Why Retail Media Networks Are Becoming the Next Big Advertising Channel

Industry & Competitive Context

Digital advertising has historically been dominated by two platforms Google and Meta which built their businesses on first-party behavioral data gathered from search queries and social engagement. Over the past five years, a third category of scaled advertising platform has emerged: the retail media network (RMN), built by retailers on the first-party purchase data collected at the point of sale. Amazon Ads, Walmart Connect, Target’s Roundel, Kroger Precision Marketing, and Instacart Ads are now core profit centers for their parent companies rather than peripheral marketing services.

The scale of this shift is documented in company disclosures. Amazon reported full-year 2024 advertising revenue of $56.2 billion, the first year its ad business topped $50 billion, with fourth-quarter 2024 advertising revenue of $17.3 billion, up 18% year over year. This places Amazon’s advertising segment, on a standalone basis, among the largest advertising businesses in the world, built entirely on inventory the company did not originally set out to monetize as media. Walmart’s global advertising business grew 27% to $4.4 billion in fiscal year 2025 (ended January 31, 2025), with the fourth quarter alone showing 29% global advertising growth and 24% growth for Walmart Connect in the United States. Target disclosed that Roundel, its retail media arm, generated $649 million in revenue for fiscal 2024, up 25% from $522 million in fiscal 2023, and continued that momentum into fiscal 2025 with first-quarter advertising revenue of $163 million versus $130 million a year earlier. Kroger’s management reported on its fiscal 2026 second-quarter earnings call that retail media profit grew 24%, which CEO Greg Foran described as the company’s strongest retail-media profit growth since 2021. Instacart, operating as a marketplace rather than a traditional retailer, reported fourth-quarter 2024 “advertising and other revenue” growth of 10% year over year and disclosed more than 7,000 active brand partners collectively spending north of a $1 billion annual run rate on its platform in that quarter, while also powering on-site advertising for more than 220 retail partners.

Independent market research corroborates that these are not isolated corporate anomalies but an industry-wide reallocation of ad budgets. eMarketer’s 2025 forecast projected that US advertisers would spend more than $62 billion on retail media in 2025, over $10 billion above 2024 spending, with a revised compound annual growth rate of 17.2% through 2028 a figure eMarketer itself revised downward from an earlier, more aggressive 24.1% projection, underscoring that growth remains strong but is normalizing as the category matures. eMarketer separately projected that US omnichannel retail media ad spending would reach $129.93 billion by 2028, and that retail media would account for almost a quarter of all US media ad spending by that year.

Brand Situation Prior to the Shift

Before retail media matured into a distinct advertising category, retailers across grocery, mass merchandise, and e-commerce operated primarily as sellers of shelf space and distribution, not as media owners. Advertising dollars from consumer packaged goods (CPG) brands flowed mainly into traditional trade marketing in-store promotions, slotting fees, and circular placements alongside television and, increasingly, Google and Meta, which offered brands precise digital targeting that retailers’ own channels largely could not match. Retailers possessed an asset that neither Google nor Meta had verified, deterministic, closed-loop purchase data tied to real transactions but had not yet organized it into a sellable media product. Amazon was the first major retailer to convert this asset into a true advertising business at scale, formalizing Amazon Advertising well before competitors followed. Walmart’s effort traces to the 2021 rebranding of its advertising business as Walmart Connect, a name change that marked a deliberate repositioning from an internal marketing function into an externally facing media company. Target, Kroger, and Instacart built out their respective networks Roundel, Kroger Precision Marketing (operated under Kroger’s data-and-insights subsidiary 8451), and Instacart Ads on a similar premise but on different timelines and with different degrees of fourth-party reach into other retailers’ sites.

