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Next in Media
What Happens to Retail Media When Agents Start Taking Over Shopping?
00:25:02
This episode is brought to you by Walmart Connect. From homepage to home improvement. Win Carts and Minds with Walmart Connect. Next in Media spoke with Sarah Hofstetter, chairwoman of Profitero, a division of Publicis, about the haves and have nots in retail media, whether the big players TV presence is going to cause a bifurcation in the market, and what agentic shopping might do to the whole category.
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- [00:00]
A
This episode is brought to you by Walmart Connect. From Homepage to Home Improvement. Win carts and minds with Walmart Connect. This week on NEXT Media, I spoke with Sarah Hofstadter, chairwoman of Profitero, a retail data firm which publicist acquired a few years back. Sarah has a bird's eye view of the entire retail industry, as well as the retail media sector in particular. So we talked about how she sees the category evolving, whether the big players like Amazon and Walmart are putting distance between themselves and everybody else. Sarah also gave her take on Agentix Shopping's potential and what that might mean for advertising. Lots to unpack here, so let's get started. Hi, everybody. Welcome to Next Immediate. My guest this week is Sarah Hofstadter. She is the chairwoman of Profitero. Hey, Sarah, thanks for being here.
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B
Hey, Mike, great to see you. Appreciate being on.
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A
Sorry, I looked it up. You were on the. You were one of my first guests. You were on the show five years ago, so it must have gone really well.
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B
I mean, I haven't heard from you in five years, but other than that, sure.
- [01:06]
A
Yeah. No, I made a point to not do a lot of repeat guests, but you are, so you're one of the few. So that is an honor. But it has actually been way too long. So thank you for taking time out here.
- [01:17]
B
It is truly a pleasure. And for the listeners that did not catch my sarcasm, this is not the first time I've spoken to Mike in five years.
- [01:23]
A
Yes, we, we have. We actually had a coffee recently. We are, we've. We're all caught up. You are in an interesting position because you can talk about the retail media business from a little bit of a different position than maybe someone who's like day to day buying. So I want to get into that. Why don't we just remind people of your company a role. When we talked, you were independent publicist. Jumped in a couple of years later, which shows the power of my podcast, by the way. Tell us about your company, your role right now. Outworks.
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B
Oh, no, you definitely upped my valuation big time. I don't know. I don't know if I would have been able.
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A
I also had Lindy Ocarino on early on and look at her. But that's a whole nother conversation. Anyway.
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B
Wow. Yeah, we could totally change the topic for sure if you'd like, but just to kind of level set. Yes, Profits Hero was originally founded as a software capability specifically to help brands understand how they're showing up on the digital shelf. Whether that's right really?
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A
Before this whole retail media thing was blowing up?
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B
Oh yeah, yeah, it's been around since. The company's been around since 2010. I've only been with about five and a half years. But yes, before retail media blew up it was more of a. It was and still remains to be a digital analytics capability. We've layered on since managed services and strategic council and all that other stuff. But you know, the heartbeat of the company has been data and tech.
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A
I want to get back to that, how things have maybe changed since the publicist deal. But so given your unique vantage point, you know, in this, in this sector you've seen almost everybody realized we've got great data, we've got like low hanging fruit money that we can all go after right away ads on our platforms when people are shopping. Awesome. Now you're seeing the big guys are really trying to talk about being full funnel players, kind of being at the center of everyone's or everything a brand can do or wants to do digitally, I guess. Like is that realistic? Is that, how's that going? Is it only going to be for a small few? What does that look like in your mind?
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B
Well, when you say the bigger companies you're talking about the bigger retail.
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A
I think we're talking about Amazon, Walmart, Target and maybe if that's a very short list, I don't know.
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B
Well, yeah, and are we talking global or are we talking. Are we.
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A
That's a great. I'm thinking we're talking us, but that's. You're right, the answer will probably change if we're talking globally or not.
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B
Well, it'll only change slightly because you know, the trend is our friends and the way people shop is not changing radically country to country. Behaviorally modality, there are going to be nuances, but let's just look at the US just for fun. Yeah, I mean obviously Amazon, if you read the Bradstone books on Amazon, they stumbled into advertising as a revenue stream for them. So gosh, we should all be so lucky to stumble onto billions of dollars of opportunity. Walmart a little bit more considered and thoughtful of it, but you know, also came in different chapters. By the time Covid hit and this retail media thing started exploding, they already had a lot of the infrastructure in place. But what they've done with Walmart, you know, with wmc is nothing short of extraordinary in terms of, in a really short period of time, very short period of time. Not just selling advertising, but the data story of it is pretty remarkable as well.
