Why Retail Media and CTV are 2025’s key “battleground” categories

Arete Research, the leading independent technology research boutique for investors, hosted a Zoom for industry running through its Outlook for 2025 covering digital advertising, consumer tech and e-commerce.  

The tale of the tape shows the top five Big Tech firms on track for sales of $2 trillion in ‘25E, generating $430bn in free cash flow, while investing $300bn in capex. A few of Arete’s key themes included: 

Please click here for the Video Presentation using passcode: V6Fjw6#i 

• AI Swamps the Market. From Meta aiming to “get business objectives and a budget, and we do the rest…” to Google also launched multiple AI tools for automating advertising, AI is already leading Big Tech to record margins, deployed for internal productivity.  AI should help savvy marketers cut out “non-working media” to the detriment of ad tech arbitrage, but its main role in ’25E will be to further reduce operating costs.  

• Forensic Ad Tech/AI Tests “Black Boxes”. Following Google’s PMax and Meta’s Advantage+, we now see similar offerings from AMZN and PINS. There is greater scrutiny around TTD, APP, ZETA, DV and other opaque business models. We think investors will look more closely at “black box” models, prompted by more disclosures by forensic ad tech. 

• Consolidation for Survival. As we saw in successive waves of ad tech consolidation, M&A is already happening among smaller struggling ad tech and e-commerce players, now reaching the largest agency holdcos. This reflects consistent share gains, with revenues swallowed up by Big Tech.  

    

• Hunger Games Competition. Big Tech can no longer avoid directly targeting each other’s “core” businesses and taking steps to co-opt rivals.  META and GOOG investing more in Devices (loss making); META making moves in e-commerce; GOOG and AMZN in AVs/logistics. AAPL (if not MSFT) expanding in Ads.  Expect more direct overlap and competition exiting ’25. 

With Group M, Zenith and other forecasts expecting a gradual slowing of the growth in global ad spend, there again remains a mismatch between market expectations of nearly $60bn of incremental revenue at the top five Ads stocks (mostly Google, Meta, and Amazon), and where that money comes from in the economy, especially with a weak macro backdrop in many markets.  Meanwhile, of the 15 digital ads related IPOs in ’20 and ’21, two are above issue price, two got acquired, and the other 11 are down between -27 and -89%. The markets remain largely hostile to smaller ad tech companies, while the large agency holdcos all lag the market, with even the best performer (Publicis) up 13% LTM vs. 26% for the NASDAQ, and OMG-IPG beginning a messy merger process. 

Retail Media and CTV are 2025’s key “battleground” categories, with dozens of new ad networks (RM) and inventory sources (CTV) launching to compete for ad spend, while in both cases there is extensive scope for poor quality inventory getting added to the mix and limited measurement leading to cases of ad fraud or wasted spend.  

Both markets are likely to see “winner take most” dynamics emerge by the end of the year. 

Arete also made some predictions for game changing deals in ’25: Beyond the obvious machinations around TikTok, which could lead to a cascade of deals including an acquisition of Snap, we think Google may be prompted to spin out its 3P Network business or do a partial IPO of Waymo, while we could see The Trade Desk buying Roku (given it has no obvious path to scale for its own TV OS), and Shopify buying Criteo to get scale in retail media and build an advertising business similar to Amazon.