Retail media remains a bright spot for retailers as sales plateau and margins tighten. Walmart reported its earnings about a week ago, sharing that it grew revenue for its ads business, Walmart Connect, by 26%. Yesterday, it was Target’s turn to celebrate.
Target reported strong overall Q2 earnings and provided updates on the progress of its media network and adtech division, Roundel. According to Target, Roundel, which was one of the first retail media businesses ever, launching over 15 years ago, continues to show strong growth and is a key contributor to the company’s overall success.
Why This Matters:
Roundel drove double-digit increases in the company’s total gross margin and other revenue lines. For the full year, Target projects Roundel will grow in the high teens, following a 20% growth in 2023. Target didn’t provide specific revenue figures on the call, but, did disclose that Roundel generated over $1.5 billion in ad revenue and is set to hit $2 billion this year in their Q1 earnings report.
Per Michael J. Fiddelke, Target’s EVP, Chief Operating Officer and Chief Financial Officer, “Second quarter total revenue growth of 2.7% reflected the benefit from sales in nonmature stores and double-digit growth in other revenue, driven primarily by strong growth in our Roundel ad business.” (Hopefully, given the performance and number of titles/roles had by Mr. Fiddelke, he can take some time off after this report.)
During the earnings call, Target also highlighted the synergy between Roundel and Target Circle, the company’s customer rewards program which boasts over 100 million members. This connective tissue is providing deeper consumer insights for Roundel and its customers, allowing for the delivery of more personalized ads, both on and off-site.
This year has been pretty eventful for Roundel, with several notable upgrades announced so far. The introduction of the Roundel Media Studio, for example, is a self-service tool that lets brands of all sizes engage with Target’s audience and streamline media buying. Moreover, the expansion of Shoppable CTV Formats is enabling viewers to add products directly to their carts via QR codes during streaming. These initiatives are part of Roundel’s strategy to broaden its media network capabilities and enhance accessibility for buyers.
Experts React:
When explaining why retail media is so hot right now, LiveRamp’s Kevin Dunn, VP of Industry Sales, Retail & CPG, recently told Beet.TV it’s really about “brands having “the inherent desire to get closer to consumers,” with first-party data becoming “the most prevalent signal that brands are looking for.”
Our Take:
Looking ahead, an intriguing area poised for media network expansion is likely Roundel’s on-site physical store. In June, Sarah Travis, President of Roundel, shared with Adweek that about 35% of their advertising is off-property through partnerships, while about 65% is on-property. This focus on on-property advertising is a growing trend among major retailers like Target and Walmart. Emarketer identifies the expansion of in-store media networks as a significant opportunity, bridging the gap between digital and offline. Related to that, CoolerX (formerly Cooler Screens) released survey data a few weeks ago that found consumers have a positive view on in-store digital screens with about two-thirds polled saying it supports their shopping experience.
