monopoly and there was a rumor. Reuters published a story in September that Google had already offered to spin out Adex as a separate company to make the Europeans happy. So Google would only do that if they already felt like they were really back against the wall and they're negotiating. So. So the European final decision, which they even have this graphic that's really comical of a scissors cutting off Google's publisher ad server that they posted as for the use of the press, you know, it's like the silliest little graphic that's a graphic. Yeah. So they're pretty serious I think. I don't have Any information that it will come out this week, but I had heard that it might and the US Antitrust. We know that the judge said specifically she wanted to get out before the end of the year and there's not much time left for that. So I'm waiting, waiting, waiting. Check. Refreshing Twitter, hoping for some news.

[Eric Franchi]

We might have an emergency pod.

[Ari Paparo]

If that's emergency pod, expect it.

[Eric Franchi]

Get ready, people. Andrew, just out of curiosity, have you been tracking this stuff to the degree that we have?

[Andrew Lipsman]

I'm trying to stay out of it as much as possible.

[Ari Paparo]

That is smart. I wish I had chosen that six months ago.

[Eric Franchi]

Oh, yeah, I can respect that. Okay, let's move on then. We'll continue to wait. More out of D.C. so apparently Jim Jordan is investigating Omnicom Interpublic's proposed acquisition merger because of their involvement in Garm. So this was a little weird. Funny enough, the New York Post broke the article, but effectively they're investigating this and trying to make sure that the two companies didn't have any involvement in Garm because I guess, you know, kind of like extrapolating what could happen if these are now, you know, effectively the largest agency in the world and has ties to Garm and it's, you know, proposed or supposed support of left leaning versus right leaning sources, there could be bad things to come from a media investment standpoint. Is that basically the concern here?

[Ari Paparo]

Yeah. Jim Jordan's been advocating this right wing talking point that their voices are being suppressed by social media and by groups like Garm, which doesn't exist anymore because the actual most powerful person in the world, Elon Musk, destroyed them. And so I think the lesson here is you may want to stay out of politics, but politics is not going to stay away from you.

[Eric Franchi]

That's right, yeah. I mean, how much of a thing is this? Because Garm is no more. Right.

[Ari Paparo]

Look, I think that the policy of the incoming administration and the Republicans not to get all political here, but they're going to treat the media like a whipping boy and get it to do what they want. They work the refs. That's what it's called, they work the refs. They know the media has a big influence, so by constantly harassing them, and by the way, Disney and ABC just gave up on a bogus defamation suit against Trump and ended up paying him $15 million as capitulation. So there's a clear trend here where the media feels like they have to do what the incoming regime wants them to do.

[Andrew Lipsman]

It's absolutely working. The refs and Getting everyone to capitulate. And guess what? It's working because they've already had the biggest CEOs in the world kissing their ring.

[Eric Franchi]

Yeah. Okay, I guess we'll just keep going on this front. The Supreme Court agrees to hear the case over the TikTok ban. So this thing is heating up. What's your take, Ari?

[Ari Paparo]

Yeah, so TikTok lost their case to stop the ban from happening. This is an interesting legal case between the balance of free speech versus national security. I've listened to other podcasts where they know more than I do, where they've said that usually national security wins these kind of arguments and that the Supreme Court is pretty hesitant to overturn a bill that was signed by overwhelming majorities of both Congress and the president. So it's interesting that they took the case in the first place. They have not made a decision. They're doing this on a fast track because I think the deadline is January 19, exactly a month from now than when it's supposed to take place. So it's pretty interesting that they took it. And I think the other thing is that Trump has been saying things which are kind of reconciliatory a bit towards TikTok, not totally saying what he's going to do, but he's not on the warpath trying to execute this law and kick them out. So it's a pretty interesting mix of feedback that we've heard so far.

[Eric Franchi]

And timing. Right. Like January 19th versus January 20th.

[Ari Paparo]

I think they made that on purpose. I think Congress really, like really did some rat effing on this one. You know, they wanted to make it after the election but before someone had to take blame for it.

