To find a new revenue stream, Wal-Mart didn’t need to open a new store or work with a new distributor or sign a new supplier. All it needed to do was monetize its existing audience through advertising to the tune of $3.4 billion per year. That’s only slightly less than Barnes & Noble made in revenue all of 2022.
Wal-Mart achieved that incremental revenue through the creation of a retail media network, which enables the companies that sell goods at Wal-Mart to pay to reach potential customers through advertising.
While Wal-Mart’s retail media network still represents a fraction of what Amazon makes from its own advertising, Wal-Mart has big plans, which is why it’s attempting to buy Vizio.
What are Retail Media Networks
To understand retail media networks is to understand that in them retailers are both demand and supply, not entirely dissimilar to their core business.
A retail media network (RMN) is an advertising platform operated by retailers to allow brands to reach their customers. A retailer can offer ad space on their owned properties (e.g., a retailer’s website, in store display, apps, etc.) where they are the supply. They also can place ads on third-party sites, like external publishers, where they act as supply and demand. The latter is where retail media networks are expected to skyrocket.
Brands that advertise on RMN benefit from reaching their customers during the buying process and being able to utilize retailers’ rich 1P data.
Amazon revolutionized what a retailer could do with their digital storefront, Wal-Mart set the trend for brick-and-mortar-first operators; now over 200 retailers have established or are in process to create their own retail media network: including recent entrants Wawa, Wakefern Food Corp., Co-op, and more.
RMN Meets Its Biggest Opportunity: Cookieless
Retail media networks were already becoming a powerful force, but Google finally following through on its cookie depreciation plan has made them even more desirable for advertisers.
The ongoing cookie depreciation has broken a key connecting force in digital advertising. Many publishers and advertisers do not have enough first-party data to produce meaningful targeting in a post-cookie world. Retailers do not have this problem, having built up a massive database of opted-in first-party data. More importantly, that first-party data includes a rich purchasing history far exceeding what any other supply side platform has been able to accumulate.
They are also in-pocket, which means they have the ability to reach consumers in-app, on consumer mobile devices as they are shopping in stores.
Using first-party data signals, retailers don’t necessarily need third-party cookies to create a major scaled network. They are poised to become programmatic advertising leaders. Retailers can use their data to match, segment, and measure at a clip at pace or better than all advertisers could do with third parties.
Too Few are Taking Advantage
Retail advertisers are the largest programmatic buyers on the 33Across Exchange. Simply put, they are the fastest-moving vertical to embrace cookieless buying. And it’s only increasing: retail advertisers grew their cookie alternative investments by 117% in Q4 2023.
And yet, there are still plenty of retailers that are otherwise underutilizing the ones they have set up by not embracing cookieless traffic.
Like most advertisers, retailers are still figuring out how to operate in a cookieless world. Their default stance may be to continue prioritizing third-party cookie traffic out of convenience and familiarity. Or they don’t have the right technology in place to leverage their first-party data advantage, especially those smaller and mid-sized retailers that struggled to launch a RMN in the first place.
But retargeting and conversion tracking are possible in a cookieless environment, especially for retailers that have a large enough database to power them. Companies will still be able to use first-party data for retargeting, giving retailers a powerful tool over other platforms that have not built up this moat.
They are also able to use non-personally identifiable data to make better decisions on where to show an ad. Given the context-rich world retailers play in, it’s another huge opportunity.
Retailers looking to win at cookieless retargeting and conversion tracking should audit their data collection to ensure it follows all regulations. They will also want to utilize the right identity resolution partners to ensure that first-party data matches up with publisher data.
Key Benefits
- A higher response rate to bids: Less competition for cookieless traffic increases win rates, giving you cheaper inventory in great environments.
- Equal tracking to cookied traffic: Savvy RMNs can easily track conversions and retarget on cookieless as easily as cookies traffic. RMNs with the right partners can supply their advertisers with effective campaigns, measurement, and retargeting.
- More direct deals: RMNs bidding on cookieless traffic is also a positive for publishers that are facing lower demand because of cookie depreciation. Leading publishers will be increasingly willing to invite RMNs that buy cookieless traffic to take part in direct deals or private marketplace deals (PMPs) when their full inventory is considered.
- Act fast – Cookieless is undervalued: One of the biggest incentives is that cookieless inventory costs about 40% less than cookied inventory on the same site. Combining these lower CPMs with higher win rates due to lower competition means that cookieless could quickly become a large and effective part of retargeting initiatives.
Right now, programmatic advertising runs on third-party cookies. Already we’re seeing cookie depreciation creating gaps in advertising spend. Once cookies completely go away, this potential gap in spend could throw the advertising industry into chaos. We believe that RMN is at the tip of the spear to scale programmatically without third-party cookies. Retailers have the advantages And considering retail networks control 1/5 of overall ad spend and that number is slated to increase, they can lead the entire advertising industry into the cookieless future, which is brighter than the naysayers have led you to believe.
This original article was originally featured on AdMonsters.