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GUEST COMMENT Why retail media is the final frontier for advertising

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Ever since Amazon announced its advertising earnings – an amount which even exceeds that of social media giant YouTube – other ecommerce players have been scratching their heads to see how they can replicate this success. However, Amazon’s success didn’t happen overnight and there were a number of key drivers which kicked off their ‘flywheel’.

Intelligently leveraging first party data meant that Amazon was able to consistently deliver high performance to help advertisers realise and exceed their Return on Ad Spend (ROAS) metrics. These results ensured that brands felt more confident in moving their advertising dollars from other platforms – such as social media channels – to Amazon’s marketplace.

But what about ecommerce retailers with a fraction of Amazon’s resources? The good news is that they may be sitting on a goldmine and there is still a significant opportunity to introduce a new revenue stream.

Not such a new idea

Although what Amazon did was clever from a data perspective, the idea isn’t new. Traditional brick and mortar retailers have been doing this in store for some time; providing the opportunity for brands to pay for where their products would be positioned. This reasoning is heavily based on consumer behaviour. Customers tend to reach for the products which are front and centre (such as at the end of aisles or in their direct eye line), meaning these will be purchased more frequently. After all, out of sight, out of mind…or rather, in sight, in the basket.

In the digital world, the premise is the same – brands can bid to appear at the top of searches (or product or ‘add to cart’ pages) which translates into more clicks and sales. But the fundamental difference this time is the use of machine learning and customer data to predict what product consumers are most likely to click on and purchase. Armed with this information, the retailer can show them relevant product ads based on their previous shopping and browsing behaviour. This would be the equivalent of a customer walking into a shop where all the products on display were personalised to their preferences.

From a multi-brand advertiser’s perspective, ecommerce media (i.e. websites and apps) is becoming a hot commodity. At a macro level, these brands ultimately want access to safe environments where consumers are in a shopping mindset and already poised to buy. Performance is underpinned with real-time customer data and machine learning that consistently refines which product ads are shown to the consumer, to better drive discoverability and sales.

First party data is the key to making this work

The imminent depreciation of third-party cookies and improved privacy for device IDs means that advertisers will be challenged to target consumers in a meaningful way. The good news is that retailers have a captive audience and access accurate first-party data which allows them to provide a brand safe, trusted media environment which is updated in real time.

Capturing how customers shop, the brands they prefer to purchase, their site journey, pages visited, items clicked and navigation sequence, provides the data input for machine learning to determine what products and brands consumers are likely to purchase. Armed with this knowledge, multi-brand retailers can make better decisions that an investment in advertising will generate the desired business outcome, by reaching the customers most likely to purchase – ultimately the holy grail of advertising.

However, the key to this is managing first party data effectively and ethically. This will help ensure that retailers have the right information at their fingertips and remain respectful of their customer’s privacy preferences. Data collection and analysis can be tricky to navigate and being transparent about how data will be used will ultimately build, rather than undermine customer trust.

Putting the wheels in motion

By now it’s clear where the opportunities lie for multi-brand retailers who are looking to leverage their first party data in an intelligent way to drive revenue. The next logical question is how? As mentioned, Amazon invested a lot of time and effort into developing its solution, but most retailers are looking to strike while the iron is hot.

They could either build their own solution from scratch – which is a worthwhile pursuit, but ultimately time consuming and costly – or work with a partner who can provide the right technology and expertise to get them on the right track. Both approaches will work, but one will get them to their goal much faster.

Another element to consider in parallel to the solution is the multi-brand retailer’s wider publisher ecosystem (aka audience extension). This will consist of third-party sites (for example, lifestyle sites) which have been vetted to align to the retailer’s values and also represent brand safe destinations for relevant ads. These can act as another feather in the cap by providing brands with multiple options to place their ads to reach the right audiences.

Ensuring survival in a competitive market

It’s clear that the retail industry is becoming more crowded and therefore competitive and seeking paths to increase profits. For this reason, retailers need to think outside the box to find novel ways to diversify their revenue streams. Transforming their own real estate into an advertising platform makes sense. After all, advertising is an accepted part of the customer journey and will be most effective when it’s based on insight, to show relevant, non-intrusive ads which fuel brand exploration, discoverability and sales.

Using retail media platforms allows multi-brand retailers to promote products on the site to an audience who is poised to buy – as long as the products are relevant and of good quality. Technology can help deliver the insights needed to drive value for both customers and brands, resulting in increased sales and satisfaction.

This must also be scalable, so the entire retailer ecosystem – even including their physical stores – should be aligned to support growing advertising demand. Looking ahead, the future is shifting towards omni-channel retail media where an ad shown (powered by machine learning) on one screen could be attributed to a purchase across any retailer customer touchpoint (the move into the phygital space). This is a long-term vision for any multi-brand ecommerce retailer and retail media platforms are a good place to start your advertising business and growing sales.


Paul Childs, EMEA vice president of Business Development at Moloco

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