While other retailers are just learning to crawl, Target’s ad business could soon apply for a learner’s permit.
The Minneapolis-based retailer has sold digital ads since the Obama administration. At Cannes, Target hosted happy hours and panels about the “evolution” of retail media, joining the crowded field of retailers on the Croisette, pitching their sweet, sweet shopper data to the ad industry.
A look at the business: Roundel, Target’s advertising business, brought in $1.5 billion “in value” for the company and grew 20% in 2023, Cara Sylvester, Target’s chief marketing and digital officer, told investors during its Q4 earnings call.
Roundel grew another 20% in Q1 of this year, per the company’s earnings report.
According to analysts at BMO Capital Markets, in 2023, Target operated the fourth largest retail network, behind Amazon, Instacart, and Walmart.
The ad business is among the company’s fastest-growing revenue streams, even as Roundel’s reported value represented less than 1% of the retailer’s total revenue last year. Target isn’t alone in this trend: Over the last several years, retailers from Costco to The Home Depot have added ad networks into their e-commerce platforms. The category is expected to grow to $166 billion by 2025 and will account for 20% of all digital media spend this year, according to eMarketer.
Bull’s-eye
In an interview with Marketing Brew, Roundel President Sarah Travis credits part of Target’s success to its media mix. The company has publicly shared that 35% of its advertising revenue comes from ads that have run on properties Target doesn’t own, including social and streaming platforms. Though filling Target’s website with ads could be great for the bottom line, Travis said the company prefers to be “more curated in the approach that we take.”
“We’ve always thought about that full journey and we’ve thought about curation across that journey, ensuring that we’re showing up in the right moments from an advertising perspective versus just flooding our web properties and our app with a bunch of advertising,” she said. “We’re really thoughtful and curated in the approach that we take.”
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When asked whether that mix will remain consistent, Travis said she and her team “believe in the strategy we have in place.” After our interview, Target announced a partnership with Shopify to onboard more merchants onto its third-party marketplace.
What about non-endemic advertisers—those that aren’t sold in stores? “We’re continuing to evaluate what’s right for the business over time,” she said.
Travis was a 13-year Google vet before joining Target in 2021, and Target’s ad business appears to be following a similar playbook by investing in self-serve advertising platforms. In March, for example, the company unveiled Roundel Media Studio, which lets advertisers buy and manage search ads directly through Target. Over time, Travis said, the company plans to roll out new inventory and features designed to turn Media Studio into a “one-stop shop to buy Roundel media.”
“What a P&G might need might be different from what a Bob’s Red Mill is going to need,” Travis said. “We want to make more brands more accessible to guests. The easier we make our media to access, the more brands guests are going to be able to interact with. And that’s good and important for those smaller brands.”
Loyalty matters: Target uses the term “guests” for its shoppers, and in April revamped its loyalty offering, called Target Circle. Target Circle currently touts more than 100 million members. These customers and their shopping behaviors will help inform Roundel’s business, Travis said. When a brand is advertised to loyalty members during weekly promotions, like Target Circle Week, the return on ad spend increases by about 33%, Travis shared.
“It’s a hugely valuable audience,” Travis said. “They’re our most valuable audience, and brands want to reach them.”