Morgan Stanley: Retail Media Will Steal $1.1b From Aussie Media Owners

The likes of ARN, Southern Cross, Seven, oOh!media and Nine could stand to lose as much as $1.1 billion in advertising spend to retailers such as Woolies, Coles and Amazon by 2027 according to investment bank Morgan Stanley.

The bank has downgraded its valuation in the listed media companies, saying that the threat of retail media was “not well understood”.

Woolies made some $550 million from its retail media arm Cartology over the last year, while Coles360 raked in $250 million according to Morgan Stanley. The likes of Amazon, Chemist Warehouse and Endeavour Drinks were also significant players in the sector.

Morgan Stanley believes that the more traditional media players stand to lose because they do not have the reams of customer data and targetability that retailers do through their apps, websites and shopping data. This gives advertisers a chance to drive better, more targeted campaigns that can better attribute consumer spend to marketing activities.

The broadcasting industry is set to suffer the biggest hit with Morgan Stanley estimating that the TV and radio networks will lose almost $600 million in advertising revenue by 2027. Outdoor and print stand to lose $56.5 million and other categories could see a drop of $418 million.

The value of retail media will grow to be worth $2.8 billion by 2027 — 23 per cent growth per year. Just this year, Woolies and Coles announced that their retail media arms saw sales growth of 29 and 27 per cent, respectively.

Coles said that it was able to grow its media income thanks to “accelerated investment in product innovation, technology and talent” and rebranding its offering to Coles 360.

Woolies, meanwhile, said that “Cartology grew sales by 29 per cent (including Shopper) for the year despite a more challenging advertising market with strong growth in Everyday Needs categories.”

“A step change is underway,” wrote the Morgan Stanley analysts in a note seen by the AFR, led by Angela Sutcliff. “Retail media dollars will increasingly come from traditional media budgets.”

“What is key is the characteristic highly fixed cost base of most media companies, which means even the loss of an incremental, say, [$5 million to $10 million] in revenue per annum really hurts,” the note continued. “The cumulative impact … is potentially significantly negative.”

As a result, the bank has cut its target share price for Nine, Seven, ARN, Southern Cross and oOh!media by between four and 10 per cent, with Seven, ARN and Southern Cross the worst affected, Nine moderately hit. oOh!media, meanwhile, is the least affected and has even started to make inroads into the retail media game.

However, the analysts did note that the greatest threat to the companies’ earnings was “perpetually falling audiences”.

Nine launched its RTLX retail media program earlier this year, while ARN, when contacted by the AFR, said that it had been making radio programming for Chemist Warehouse and Woolies for a while. Seven and Southern Cross did not respond to requests for comment.

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