The shift towards launching retail media ad networks began in 2005 when Amazon started experimenting with its retail media ad networks business model.
Seventeen years later, in February 2022, Amazon's Q4 earnings disclosure indicated that the platform had sold $31.1 billion in ads on its platform in 2021.
Two weeks later, Walmart disclosed that it had sold ads worth $2.1 billion in 2021.
These figures demonstrate the potential of retail media ad networks to generate revenue and build a whole new pipeline of income for retailers.
This is an advertising opportunity where advertisers can purchase advertising space across an online retailer’s owned and paid media properties, which already have a large captive audience of consumers. This is different from a demand-side platform, which enables advertisers to buy advertising inventory via automation across multiple platforms.
Today, several online retailers have launched their own retail networks. However, there are several myths surrounding retail media ad networks that hold back online retailers from taking the plunge.
Let's take a look at these and deconstruct the reality of this very important arm of commerce advertising.
1. Launching a Retail Media Ad Network Will Take My Focus Away from My Core Business
An online retailer's core business will always remain eCommerce. But by building a retail media ad network on top of the eCommerce experience, online retailers can complement their existing business model and drive up profitability.
At the same time, they can offer their brand suppliers more value and enhance the consumer experience when done right.
2. Retail Media Ad Networks are Only for Generic Online Retailers
While platforms that sell a mix of consumer goods have successfully built a robust ad network, there is also space for category-specific online retailers to invest in developing their retail media ad networks.
For instance, platforms such as Best Buy (consumer electronics and appliances) and Home Depot (home improvement) have successfully launched retail media ad networks.
Similarly, category-focused platforms offering jewelry and luxury goods, beauty products, and home and gardening are also making a foray into this revenue stream.
3. Supply Partners Don't Want to Advertise on Retail Platforms
There is a common misconception that brands selling their products don't want to invest in advertising inventory on the same platform. This is far from true. Brands want to advertise where consumers are present.
Instead of advertising only across social media, messaging apps, publications, and general platforms, many see value in buying ad inventory on retail media ad networks.
Access to authentic, real-time consumer behavior first-party data is another key attraction for advertisers, which helps them improve consumer segmentation and targeting at the point of sale.
4. Brands are Only Looking to Advertise on the Retail Media Ad Networks with the Highest Traffic
The Retail Media Networks Perception Benchmark 2022 report revealed a very different reality. According to the advertising agencies and consumer goods advertisers surveyed, the highest online traffic is not the only parameter delivering value.
A total of 13 attributes contribute to the overall value that digital advertisers seek: traffic quality, traffic scale, in-store/omnichannel sales data, audience targeting capabilities, first-party consumer insights data, return on ad spending (ROAS), reporting metrics/key performance indicators (KPIs), ad relevance, ease of use, closed-loop sales attribution, ad load, variety of available ad formats, and off-site targeting capability.
The retailer that emerged at the number one spot was eBay, which outperformed on attributes like first-party data, targeting, and measurement, not Amazon, which has the largest traffic.
5. The Retail Media Network Model is Not Suited for Food Delivery Platforms
Food delivery platforms currently have only two primary revenue streams - the service charges that are billed to consumers and consumer loyalty programs.
Food commerce consumer bases continue to grow, yet, the space is also becoming more competitive, making profitability a major concern.
In this scenario, food commerce platforms that invest in building a robust retail media ad network can bridge the revenue gap and grow profitable.
6. Only Restaurants Will Want to Advertise on Retail Media Ad Networks Launched by Food Commerce Platforms
B2C brands are continually looking to advertise on online platforms with high web traffic as well as relevant audiences.
In this context, food commerce platforms can open their advertising inventory to non-food delivery advertisers targeting similar consumer segments.
For instance, a movie campaign could seamlessly work on a food commerce platform, as food and entertainment go hand-in-hand.
7. The Only Reason Supplier Brands Leverage the Retail Media Ad Network Model is to Increase Conversions
As retail media ad networks become more innovative and advertiser expectations evolve, here are the key buckets of interest to advertisers:
- Traffic: Advertisers review both the scale and relevancy of traffic to their business needs.
- Access to first-Party Data: Advertisers seek high-quality first-party data, which, when converted into actionable analytics, gives them ammunition to design campaigns.
- Targeting: Advertisers leverage real-time consumer data to segment customers in a way that empowers them to develop hyper-personalized engagement, which translates to sales.
- Measurability: Retail media ad networks enable advertisers to measure the impact of advertising campaigns and reconfigure campaigns in real-time.
- Platform Experience: A wide range of inventory formats are accessible, enabling brands to customize campaigns to their budgets. Retail media ad networks offering a seamless experience and ease of use have a competitive advantage.
8. Online Retail Platforms Have to Build Ad Networks from Scratch
Partnering with a savvy, tech-enabled ad tech provider, retail platforms can significantly reduce time to market.
Your adtech provider will offer end-to-end support in setting it up, which reduces investment and labor costs. It will bring efficiency as well as a seamless transition into this new identity.
On the other hand, if an online retailer attempts to build their ad network from scratch, they could be looking at a timeline of at least three to five years, not to mention the cost of hiring and training an in-house team.
Your adtech partner will offer a comprehensive roadmap to move forward and round-the-clock support.
9. Managing Retail Media Advertising Inventory for Supplier Brands is a Nightmare
It all depends upon how the backend management systems are built.
A superior and experienced tech partner understands the importance of offering a seamless experience to advertisers. So make sure you partner with the right one to reduce the potential for systems that are not user-friendly and consistently crashing.
This enables retail platforms to charge a premium on their inventory.
10. The Only Benefit of Building a Retail Media Ad Network is Revenue Generation
While growing revenue is a major outcome, other by-products benefit online retailers. This includes building deeper relationships with supplier brands and offering more long-term value.
Another by-product is to drive product development that enhances the consumer experiences through hyper-personalized messaging and campaigns, which in turn creates the potential to increase customer lifetime value.
The Takeaway
According to a BCG report, the retail media ad networks market is estimated to grow by 25% to $100B over the next 5 years. By 2026, it will account for over 25% of total digital advertising media spending.
Online retail platforms making early investments in building their ad network have the potential to accelerate revenue growth and offer more value to all stakeholders.