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A
And there's a subscription service there's all. Yeah, they've, you know, Vizio a million things in a short period of time.
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B
Yeah. And I think Amazon also, when you think about the diversification of advertising, when you look at prime and a lot of the stuff that they've been doing with sports, like what does it mean to do a real top to top with Amazon now versus let's say when set the lair was running revenue. Right. And now what, what is it like to do a top to top with Walmart when set the layers over there.
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A
Yeah, yeah.
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B
It's a very different kind of vibe because the basket of goodies you could be selling, no pun intended, I suppose, is that much wider. Now what does that mean for our target? What does that mean for a Kroger? And frankly what happens when you get to the fourth, fifth or sixth retail media network, let alone the ridiculous long tail. So there's almost like there's the tier one and there's everyone else. It's like the way Social was 10, 15 years ago. Right, True.
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A
I remember meeting with we're going to be the Facebook of this group and we were going to the Facebook of that group. And you really, you're right. The behavior consolidated and obviously the budgets did. When you can have the flywheel thing, it's, it's pretty hard to compete with that. So I mean, I guess that leads to, I feel like I ask this question all the time. You know, people talk about oh my God, there's so many networks, is this sustainable? Are they going to get, you know, tired of this? Not, not tired of making lots of high margin dollars but just running a media business is not these companies core yet nothing seems to change. Like do you think a shakeup is inevitable because of a need for standards or because of the big guys being so much bigger or no?
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B
Well, you know, there's a difference between needs and wants. Buyers would love consolidation. But here's the thing. The people that are buying the media are very rarely the ones that. Not very rarely but certainly are not consistently the same people that are negotiating shelf space in store. And so the, when, when the retailer thinks about their revenue generation, they look at this and say we need more out of the supplier. But when the suppliers like the CPGs are looking at it, they're saying I only have so much money to spend and I don't really want to get into the nitty gritty of the long tail at XYZ Regional grocer. So there's a bit of an odds between both the buyer and the seller of the media. But there's also odds within the brands themselves as to where the money gets allocated. So yes, it would be great if there was consolidation but if you're responsible for, let's just pick a longer tail retailer at the end. If you're responsible for the end to end on meer in store and online, do you want a consolidated that's going to go horizontally across all different retailers? How much does that make your life really easier?
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A
It's Well, I, yeah you're. I, my mind goes towards the typical media buyer we think of has some kind of leverage. I don't know if, if all the TV networks sold different ad lengths they would say no, you guys are, we need 30s, we need some kind of thing. And they would and that would happen. But it's a different dynamic in this category.
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B
Well, there's a smorgasbord of opportunities right now of what you can buy and frankly the retailers that are winning are the ones that are creating the most flexibility both in the ability to buy but also, you know, based on where you are in your journey. So like if you're Walmart, you could be buying in store ads, you can buy it be buying in app ads, you could be buying search, you could be buying display, you can be buying contextual, programmatic or tied to digital shelf signals. There's like all of these other things not to mention now Vizio. So if you can basically say, you know what, like my top three places I'm going to be spending are going to be, let's say, you know, Walmart, Google Meta and Disney. That's the new normal.
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A
That's the list.
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B
Right Banana. Right.
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A
Okay, so then I keep coming back to this. I think there's the, the, the dream maybe of some on, on one side who say Whitney, why don't, why don't all these networks just get together and, or there's the, why don't we use the third party like a trade desk to just roll them all up together or critio or something are either likely to happen given that you just said like these retailers are not necessarily prioritized to play ball together or is it, who knows?
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B
I mean a roll up is certainly a possibility or just an aggregator that makes it easier for the buyer like a credit ho or an epsilon like either one of those I think is a great, is an easier way for people to buy audiences across different retailers. And the trade desk is also a great opportunity because you can do the on and the off site. It comes back to the same question. What's the best bundle. Again, I feel like I've been in this industry a couple of decades, and is that not what we always keep.
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A
Coming back to back and forth? We don't like the bundle, let's break up the bundle. Let's put the bundle back together in every category.
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B
Yes, exactly. Exactly. So do I think that there are those who are aching for consolidation? Absolutely are. But you know, how many people are incented to necessarily do that and how many people are going to be fighting it kicking and screaming, and where does that center of power lie?
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A
Right, okay, so you've kind of hinted at this when this category started to take off. You'd hear things like those that negotiate the shelf space are going to get the priority. And retail media is almost coming along for the ride in some cases, but eventually everyone's going to bring their budgets together and the team's together, and it's all going to be one strategy. Is that realistic? Is that, is that different across the board? Like how? What is it like on the brand side in terms of centralization or lack thereof in your experience?
