By Dr. Grace Kite

Don’t blow your 2025 media budget on retail-media “rent”

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You don’t have to be Martin Lewis to know it’s a bad idea to pay the rent out of your savings. No one can carry on that way, it’s a sure route to poverty.

But it is a path that marketers are unintentionally heading down.

Media plans are increasingly running down reserves of awareness and familiarity by swapping traditional ads, especially on TV, for huge outlays on retail-media search.

It’s paying to occupy digital real estate, and it’s also rent in the sense economists use. Where a company owns something that people need to use and there’s little or no competition, so they can charge what they like for the privilege.

There’s a vicious circle ahead. Because if you redirect the brand budget into rent, familiarity falls, and your rent-like ads get fewer clicks. So, the auction algorithms charge you more, leaving even less cash available for brand.

The only way out of this bind is to protect your traditional advertising budget, and argue that the cost of retail media must be met by colleagues in distribution or merchandising.

Money for nothing

The simple explainer for “monopoly rent” in economics is a fairy story.

There’s a river that goes through the mountains in a made-up place. Dwarves go up and down it as they please, getting firewood for their axe-making furnaces.

One day, the king of the elves puts a rope across the river and charges a big bag of gold coins to anyone that wants to pass. There was no need for the rope, the elf king just saw an opportunity and now it costs a lot to travel the river.

There’s no alternative route through the mountains so the dwarves pay up. The elf king gets rich, but the dwarves are a lot worse off. They drink less mead, increase the price of axes, and face dragons armed only with kitchen knives.

It’s a story that’s relevant to marketing because if you buy a lot of search ads from Google, you’re the dwarves in this story, the river is the flow of people who want to buy stuff online, and Google is the king of the elves.

The regulators at the UK CMA (Competition and Markets Authority) have confirmed it: Google controls more than 90% of UK searches, and in turn more than 90% of the £7.3bn search advertising market.

And there is no alternative to paying whatever Google wants to charge. Because of Google’s size and unmatchable access to user data, other search engines are, and will remain, a woefully poor substitute.

Over time, Google has been able to charge advertisers more and more. The CMA found that prices for search ads roughly doubled between 2011 and 2019, without any significant loss of demand.

Retail-media rent

Big retailers’ sites are another pinch point. You have to be there if you want your product to be available for purchase, and some sites control huge swathes of product-buying traffic.

80% of all growth in UK media spending since 2019 has gone to retail media and globally, it is set to over-take linear TV in 2025, growing twice as fast as other channels.

Amazon is the most important media owner. More than 50% of all product searches come through its pages, with 70% of those journeys never making it past the first page.

Amazon’s customers no doubt still believe that the top of their search page is where the best products are listed. That used to be the case, and sellers used to be able to get there for free if they had good reviews and a good price.

But look at it now. In the graphic above, which describes Amazon search results for dog toys, the blue is ads. It’s c.40% of the page and more like 70% of the important bit at the top.

This means that if you sell dog toys or anything else through Amazon, you now have no choice but to pay the rent. If you don’t, no matter how good your product is, it’s no longer available to customers.

And the rent is not cheap. Amazon sellers pay a full 50% of their revenue from customers straight to the platform.

Taken together, it’s all very costly.

The chart above shows that payments to search and retail media have been increasing rapidly since 2015, and amounted to 14% of UK retailers’ online revenue by 2023.

Regulation is slow to the rescue

In the story about the river, the dwarf king, seeing his kingdom overrun with dragons, eventually equips his army with the remaining rusty axes and heads up the river to cut the rope and punish the elves.

And it’s possible that regulators, on one side of the pond or the other, will do the same thing for advertisers.

In the US, after a great deal of preparation, and a year in court, the authorities have now finally moved on to considering what to do about Google’s monopoly.

They might break up the different advertising businesses in the group, and they might outlaw deals that make Google the default search engine in new hardware.
But it might also be too late to do anything.

“I’ll just Google it” is now so ingrained in people’s behaviour, that these measures and others on the table might not make a difference.

Stronger brands pay less rent

All of this means it’s more important than ever for advertisers to invest in familiarity and positive perceptions of their product and brand.

Because if people want your product before they get to the search page, any set of search results for the category which doesn’t include you is “wrong”.  And auction algorithms, which value relevance as well as advertising revenue, will allow you to be there for a reasonable price.

Better still, if you’re top of mind amongst category customers, a higher share of purchase journeys to your till will avoid big tech search pages completely, arriving to you direct.

So don’t plunder your TV or out of home budget to pay retail-media rent in 2025. Instead, make the case now that this must be paid for out of the distribution or merchandising budget.

With today’s rent-ridden media landscape, it’s the only way to avoid a future where your profits are paid over to ever richer landlords, and you’re only just making ends meet.

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