More than half of the $129 billion in U.S. digital advertising revenue is predicted to be generated across just three platforms this year: Google, Facebook and Amazon. Although spend across the big three is expected to grow into 2020, there are significant signs of retailers fighting to get a piece of the digital ad pie with promises of tight audience targeting and ultimate trackability.
Wins for the retailers are anticipated because diversification away from Google, Facebook and Amazon is recommended by most marketing leaders, but advertisers should proceed with caution. Before moving forward with any new venture, advertisers should ensure the opportunity supports marketing and compliance objectives. And even when a network provides its own tracking, advertisers should always verify all measurements to confirm advertising efforts are successfully boosting sales at similar rates compared to the big three.
Walmart Monetizing First-Party Data In Support Of Their Retailers
After a slower digital start, Walmart is now a top online retailer. But the competition with Amazon has forced Walmart to lower prices and shrink their delivery windows. Both of these actions have taken bites out of their already low retail margins. Mirroring Amazon’s path to success, Walmart decided it’s time to break into the digital advertising business by leveraging their first-party data as their competitive advantage over Amazon. “Our data has never been monetized,” summarized Doug McMillon, Walmart CEO, “and we have a tiny ad business. It could be bigger.”
Collecting advertising revenue is not new for Walmart. Like other big retailers, Walmart charges brands for premium store locations and in-store advertising opportunities. And, until recently, they sold digital ad space on their owned properties via WPP’s Triad. But this year, Walmart cut ties with Triad and they’re in the process of building out an in-house team to manage their ad platform, including ad sales. As part of their advertising expansion, Walmart acquired Polymorph Labs, providing Walmart with an ad server, header bidding technology and ad serving expertise.
During their May announcement to big brands, including Kellogg’s, P&G and Unilever, Walmart explained how its ad platform will take advantage of shopper data from its brick-and-mortar stores, which account for 85% of their sales, for both campaign targeting and attribution measurement. According to Stefanie Jay, General Manager and Vice President of Walmart Media Group, the Walmart ad platform “has the ability to both target and measure advertising, ingesting both online and offline sales.” The ad serving, explained Jay, will be “informed not just by online purchase behavior and intent but also by data on what people are buying in stores and after they see an ad.”
The Walmart ad network is currently exclusive to Walmart retailers and facilitates advertising across Walmart websites and apps plus Vudu, their streaming service.
Target’s Roundel Broadly Offers First-Party Shopping Data Targeting
Target Media Network was rebranded to Roundel this year. The rebrand was a strategic move to position the company as a broader advertising solution compared to that of Walmart’s — proper for both Target retailers and advertisers who do not sell through Target.
Applying Target first-party shopping data, Roundel already has 1,000 clients including big name brands like Coca-Cola, Disney and P&G. For their clients, Roundel helps design and execute campaigns across its owned platforms and 150 of what they call “brand-safe” external channels.
Announced at Cannes Lions International Festival of Creativity, Roundel partnered with Index Exchange, an ad network that will allow brands to tap into Target’s data and inventory using supply-service platforms (SSPs) and demand-side platforms (DSPs) the advertisers are already employing. “It’s bringing an incredibly rich, desirable data source to the marketplace in a way that is very appropriate and privacy compliant,” stated Kristi Argyilan, Roundel President, during her Cannes announcement. “It is about building audiences and allowing people to do that based on what their marketing challenge is.” Currently in beta, the Roundel/Index Exchange partnership is expected to roll out to all advertisers in July.
A Long List Of Big-Name Retailers Are Also Offering Data-Based Digital Advertising
Although collecting advertising revenue from suppliers is not new for retailers, placing ads on their websites was typically avoided until recently for fear of steering consumers away from making purchases. But with retail margins squeezed as ecommerce sites leverage low prices to attract customers, selling digital ad space is becoming more common for retailers. “It’s such easy money. I’m sure advertisers are willing to pay a lot because you’ve got consumers right where you want them. But they’ll have to be attuned to how much this is damaging the user experience,” warned Andrew Lipsman, eMarketer Analyst, “because in the long run they [the retailers] don’t want to turn those customers away.”