[Andrew Lipsman]

Can't. I think Biden can punt it down the road a few months though, right?

[Ari Paparo]

I'm not sure he can. I think it actually is supposed to happen on January 19th. Wow.

[Eric Franchi]

That'S so crazy. All right, one last non ad tech, but maybe ad tech related thing that we should, we should talk about here. So, Ozy media, this case has been out there for some time. The CEO, his name is Carlos Watson, he was sentenced to nearly 10 years in prison, found guilty of conspiracy to commit securities fraud, conspiracy to commit wire fraud, and aggravated identity theft in practice. And this story is wild. Folks should read some of the coverage of this. As part of their raising money, communicating to investors, trying to raise more money, they lied about everything possible in their business. How much money they raised, how much money they had committed, how much revenue they had pending. They even impersonated a YouTube exec on a diligence call with investors. As an investor, I'm glad to see this happen because this is just like unacceptable.

[Ari Paparo]

All right.

[Eric Franchi]

I'm speaking till snap. I cannot believe this actually happened. And I'm happy that he was found guilty and is going to prison for a long time because we can't allow this stuff.

[Ari Paparo]

I just love the fact that he joined a conference call and changed his voice. Like, yeah, actually I'm from YouTube. I love Ozzy. It's the funniest part of this whole.

[Eric Franchi]

Story and that's conspiracy to commit wire fraud right there. Folks do not do this stuff.

[Andrew Lipsman]

The signs of this when I look back actually were evident years and years ago. I was at comscore and I had a lot of journalists asking me. They were obsessed with Ozzy media and asking for their numbers and stuff. And I just remember I was like, what, what is the hype here? I've never seen this come up in, in a social media feed. I have no knowledge of this brand whatsoever. And it was obviously something in media circles. And then the numbers started to inflate, but it never really matched reality. Every time you see something where the numbers don't seem to match the reality in front of your face, just start asking questions.

[Ari Paparo]

Yeah, that's always a sign. So Eric, how do you avoid intentional fraud in diligence? It's very easy to find mistakes in diligence, but when someone is really trying to deceive you, it seems very difficult to find in the sort of diligence that you would do in an investment.

[Eric Franchi]

Yeah, I mean this is the biggest nightmare for an investor from our perspective and in our process, it's a couple things. Number one, I think being so sector focused, we have a bit of an advantage here because we're close to everyone and we can do real diligence. We would in this case know the person at YouTube and call them personally on their cell phone versus asking the CEO for the phone number of proposed YouTube execs. So I think number one, from our perspective, like you need to get as close as possible to the source of information. Number two, I think in as I've found in diligence, oftentimes venture capitalists are fairly like lightweight in terms of what they ask for. So like actually seeing contracts, actually seeing bank records, like having that in a data room, I think something like this should be a wake up call for folks to make that standard operating procedure.

[Ari Paparo]

I think especially later rounds, if you're B or C investor, you've got to see that stuff.

[Eric Franchi]

Yeah, for sure. And again I think some of the larger investors they just make the standard operating procedure.

[Ari Paparo]

But what Andrew says, so true. If you see a publisher or a publishing group that's climbing up the charts as huge numbers and you've never seen it in the why you've never read an article from them or watched a video from them, it's a huge red flag. Absolutely.

[Eric Franchi]

Like just think about the, you know, just the NFA and you know, kind of like the way that traffic is, is bought and you see this just like weird metrics on a site you've never heard of and it's got such low traffic but just like high referral to your campaign. This stuff is just like really easy to weed out.

[Andrew Lipsman]

This is the story of digital advertising. It's gaming metrics. So much of it is built on game finding ways to game metrics in some, some cases are worse than others.