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B
Well, it goes back to what you were just saying about the, you know, I want the bundle, I don't want the bundle. Break it up. And sales and marketing is a similar kind of environment. Right. So shopper budgets for decades been owned by the sales teams within the brands. And you know, that whole above the line, below the line, basically using the supermarket door as this imaginary line of demarcation.
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A
Who the hell are these ad people? What do they know about what I do?
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B
Exactly. Let me get my floor decals set up in the most perfect of ways. And the fact that these were environments that were seemingly separate seemed to work from a budgeting perspective because it was all about negotiating with the retailer about what was happening in store. Now that we live actually fluid digital lives, the question is not about who owns the money. The question is how attuned to shopper behavior is the supplier is the brand. And then how are they not just organizing around it, but how are they activating against that? And so to me, it's the difference between playing catch and playing dodgeball.
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A
Okay, help me understand. In the theoretical example, you're using the brand. It's not just about spending, it's not about clout, like you said, or who controls the budget. How might their level of being in tune with this data change what they do or not?
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B
Well, if I were to tell a typical, like head of sales at a cpg, if I were to say to him, you know, that end cap that you just paid a ton of money to put up before the super bowl to get people to buy your chips. Somebody in the store just took the whole thing down and put up your number one competitor. They would freak the hell out.
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A
Right. What the hell? That's like everything. It's. I paid for that.
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B
My targets are shot. I am totally effed. Okay. And that is retail search. Every single day or every single minute.
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A
Because there's no permanence. You mean it's just always, it's always changing.
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B
Exactly. So if you're the head of sales and you're selling into the retailer and you've negotiated that, that end cap, shouldn't you also be negotiating your point of discovery online? And so that's where I talk about the mindset. If the person who's negotiating it can't get their head out of their ass on the end cap, the digital end cap being search or display or some element of point of discovery. If you are searching for chips on Walmart, you better damn well be showing up.
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A
And I think you're, I think you're saying that it sounds like certain chip CMOs are in one place and certain or not are still thinking the old way.
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B
Yeah. And is it the CMO or is again, maybe the CMO is thinking like.
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A
That and the CFO is getting in the way or something, or the salespeople, whatever.
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B
Right there. There could be a million different barriers that come up that you, that some are seen and some are just pocket vetoes. So it's an organizational cluster.
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A
So it sounds like you're saying this is all over the map. Like this is not as much as we say. This is all going one direction. It's. It's very company by company.
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B
It is, it is company by company, culture by culture. I surveyed the largest FMCGs about how many reorgs they've had as it related to digital commerce and retail media in the past 12 months. And the minimum is one.
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A
But there's a lot of them are.
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B
Having more than one more in a year.
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A
Yeah, that's. That is rough. And that shows you that they don't know what they. What's right.
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B
And the answer really is it's not about the structure. It's about the mindset and the behaviors. And it's what, what I call habitual connectivity. It's not just about like, oh, we're going to put this team with this team. It's like, how do you actually change habits so that you're not just dealing with things in, in a crisis, you know.
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A
Yeah. And that is probably easier said than done. And some leaders are going to be really good at that and others are going to struggle. What about, okay, what about the agency equation? And like I said, you were, you were an agency person for a long time. Then you were kind of on the outside. You're back in a little bit. Like there were, there were a lot of upstarts who specialized in this category, specialized in Amazon. They got a lot of them have gotten absorbed. And then a lot of the big holding companies had these like commerce practices that do more, way more I think than just buy retail media ads. They're providing services and tech, I guess. Am I thinking about it the right way? How would you kind of describe that category and where it might be headed or where the. How the interest is trying to reinvent themselves around this?
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B
Well again, you know, looking back at history. So let's go back, I don't know, like maybe 20 years when search agencies were the novel thing because people didn't know how to buy search. Like big, big agencies didn't know how to buy search. It's text, it's auction based, it's not for specialists.
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A
Yeah. All of a sudden.
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B
So all of a sudden you're either paying for specialists or you're buying the I prospects. The I prospects, the 360 eyes of the world so that you can figure out how to, how to integrate these quant jocks into old school ad agencies. And you know, and it worked with varying degrees of success, but mostly failure. But what also ended up happening over time is that people got upskilled and the specialization was not nearly as special anymore and talent developed and you got there. And I think the same thing happened with social. Right. Like totally mobile.
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A
Even had a wave there.
