YouTube Plays Second Fiddle to Retail Media for Home Goods Advertisers

It’s not everyday that advertisers aren't eager to hand YouTube their ad dollars—but that’s precisely what’s happening as Home Goods advertisers opt for retail media instead of the video giant.

In Q1 2022, Home Goods advertisers spent $187 million on ads on retail sites like Amazon, Walmart, Target, Kroger, and The Home Depot. Meanwhile, they spent just $77 million on YouTube ads.

What does this preference for retail media reveal about their overall digital advertising strategies? Do these advertisers see a future with YouTube, and can we predict anything about their strategies moving forward?

Retail Media Has Found a Home

Traditional advertising tactics like YouTube and Google have become staples in digital advertising due to their longevity and proven success. However, retail media is charting its own path.

Despite being relatively new, retail sites have already become favorites among Home Goods advertisers, especially those promoting Laundry and Cleaning products, Mattresses, Dish Detergent, and Furniture. These top five product categories accounted for 48% of Q1’s ad spend from Home Goods advertisers.

Since May 2021, Home Goods advertisers have invested more than $622 million in ads on major retail sites. Nearly $210 million of this spending occurred in Q4 as advertisers ramped up their buys leading up to the holidays. After December, which peaked at $76 million, spending on retail sites decreased following the holiday surge.

With Q1 completed, it’s clear that Home Goods advertisers are returning—February and March numbers have already neared pre-holiday levels. Over half of that is going to Amazon; almost 1,500 companies spent more than $187 million to promote over 2,000 brands, with 55% of that going to Amazon. Walmart received 17%, while Target, Kroger, and The Home Depot received 7%, 6%, and 3%, respectively.

Amazon’s dominance in retail media is clear, but as other retailers enhance their data and capabilities, more ad dollars are expected to shift their way. New retailers are entering the media game—Ulta Beauty recently introduced a revamped media network—and much of the pressure on Amazon will come from Walmart. Earlier this year, Walmart announced upcoming improvements to its media network, Walmart Connect, including ad formats that will help brands reach consumers when they’re watching CTV.

Facebook Meets its Match in Native Ads

YouTube isn’t the only advertising giant feeling the impact of retail media—Facebook is experiencing it as well.

When analyzing the data, including retail sites, Home Goods advertisers spent 40% of their dollars on Native advertising in Q1 2022, while spending 29% on Facebook. If retail media is removed from the data set, Native advertising drops to just 3% while Facebook jumps to 48%.

The sharp decline in Facebook spending when retail media is included is notable. The fact that advertisers are moving away from such a tried-and-true channel in favor of something relatively new is intriguing.

Why the preference for Native Ads? The future of digital advertising is about creating the best and most seamless experience for consumers. Regulations like GDPR and CCPA underscore this shift. Native ads deliver on this necessity. Combined with high-intent data from retailers, Home Goods advertisers can deliver timely and relevant ads to consumers—a strategy likely to attract even more ad dollars moving forward.

YouTube Gets the Hand-me-down Ad Dollars (for Now)

It’s unusual for YouTube to receive less attention from advertisers, but that’s the case with Home Goods advertisers so far in 2021.

During Q1 2022, ad spending on YouTube was over $4.4 billion, but Home Goods advertisers accounted for just 2% of that ($77 million). While this is low compared to spending elsewhere, especially on retail media, YouTube is seeing growth among these advertisers. In Q1 2022, there was a 68% year-over-year increase from the first quarter of 2021 as YouTube’s top-spending categories increased their ad buys.

Spending from Home Improvement brands was up by nearly 400%, with top names such as Carsen Clamp, Chervon (Ego Power+ and SKIL), and Product Bliss (Riggable) increasing their spending. Household Maintenance increased by 77% in Q1 year-over-year, thanks to significant investments from P&G (Febreze, Gain, Microban 24, etc.), Reckitt Group (Air Wick, Lysol, Resolve, etc.), and The Clorox Company (Clorox and Pine-Sol).

Additionally, the number of new advertisers on YouTube indicates a growing fondness for the platform. In Q1, nearly $18 million (23%) of total spending on YouTube came from brands that didn’t advertise there in 2021.

It’s Retail Media’s Game to Lose

Recent spending habits of Home Goods advertisers suggest that retail media will remain central to their future strategies. Even in its relatively early stage, retail media is already a powerhouse, offering an unrivaled opportunity to reach consumers who have shown true purchase intent in a way that doesn’t trigger more privacy regulations.

However, the recent increase in YouTube ad buys shows that the video giant isn’t going to sit idly by while retailers gain more momentum. Will YouTube continue to close the gap? Undoubtedly. Video is too ingrained in society for them to ignore it.

But retail media is still in its early stages of evolution—and it’s only going to get stronger. As it does, expect even more ad dollars to flow its way.