[Eric Franchi]

Yeah, well you know, do this and go to jail. Anyway, let's shift gears. Applovin. We've been talking about Applovin for some time now and there was a really good BI article shout out to Lara just talking about like why is it so hot? Some of the questions around it and then there's an interesting theory about an acquisition that they should make. So background here. Applovin has been on an absolute tear with their core business for a year now. Recently they started basically like opening up their inventory to non endemic for them endemics are just like game developers started opening up their inventory footprint to E commerce advertisers and it's been going great. So according to the article they're offering like a free credit program of like $10,000 if a brand has the capacity to spend up to $20,000 per day. So targeting like big E comm spenders and according to some of the data it's working. So there was some data actually ironically from a portfolio company of ours. Prescient AI said that AppLovin delivered a 1 1/2 times higher return on ad spend for its customers that were testing this than Meta and Google AdWords on average. And the top spenders are spending 25 to 30% of their budgets on Applovin something that again this company hasn't seen before except for something like TV where brands will intentionally bulk up spending over the holidays. So it's a unique inventory footprint, it's a scaled inventory footprint. It's working for E Comm. So you're kind of thing one, thing two the theory that this article pointed out is they need to you know, go beyond the App inventory footprint. So they floated the idea of Applovin buying Snap, which I thought was like a potential like killer move and something they can very easily have the capacity to do. So number one, what do you think about this product of basically taking Applovin and its core business opening up to E comm? Can this continue to scale? And then number two, Applovin buys Snap. What do you think of that?

[Ari Paparo]

Well, Snap's controlled by Evan and he hasn't shown any interest in selling in the past. So I mean, it's good to speculate, but it's up to Evan if he wants to sell or not. So Applovin is kind of the talk of the ad tech Twitter types and people back channel to me and they're like, hey, can you get on the phone, I need to talk to you. And then they have some weird conspiracy theory about how Applovin works. So let me summarize the theories that are going around. None of this is no facts. These are just rumors are going around and I will order them in least to most offensive. The least offensive is that they're just running an ad network model and they share their data between clients so that when one customer gets results in E commerce, they could just start showing ads for the other customer to the same users, the same apps. And it's sort of a co op. And there's nothing wrong with that as long as you're okay with your data being used to help your competitors and they have enough scale to make it work. That's like the most innocent explanation for how Applovin is working. The slightly more sinister is the same thing, but they're extensively fingerprinting people. So fingerprinting is not allowed in the Apple ecosystem, but Apple does not enforce that in any way. And that puts Google and Facebook at a disadvantage because Google and Facebook are not willing to do it because they don't want to get into a multitrillion dollar lawsuit with Apple. But someone like Applovin could take the risk and they do it extensively. And so they have an information advantage over the big guys because they're willing to do what they're not willing to by policy. And then the most sinister explanation has been going around on Twitter a bit is because Applovin owns Max, which is effectively what they call on mobile the unified auction. But really it's like a header bidding wrapper. They get information from all the bidders that are on the apps and they're somehow using that to either steal data from people like Facebook or more likely just game Attribution so that they know which users are likely to convert based on who else is bidding and they just like trail the wake and show ads to those users and get some credit. Those are the theories going around as to applovin success.

[Andrew Lipsman]

I'm going to jump on that last one because that's where my head was kind of landing is. It's just another, could be a version of gaming attribution. The first thing for me was, well, first off, it's starting to become a retail media play, right? Because they're getting into E commerce. I had to start paying attention. $100 billion company based on the mobile advertising market, like right away something doesn't smell right to me because mobile advertising is by far where there's the most fraud, most impressions that might take credit for attribution. And so that's where my initial skepticism comes in. And then if I'm understanding correctly, it kind of sounds like a vmax sort of mechanism where it's a black box. I don't know why any advertiser would ever put their money into something where they can't see where the ads actually run. You have to know what site and if they're hiding it from you, there's a reason they're hiding it from you. So I just think everybody should think twice before they put any money into a black box.