Strategic Objective

The strategic objective shared across these companies was not simply to generate incremental ad revenue, but to convert data that retailers already possessed as a byproduct of transactions into a structurally high-margin business line that could offset compressed margins in core retail operations. Retail gross margins on merchandise sales are thin and have been under continued pressure from e-commerce logistics costs and price competition; advertising revenue, by contrast, carries software-like margins once the underlying commerce platform and data infrastructure exist. Walmart’s own disclosures illustrate this logic directly: the company’s chief financial officer stated on an earnings call that advertising and membership income together made up slightly more than a quarter of Walmart’s fourth-quarter operating income, a disproportionate profit contribution relative to the advertising segment’s share of total revenue. The objective, in other words, was margin-mix transformation, not merely top-line diversification.

A second, closely related objective was defending and monetizing first-party data as privacy regulation and browser changes eroded third-party tracking across the open web. Retailers sit on a form of data actual purchase history, linked to loyalty programs and payment credentials that is both deterministic and resistant to the kind of platform-level erosion affecting cookie-based targeting elsewhere in digital advertising. Building a retail media network allowed these companies to package that asset for brand advertisers seeking measurable, closed-loop attribution between ad exposure and purchase.

Campaign Architecture & Execution

Rather than a single campaign, what these companies executed was the construction of advertising infrastructure layered on top of existing commerce platforms, extended progressively across three formats: on-site search and display, off-site programmatic extension, and in-store or connected-TV media. On-site formats sponsored product listings within search results and category pages represent the foundational and most mature layer, directly tied to purchase intent at the moment a shopper is already searching for a product. Walmart’s disclosures show this layer scaling rapidly alongside its marketplace business: in the fourth quarter of fiscal 2025, the number of marketplace sellers also advertising on Walmart Connect grew 50% year over year, while US marketplace revenue grew 37% in the same period, indicating that seller advertising and marketplace expansion were reinforcing one another.

The second layer, off-site extension, involves retailers using their first-party purchase data to target audiences on third-party inventory programmatic display, social platforms, and connected television outside their own properties. This extends the retailer’s audience data asset beyond the constraints of its own site traffic, which is necessary for retailers with large grocery or general-merchandise customer bases but comparatively modest digital page views relative to Amazon’s scale. The third layer, in-store and connected-TV retail media, is newer and smaller in absolute dollars but is the fastest-growing format tracked by eMarketer, reflecting retailers’ efforts to bring the same measurability that defines digital advertising into physical store screens and streaming inventory tied to grocery delivery and loyalty apps, such as Instacart’s.

Execution required each retailer to build or acquire ad-serving and measurement technology, establish a dedicated sales organization to sell directly to CPG brand marketers and agencies (a skill set distinct from traditional retail merchandising), and create closed-loop measurement products that could report sales lift attributable to specific ad campaigns using the retailer’s own transaction data. Kroger’s approach, built through its 8451 data and media subsidiary, exemplifies the reorganization of retail media as a distinct, data-led operating unit rather than a function embedded within merchandising or marketing.

Positioning & Consumer Insight

Retail media networks are positioned to brand advertisers on a single core insight: advertising dollars spent closer to the point of purchase are easier to measure and more directly tied to sales outcomes than advertising spent further up the marketing funnel. This is less a positioning claim invented by any one retailer than a structural feature of the channel a sponsored listing that appears when a shopper searches “laundry detergent” sits closer to a transaction than a television commercial watched weeks earlier, and the retailer can measure, with its own sales data, whether that shopper subsequently purchased. Instacart’s management articulated a related insight on its fourth-quarter 2024 earnings call, where CEO Fidji Simo cited a long-term target range of advertising revenue representing 4% to 5% of gross transaction value (GTV) explicitly treating advertising as a monetization layer scaled proportionally to commerce volume rather than as an independent line of business pursued for its own sake.

For the retailers themselves, the relevant insight was that brand advertisers, particularly CPG companies, were already allocating meaningful trade-marketing and shopper-marketing budgets toward retail channels; the opportunity was to make that spending measurable, biddable, and expandable in the way Google’s search auction had already proven advertisers would pay for, rather than inventing new advertiser demand from nothing.