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B
Exactly. Oh yeah, we're going to buy this. And these agencies, these specialist agencies get gobbled up if nothing else. And for the talent and the fact that it is a foreign language to people that are looking at things from a bigger budget perspective, commerce is no different. So then the question really becomes are we at that tipping point of integration or not? And how savvy are the agencies that they actually know when and where and how to create? We talk about transactability anywhere. Like when you're coming up with an ad campaign, how are you thinking about all the different mechanisms that you can drive shoppability regardless of where you quote unquot put it in the funnel.
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A
Right. I think you can have the same answer with as the brands. Like would you say that the. This integration slash education Is where it should be or is it, is it, is it evolving? Of course, publicist has got it now, but like is it whole? Is it holding company by holding company?
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B
I think it is holding company by holding company. And it's. But, but also it's about how the client sets it up. What agencies are only a reflection, right?
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A
You can, yeah, you can do whatever you want and then the client has it their way, right?
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B
Yeah. I mean ultimately, I mean sometimes as a partner to my clients, I feel like I'm a child of divorced parents. I got to sit there and tell mommy and daddy like, oh, this one said this and this one said that and they sugarcoat it a little bit for both. Exactly. And then I just get double Christmas presents. But the idea of like how do you think through it? I think it does start with the client, but I do think that the agencies are raising the bar and coming back to the client saying this is what being end to end commerce ready means. Then retail media is just part of that.
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A
That's much more of a consultative thing, right, Than just I'm going to be your buyer or whatever.
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B
Yeah, but I mean, but that's, that's, that's what we should be doing. I mean anybody who's in, in service of, of brands, I mean, what's the like one of the biggest benefits that I as an individual contributor bring. I'm an arms dealer. I talk to everybody. I can tell you all the dysfunctional things that are happening at every cdg, but it's not about what, who's winning and losing. It's like what needs to be true for that organization to be right based on their battle rather than bit. And I do think that's a part of, of your responsibility as a partner to these brands.
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A
By the way, on that note, what you're describing about being really in tune with customer behavior and retail channels and the way they're organized, would you stick social shopping in that group? Should it be? The reason I ask is that you're. You're constantly hearing about how much TikTok Shop has taken off it. It feels like it's another universe than re from retail media for the most part, but I don't know, should those things come together? Are they?
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B
I, I hate to give the classic answer of it depends, but some companies do put social shopping in their retail budget. It's like it interesting that that area social shopping, whether that's TikTok Shop or click to buy ads or just social commerce in general, many companies bucket that into retail media and Others look at it as part of the mess. So, again, I don't know that there's one right answer in this regard. I think it's more a matter of making sure that you're inclusive and that you're thinking about all the different parts of what makes somebody buy or, frankly, what makes people not buy. I'll give you an example. Yesterday, I was in. I was in Target. I was looking for command strips, and command strips in a store could be anywhere.
- [18:32]
A
I don't know what those are.
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B
Oh, those little things that. That, that, like you3m, hashtag client. But, you know, those things that you ha. That you hang on the wall, but then you can pull it down.
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A
Oh, okay. I was. I thought this was a female product. I didn't know, so I was getting nervous.
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B
I mean, that sounds very empowering.
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A
Right? Feel comfortable to talk about that, Please. But I don't.
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B
You know, we. I mean, we could talk about feminine hygiene, but let's talk about financials.
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A
Yes.
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B
So I was looking for command strips. And so now that I've told you the multifunctional use that a command strip has, it could be anywhere in the store. So what happens? I actually. So I walked into a Target. I did not know where the command strips were. They did not have enough associates in the store. I opened up my phone, I opened up the Target app, and I looked, and I was like, command strips. And this is, oh, ILB 10. Easy peasy. I'm in and out in a heartbeat. So what happens? Where does the money for that digital shelf get funded from? Because I could have bought command strips, or I could have said, screw this, I'm out.
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A
Yeah, you could have had a dissatisfied experience and gone right to the, you know, the store or somewhere else or.
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B
Just not block command strips.
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A
Right. Screw.
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B
Like, too fricking hard. Or like, let's say the batteries. Batteries are all over a store. So if I look for batteries and they send me to the toy section where there's an energizer display, or they send me to the electronic section, maybe where there's a Duracell display, boom, I have an opportunity.
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A
Your experiences are divert. Yeah, totally divert.
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B
Right. And so. But the digital shelf doesn't get the credit for that because that doesn't show up on an mm.