[Eric Franchi]

Uh, let's talk about this. So from what I understand, it's pmax like in terms of it's a kind of like set it and forget it performance algorithm campaign. I'm not sure if brands get reporting over like where the ads are actually running within the various apps sort of Thing one and maybe somebody can, you know, point that out to us. Thing two is, from what I understand, the unit itself is a full screen interstitial type of unit. When somebody is playing a game, they have a template where it's, you know, like a video plus, you know, click here, call to action, buy the thing immediately. So I can imagine a scenario where this is actually working, right? People, you know, see something cool, it started well to them, they buy the thing. I think, Andrew, your point is, should Applovin, you know, get all of the credit for this or was just this, you know, the last exposure that ended up kind of putting them over the line?

[Andrew Lipsman]

That's the strongest case in my opinion, which is that it is a unique unit that could potentially be very effective.

[Eric Franchi]

I've seen it. Yeah, yeah, I've seen it.

[Ari Paparo]

Well, I mean those units have been around forever though. I mean, at beeswax we were buying full, full screen, interstitial rewarded, you know and IDFA still existed back then and no one could get performance like the performance in mobile. Open performance was like the hardest nut to crack for anybody.

[Eric Franchi]

Yep. Again bull case is this is a highly engaged user base. It skews, you know, a little bit older. Right. People with money, a little bit female. And if you read the bi article which again you know, everybody should read if they, if they can, they point to like beauty brands and female focused brands like pouring money into this thing. So again that's the bull case. I totally understand where you guys are both coming from in terms of the, the details here.

[Ari Paparo]

I think one of the more interesting companies we don't talk about a lot is Maloco. Maloco is not an ad network. I don't think they're running a mobile install dsp. And they also have a retail media play that is optimizing bids on retail. Andrew, have you run into their retail product?

[Andrew Lipsman]

Yeah, I know the folks in Maloco, I have to say this is what they're doing with on site in retail media is actually great. There's so much unoptimized inventory, core search, ad relevance, like that's the easy money for most RMNs and they're not, it's like the gold in their backyards and they're not getting it today. So that's excellent.

[Eric Franchi]

What are they doing?

[Andrew Lipsman]

Yeah, it's a machine learning ad tech that basically can take the data on these sites and help them better optimize their inventory and they run through a series of machine learning optimizations that helps them extract the value that's there that they're not currently extracting. Which you know, again this is not their core competency. So most, most RMMs should probably be outsourcing most of their tech. IT insert teams outsource tech.

[Ari Paparo]

My understanding is that Maloco has taken sort of a different approach to the retailer problem where instead of giving them tools to make their SKUs available for bidding, they, they take more of a black box. They're like we're going to build you, you know, AdSense for your site. We're just gonna make the right ads show up and you're gonna make more money. So it's a little bit more, a little less ad serving and a little bit more like, you know, full optimization.

[Andrew Lipsman]

If it's somebody on the site and they convert though, there's I think less room for it to be something where it's just taking credit.

[Ari Paparo]

I'd love to have someone on, I mean I know some people there. We should have someone on from Maloka.

[Eric Franchi]

Agreed. Want to call it there, Ari?

[Ari Paparo]

Actually, I need to give a shout out because Lumen did a deal with IAS for attention measurement and I'm only giving them a shout out because they were pissed off that we had Mark Gilsman from Adelaide on the show and didn't give them sort of equal time. That's not what we're about. But you know, I'm very impressed with Lumen, which is a first party capital company that does attention metrics. They have really interesting product and their arrival of Adelaide. So congratulations to Lumen for doing the deal with IAS and now we're even. All right. This is a great show. Thank you so much, Andrew for being here.

[Andrew Lipsman]

Thanks for having me.

[Ari Paparo]

Yes. And we're skipping next week for Christmas. So we'll be back right before New Year's with our year end wrap up.

[Eric Franchi]

We won't see you next week everybody. Bye bye. Thank you for subscribing to marketecture. New interviews are added every week at Marketing and your favorite podcasting app.

[Ari Paparo]

Thank you for listening to the marketecture podcast. New episodes come out every Friday and an insightful vendor interview is published each Monday. You can subscribe to our library of hundreds of executive interviews at marketecture tv. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv. And if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtech God.com.