3 Strategies Every Retail Media Offering Needs to Consider
By Joe Rice
Retail media is quickly becoming one of the highest growth segments in online advertising. As e-commerce continues to grow, retailers of all sizes, along with advertisers across all verticals, are making investments in this new model.
Today, retailers monetize their customers by targeting their known audience, both on their owned properties, and across a network of external properties. First-party identifiers allow retailers to understand consumers on their own sites, while utilizing third-party cookies and other identifiers to connect to and target this known audience on external networks. This off-site targeting, either through a retailer's own DSP or a partner DSP, can extend retail media's effectiveness.
At the same time, the ad industry is dealing with the imminent loss of third-party cookies, while investigating a spectrum of other third-party IDs, cleanrooms, and other matching strategies that may work as a stand-in. Still, the space faces regulatory questions as states implement varying policies about data collection and consent. As retail media grows, it faces real questions about addressable audience scale, regulatory compliance, and appropriate resource investment.
With dependence on third-party cookies, nascent third-party identifiers, and ID matching strategies, how are retail media networks and service providers navigating these waters? In our discussions, it's clear that retail networks and their partners want to add additional capabilities when structuring their off-site monetization models, without losing the obvious advantage of their unique customer footprints.
Quantifying the Loss of Third-Party Cookies
Third-party cookies are on their last legs. The real test for all marketers is understanding the level of impact that will come from the change. Retail media's distinct advantages will not be eliminated by the loss of the cookie. New means of linking consumer identities will certainly fill in some of the gaps. Matching identifiable consumers in a privacy-preserving way through cleanrooms will also extend scale. But coverage of those known audiences in a post-cookie world, while the industry investigates the effectiveness of nascent identity linkages, is not yet known.
The Three Layers of Retail Media Insight
Clearly, retailers take an iterative approach to their off-site monetization practices, adding new strategies and layers of insight to make up for this loss of fidelity. The best path forward consists of mixed audience tactics, and there are three ways these layers are commonly implemented today:
Known audience and known identity
This is the key value proposition of retail media networks. They leverage their own first-party data about customers, including emails, addresses, phone numbers, and other information captured from their customer loyalty programs, promotions, and app sign-ups. This data is housed within customer management platforms (DMP/CMPs) and demand-side platforms (DSPs). This has tremendous value for the targeting, measurement, and attribution features that a retail network can provide to a buyer of media delivered directly to the retailer's properties.
Off-site media is also targeted and sold based on these known audiences. This method heavily relies on the existing cookie networks, or an ID that resolves to a cookie, email address, or third-party identifier based on matched consumer data. Modern ad infrastructure is built around this model.
Unfortunately, up to half of all browser activity happens on privacy-sensitive browsers like Safari and Firefox, which block third-party cookies by default. These privacy preserving features, such as Firefox's Enhanced Tracking Protection, are seen as key features and their product teams provide frequent capability updates.
In early 2020, for example, Firefox released an update to block fingerprinting methods that are often used as a workaround to third-party cookie. Meanwhile, Apple continues to release updates to their App Tracking Transparency and Mail Privacy Protection products, which further impinge current tracking capabilities used in-app, or via the email address resolution that newer identity solutions rely on.
Setting aside the impending loss of third-party cookies in Chrome, even alternative methodologies for off-site addressability present major headwinds for the proposed reach and scale of retail audiences.
Known audience and new signals
This is where testing for the future truly begins. For retail media networks to serve that $250,000 example insertion order, they need to combine the known cookies audience with other identifiers that provide the scale advertisers expect for that kind of spend.
There are several ID solutions in the market right now, ranging from proprietary technologies to open source solutions, all designed to help advertisers target consumers without third-party cookies. These include UID2, ID5 ID, Lotame's Panorama ID, Epsilon's CORE ID, and LiveRamp's RampID.
No single winner has emerged from this crop of new entrants. In the early days, advertisers – and their retail media partners – will need to invest to mix and match technology and arrive at their desired level of scale. That will continue until the frontrunners emerge.
Known audience, informed contextual, attention, and network health
While cookies go away, it's important to remember that advertisers will not be blindly buying in the dark. Many signals currently used for ad targeting will remain available in the future, including attention, the share of ads on a page, content sentiment, purchase intent (how the page fits within a path-to-purchase) and informed context. Many retail media networks are already exploring this data to build out their offerings right now.
For example, a retail media partner can take its first-party audience insights and use those to build informed contextual intent signals and segments, based on how the known audience behaves on certain pages. This informs which contextual signals can be used to drive performance, scale, and return on ad spend, all in an off-site environment.
Most important of all, these surviving signals ensure that off-site media sales can fulfill large campaigns from their partner brands and agencies. This should even help these networks expand beyond their current capabilities to tap into an audience that already browses the web without cookies or IDs.
A New Look for Retail Media
It's clear that retail media is here in a big way, and that signal deprecation will force some changes to the current off-site media models. We are living in a "best of both worlds" timeframe at the moment where retailers can rethink how insights derived from addressable audiences can inform and expand on new approaches. Don't let this time slip by.
The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.
Joe Rice is senior director of business development at Peer39.