Among the list of retailers dabbling with ad sales are:
- Ahold Delhaize: Formed Peapod Digital Labs last year to provide insight and targeting data to suppliers.
- Albertsons: Delivering targeted ad campaigns via Albertsons Performance Media across owned and third-party channels.
- Kroger: Working with Microsoft to pilot digital ads on store shelves and selling search ad space on their websites via the Kroger Precision Marketing platform.
- Southeastern Grocers: Launched SEG Media Hub in 2018.
Amazon Advertising Is Still In Growth Mode
Not a brand expected to slow its pace of innovation anytime soon, when it comes to advertising, Amazon is still in growth mode.
Most Amazon advertising revenue comes from sponsored ads, for which advertisers bid to place their products near the top of the results for targeted search terms on Amazon. But according to Brian Olsavsky, Amazon CFO, during their Q1 earnings call, Amazon is planning to expand their suite of ad tools and enhance their advertising inventory to include opportunities fit for branding. The recent acquisition of defunct Sizmek’s ad serving and dynamic creative optimization (DCO) platforms is an example of the investments Amazon is making as they scale their advertising revenue.
Some experts believe Amazon may also be considering more traditional methods of advertising, including ads on delivery boxes and in their Whole Foods Market stores. As noted by Michael Lasser, UBS Analyst, “The path forward for many retailers will depend on creativity and realizing profits in other ways.” Maximizing all categories of real estate will help, too.
Google Is Not Resting On Its Advertising Laurels
Despite still being at the top of the advertising revenue rankings, Google understands their user flow has a weakness due to the extra clicks required for consumers to take action. Although Google search is a great tool for consumers to find products and services, in most cases consumers must visit other websites before they can make purchases.
With their recent merge of Google Shopping and Google Express, Google is taking actions to streamline the purchase process that begins with their searches. Although Google representatives have publicly stated Google does not intend to become a retailer, the new Google Shopping includes a universal shopping cart that provides one place to check out, even when purchasing from numerous retailers.
The redesigned Google Shopping allows consumers to search for products by brand, to digest reviews and to watch product videos. They’ve also revamped their Google Showcase Shopping Ads, encouraging lifestyle images to attract consumer attention.
The universal cart is already available for Google Search and Google Shopping, and it is expected to roll out for Google Images and YouTube later this year. Brands who leverage Google Shopping Actions will pay commissions when sales are made. If desired, Google Shopping Ads can still be set up to drive traffic to retailer sites instead of having Google manage sales.
Advertising Through Retailer Networks Will Not Work For All Brands Or Marketing Objectives
While retail executives like Brent Biggs, Walmart CFO, are now worrying about their websites becoming “cluttered” with ads, marketers must be careful not to recklessly follow a new advertising trend.
Although retailer ad networks may provide strong results for certain brands, their capabilities and audience profiles will not be a match for many marketing or branding objectives. For Walmart advertisers, it’s easy to imagine success when a known dieter is matched with a new meal replacement product sold through Walmart.com and Walmart brick-and-mortar locations. However, Audi, for example, may not see the same type of trackable success. Do Audi customers shop at Walmart? Perhaps, but how does Walmart first-party data inform that knowledge? And, if Audi does choose to advertise with Walmart, how will dealership sales be tracked?
In addition, it’s expected that retailers will be charging a premium for their first-party data. Although retailer data will likely help better target ads, the targeting must result in a sales bump at least equal in size to the bump in cost associated with the first-party data for the campaign to be deemed effective from a return on ad spend perspective. Facebook and Google know a lot about U.S. consumers. Do retailers know more, and does that information help efficiently acquire new customers? Advertisers will need to closely measure campaign performance to find out.
For all marketing and media planning, choosing whether or not to move forward requires a review of objectives, strategy and expense. Retailer ad networks represent smart media diversification for many advertisers, but not for all.