Why retail media is the future of AdTech

Retail media could offer a utopia if data is managed properly, says Moloco's Paul Childs

Like many tech sectors, AdTech is seen to have a competition issue. Over the past few years, cloud and software giants, Google and Facebook, have become synonymous with digital advertising. In fact, the “Googbook” duopoly now accounts for around 65% of total digital ad spend in the UK.

It’s commonly believed that, to reach the right customers with the right messages, advertisers are required to pay for placements in one (or both) of these “walled gardens”. But, in reality, this duopoly is facing increased competition amidst the shift away from cookies and third-party data.

Finding new “walled gardens”

As a result, advertisers are looking for alternatives. Amazon has tapped into this demand, enabling brands to bid to appear at the top of searches (or product or ‘add to cart’ pages) which translates into more clicks and sales. This is based on the wealth of accurate and up to date first-party data on its platform. Meanwhile, Google and Facebook continue to rely on third-party cookies and device IDs that may be out-of-date or lack consent. Since Amazon announced its ad revenues last month, rising 32% from the previous year, e-commerce platforms have been looking to replicate this strategy.

This will cause a ripple effect — and a boom in retail media platforms — as companies begin to realise the opportunity lying within their own first-party data and digital inventory. They’ve been able to start creating their own advertising ecosystem, allowing brands to bid for prime positions. The emergence of these advertising ecosystems that use accurate, up to date first-party data, machine learning, and brand safe shopper media is rapidly attracting ad dollars from brands and agencies.

Driving additional revenue

Obviously, not every company will drive revenues like Amazon, which has arguably the biggest pool of first-party data out there. However, multi-brand retailers and marketplaces can still put the data their customers share with them to work and bring in new, additional sources of ad revenue.

These companies can achieve this by either building their own retail media platform from scratch or by bringing in a technology partner with the expertise to get them on the right track. The former is an admirable, longer-term strategy that requires significant investment and expertise, but the latter will see a more immediate business impact. The right partner can set the wheels in motion, applying advanced capabilities such as machine learning that delivers the performance advertisers are looking for when applied to first-party data.

Additionally, this increased diversification of the AdTech space through retail media platforms will bring more reward for ad buyers themselves. It provides a method of advertising that can immediately impact product sales and realise a high return on ad spend (ROAS). The high-performance potential that retail media can deliver will challenge social, search, and other media for ad budgets.

Building customer loyalty

Retail media platforms enable retailers to improve the customer experience by showing relevant personalised product ads alongside organic listings and improve product discoverability by displaying alternatives that they may not otherwise have found.

By feeding first-party customer data — from pages visited, clicks to purchases — into a machine learning engine, retail media platforms are able to display the products that consumers are most likely to purchase. Armed with these insights, brands can invest in media that will be shown to people that will most likely engage and purchase, if not immediately, then maybe at a later date.

The key to building this AdTech ‘utopia’ is ensuring the data is managed effectively and ethically. Retailers need to deliver the level of personalised ads that customers expect, while being respectful of their privacy. Customers ultimately want to see adverts that appeal to them, so being transparent about how their first-party data will be used will ultimately build, rather than undermine, trust and loyalty.

Given that retail media is future-proofed against the end of cookies and device IDs, it’s the best placed strategy to bring targeted ads to the right audience in the most relevant and least intrusive way possible.

Featured image: Johnny Cohen / Unsplash

Paul Childs

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