Media & Channel Strategy

Each retailer pursued a differentiated channel strategy consistent with its underlying commerce model. Amazon’s channel strategy leveraged the scale of Amazon.com search traffic directly, supplemented by Prime Video advertising and off-Amazon programmatic reach through its demand-side platform, giving it breadth comparable to larger open-web ad platforms. Walmart’s strategy combined its own Walmart.com and app-based on-site inventory with its 2021 acquisition of Vizio, which closed in December 2024 and gave Walmart owned connected-TV inventory and viewership data extending Walmart Connect beyond retail search into television advertising adjacency. Target’s Roundel strategy emphasized its guest data and loyalty program (Target Circle) as the basis for both on-site and off-site targeting. Kroger’s channel strategy centered on grocery purchase data as a differentiated signal for CPG food and beverage advertisers specifically, monetized through its 8451 subsidiary. Instacart pursued a fourth-party model distinct from the others: rather than monetizing only its own marketplace, it extended its advertising technology to power sponsored listings on more than 220 other retailers’ own e-commerce sites, positioning Instacart as advertising infrastructure for retailers that lack the scale to build a competitive network independently.

Business & Brand Outcomes

The documented financial outcomes across these companies show retail media functioning as intended a high-margin, fast-growing complement to core retail operations. Amazon’s advertising segment, at $56.2 billion in 2024 revenue, has become large enough to be analyzed as a standalone business within Amazon’s broader $638 billion in net sales for the year (itself up 11% from $574.8 billion in 2023). Walmart’s global advertising revenue reaching $4.4 billion in fiscal 2025, growing 27% for the full year and 29% in the fourth quarter alone, materially outpaced the growth rate of Walmart’s core retail comparable sales, which the company reported growing 4.6% in the US during the same quarter direct evidence that advertising revenue is growing several multiples faster than the retail business generating the underlying data. Target’s Roundel grew revenue 25% in fiscal 2024 to $649 million even as Target’s broader net sales were reported as softer, with first-quarter fiscal 2025 net sales of $23.8 billion down from $24.5 billion a year earlier illustrating advertising’s role as a relatively insulated profit stream during a period of weaker core retail performance, a pattern also observed by industry press covering Target’s results. Kroger’s 24% retail-media profit growth in its fiscal 2026 second quarter, described by its CEO as the strongest since 2021, points to continued acceleration in a grocery-specific retail media model even without Kroger disclosing absolute dollar figures publicly in that release.

Strategic Implications

The business implications for retailers are structural rather than incremental. Advertising revenue has become material enough to influence disclosed operating income at Walmart, where management explicitly quantified advertising and membership income as contributing more than a quarter of fourth-quarter operating income — a profit contribution advertisers and investors can now evaluate independently of core merchandising performance. For CPG brand advertisers, retail media networks have introduced a new, increasingly non-discretionary line item in marketing budgets, justified by closed-loop measurement that is difficult to replicate in traditional broadcast media and that ties spending directly to retailer-reported sales lift. For advertising intermediaries and agencies, the emergence of multiple distinct, non-interoperable retail media platforms each with its own data, bidding system, and measurement standard has created new complexity in media planning, a dynamic reflected in the continued growth of specialized commerce-media agency practices and measurement vendors.

The eMarketer downward revision of its growth forecast, from a 24.1% to a 17.2% compound annual growth rate for the 2024–2028 period, is itself a strategically relevant data point: it suggests that while retail media’s trajectory remains strongly positive and its share of total US media spend is still projected to approach a quarter of the market by 2028, the category is moving from a hypergrowth phase into a more moderate, maturing growth phase, consistent with the pattern of prior digital advertising channels as they scale. Retailers that built differentiated data assets and extended their reach beyond their own properties as Amazon did through its demand-side platform and Instacart did by powering more than 220 third-party retail sites appear positioned to sustain growth even as the category’s overall expansion rate normalizes, while retailers with smaller, single-site audiences face a narrower addressable opportunity unless they pursue similar off-site or fourth-party extension strategies.