In June 2021, Google announced that it would be phasing out third-party cookies in its Chrome browsers by the end of 2023.
Digital advertising has majorly relied on these personal consumer identifiers to help market products and services. But this shift has advertisers worried about how they will continue to serve personalized ads and reach relevant consumers.
Simultaneously, more and more advertisers are allocating a percentage of their commerce advertising budgets for a newer channel - retail media ad networks, an emerging offering by a growing number of online retailers.
Retail media ad networks are different from demand-side platforms. The former entails retailers selling advertising inventory across their owned online and offline properties to advertisers, while demand-side platforms are an automated mechanism enabling advertisers to buy inventory across several platforms, which may include retail media ad networks.
The benefit of advertising with ad networks on retail platforms is that they have a captive audience that is present with a mindset to buy. Hence, advertisers can target their campaigns at the point of sale.
However, this is still an evolving trend. Here is what retailers and advertisers must know as they decide to bet on retail media ad networks.
Retail Media Ad Networks' Market Size
Today, all the top retailers have successfully built their own retail media ad networks, including eBay, Amazon, Macy's, Best Buy, Instacart, Wayfair, Costco, Home Depot, Krugers, and Walmart Target.
Both generic and category-specific retailers are making a play for ad network market share.
According to a US Digital Media Ad Networks report from 2019 to 2023, sales within retail media ad networks in 2019 were $13.39B, and this figure is projected to grow to $52.21B.
What Digital Advertisers Want
According to the "Evolution of Retail Media Networks" report by Ugam, advertisers are prioritizing several factors when designing campaigns and zeroing on retail ad network partners.
For instance, there were significant shifts in what consumer packaged goods (CPG) brands were seeking between 2020 and 2021:
- 62% of advertisers were looking to gain access to first-party data in 2021 as opposed to only 33% in 2020
- 51% of advertisers were looking to better understand shoppers at retailers in 2021 as opposed to only 19% in 2020
- 49% of advertisers were looking to leverage owned and operated retail inventory in 2021 as opposed to only 29% in 2020
- 51% of advertisers were looking to build a stronger partnership with retailers in 2021 as opposed to only 49% in 2020
This indicates that advertisers are looking to strengthen relationships with both consumers and retailers, the two key stakeholders in this business model.
With CPG, FMCG brands are capitalizing on this advertising opportunity.
Accessing First-Party Data
In a cookieless world, the equity of first-party data has skyrocketed.
Advertisers are not only seeking basic details of consumers, such as name, location, and purchase history, but data points such as time of logging in, cart abandonment details, browsing information, digital engagement, and loyalty status.
Such access has opened up a goldmine of potential for those advertisers who leverage it well; they can now segment consumers more accurately, enhance hyper-personalization, and improve campaign targeting.
Simultaneously, trusted retailers ensure consumers' privacy without having the onus of this responsibility fall on advertisers. This is an attractive proposition for advertisers who get access to ready-to-buy audiences.
Dedicated Digital Advertising Budgets
According to the Future of Retail Report: November 2021 by TheTradeDesk, 74% of brands have a dedicated budget in place for retail media ad networks, a core part of their digital advertising strategy. This trend is also reflected in the advertising revenues of retailers.
EMarketer predicts that Walmart’s US digital advertising revenues will grow to $1.55 B in 2022, while Instacart clocked $300M in revenue from its ad network in 2021, which is expected to rise to $1B by 2023.
CPG brands, in particular, are growing their retail media ad budgets. Merkle's survey estimates that CPG's market share with retail media ad networks is as follows:
- 77% with Amazon
- 56% with Walmart Connect
- 29% with eBay
- 27% with Home Depot
The Highest Web Traffic is Not Always the Most Relevant
While Amazon has the highest web traffic and boasts the maximum revenue among retail media ad network players, advertisers are realizing that choosing based on just one metric is not always the right strategy.
Retail media ad network strategies must be fleshed out, keeping the larger business outcomes in mind, as well as the target audience one is trying to reach.
For instance, an advertiser selling consumer electronics will need to decide whether to advertise on a general retailer or a category-specific one.
The quality of first-person data, a clutter-free inventory design and flow, and the relevance of consumers will play a key role in helping advertisers build their strategy.
8 Questions Advertisers Must Ask
Since advertising with retail media ad networks is a relatively new channel for millions of advertisers, here are some key questions to ask when building your advertising strategy:
- What strategy must I use to drive the highest return on investment for my budget?
- Based on whether I am selling niche or generic products, what sort of reach will serve my goals?
- Should I advertise with a general or category-specific retail media ad network?
- Does the ad network enable me to target audiences with my campaign goal?
- Does the retail media ad network platform have strong data capabilities that offer me actionable analytics?
- Does the platform offer ease of use so I can design my campaigns and evolve them in real-time?
- Does the ad network offer a variety of advertising formats, including video marketing and rich media?
- Can I successfully measure the success of campaigns as well as individual campaign formats using multiple metrics?
Digital advertising needs are continually evolving, and the retail media ad network model is geared to serve those needs. However, the success of this model over the next few decades depends on the ability of retail ad networks to offer a superior experience to both consumers and advertisers.
A clutter-free, seamless, value-based experience provides a win-win for all stakeholders.
On the other hand, advertisers will need to bring strategy and high-quality campaign design, execution, and measurability, to drive a higher return on marketing investment.