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A
That's right. So that is. That is a complicated thing to pull together. So that's the kind of thing these companies are having to try and come up with in their attribution models, in their planning models. That is not easy to master. Okay. Speaking of those two things, theoretically your agent will just do that for you at some point if that becomes a real thing. I've been this like skeptic on this. I mean, it's so early, but this talk about agentic AI and it's going to totally change shopping. And I wondered a couple things. I mean, I guess, are you and your clients a big believer in this pushing for it? And then what does that do to, doesn't this totally blow up retail media? Theoretically, if you don't have all these interactions with customers anymore to advertise to.
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B
Them, I think people are still going to shop. It's a question of how they shop. People are not going to be like, we're still not at that point of going to, you know, going to buy the refrigerators that tell you what to order or just order it for you forever. Yeah, yeah, let's just suspend disbelief and not, not acknowledge the fact that we are, we are not in Justin's world right now.
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A
Okay? Shopping is not over.
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B
Shopping's not over. The question is, how are people shopping? So is search going to be disrupted? Hells yeah. But I mean, didn't we, like, don't we see that today search is disrupted. So if, if, you know, one would say if search is disrupted on Google, search is probably disrupted on Walmart. So I think we have to understand in a world of, let's say Rufus or Sparky or whatever the. I don't know why everybody's naming their AI tools after dogs, but whatever the idea here is, if that is the case and if that's the way people are going to start shopping or the way the retailers start teaching you how to shop.
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A
Yeah. Which has to probably happen.
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B
Which would be, which would basically be, I would like to buy the prompt, what the f should I have for dinner? And that would just be what would I buy? Now, I don't think it's going to be that simple. But you know, there's an accountability both on the agencies as well as the brands as well as the retailers to co create what agentic AI means from the shopping experience. And then more interestingly in my opinion is how do we start using AI as partners to make it easier to deal with things like workflow management, with automation, with fewer handoffs, with saying, you know, putting in a prompt, saying, I want all of my ads to make sure that they have transactability in them, throw that into my workflow and not have to think about IT and hire 17 project managers to go do that. But from a shopping experience, from the perspective of the person who is looking for those command strips, it's most certainly going to get easier. But it might also just put you on autopilot on how you shop and then you go back to sleep shopping, which is no fun job.
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A
Right. And that's where you wonder where, like, do brands get, I don't know, devalued or just forgot about that when you're just, when you go into that, like, I'm barely paying attention mode, that's going to do it in certain categories and stuff.
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B
I think in light of like what's been going on with tariffs and price hikes and all that other stuff that comes back to like just a broader theme that you've always had in your podcast, which is like, what's the value of branding? Well, the value of branding is people waking up in the morning and saying, hey, I want to have Fruit Loops. I don't want to. I don't know who says that, but like, I want to have Fruit Loops versus I want to have fruity circles.
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A
Kids will definitely say that. Actually, I don't want this. Why'd you buy the sheep kind, Mom? That's completely a real conversation.
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B
Exactly. So if we're sitting here and we're having this conversation a year from now, no matter how much eugenic AI is, if you're not going to invest in brands, you're not going to end up being discoverable under any circumstances.
- [23:22]
A
Yeah, yeah. At least for things that people care about, which is most products. Last thing, Sarah, how has your life changed? Like you said, the company was around for a long time. You were there, the whole attorney. It was independent. It's part of publicis. How has it changed in terms of being part of this massive hold of company across all these clients? Full steam ahead. Very different. What's life like?
- [23:41]
B
I mean, one of the things I really like again, I think I called myself an arms dealer earlier. Probably doesn't sound great, but it is what it is. You know, I think I'm able to help publicist clients in the context of the environment that they play in and being part of that whole power of one thing. But I am also independent. In which case, if you know, like one of my biggest clients is Colgate, their WPP shop, I could still be a trusted advisor there. So I guess I get to play a lot of things. But you know, my focus has been on making sure the profiteero has more long term sustainability than not. Like, let's look at those cautionary tales from 20 years ago. All these search agencies getting bought up and devalued. You know, Proptera was acquired for a lot of data and tech. We've got managed services on top of it. To be an end to end commerce player, I want to still be.
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A
You have not been stuck in the basement somewhere and forgot about. That's, that's what's going well about this.
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B
That. Yeah, I think, you know, there was a, there was a lot of value in the decisions that our tour and Dave made and we want to make sure we keep it that way.
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A
All right, well, let's not make it five years next time. Thank you so much for your insights and conversation here and we'll talk again.
- [24:47]
B
Sarah, Amen.
- [24:48]
A
Thanks again to my guest this week, Profitero, Sarah Hofstadter and my partners at Walmart Connect. If you like this week's episode, please take a moment to rate and leave a review. We have lots more to bring you, so please hit that subscribe button. We'll see you next time. For a moment, what's next in media? Thanks for listening.