Following my recent articles ‘Retail Media: The Third Wave’ and ‘Retail Media: A Quick Q&A’ (published in NamNews and on LinkedIn), some questions have arisen about the role of “offsite” retail media advertising.
First, a quick reminder about “onsite” retail media. Personalised product ads placed directly on the retailer’s website typically achieve profit margins of 70-90% (and BCG estimate that onsite marketing spend will grow at 22% per year for the next five years), so retailers might be forgiven for wanting to double down on this opportunity and for thinking that offsite ads (which deliver lower margins of 20-40%) are an unnecessary distraction. And yes, for anyone new to the retail media game, onsite ads are the first port of call, whether you’re a retailer setting up a new retail media network or a brand/advertiser buying your first retail media campaign.
High levels of personalisation can be achieved if the retailer holds good-quality customer data. The advantages are clear: retailers generate high-margin revenue (useful for businesses operating on low margins and being squeezed by the cost-of-living crisis), and brands/advertisers benefit from increased revenue from ads at the point of purchase. ROIs are easily measured, closing the loop on each campaign. Everyone is a winner (except Facebook and Google perhaps). Of course, as time goes by the temptation is for retailers to run even more ads in the hope of generating more revenue. But this can be damaging to the user experience: we’ve all been on sites where irrelevant ads cause frustration and a desire never to go back. Daily Mail readers (not me folks) will know what I’m talking about.
So, the ad space on websites is hard fought for and is lucrative for retailers, but it’s limited. It’s therefore essential to maximise offsite opportunities too. The key concept here is that rather than acting as the ‘publisher’ (i.e. publishing the ad on their own website), retailers can ask brand agencies to fund or co-fund offsite ads that drive awareness and traffic. The constant in these equations is the data held by the retailer. Ads can run on any ad space across the entire web but can still be personalised and targeted using insights and audiences from the retailer’s first-party data. This is especially useful to brands and advertisers grappling with the slow death of the cookie. An additional benefit is that campaigns are highly measurable as the retailer can report back to the brand the level of increased spend on their website.
An important factor when placing offsite ads is to ensure they always appear in brand-safe contexts and on sites with long view times. A simple first step into the offsite world will often be to use social media networks. A simple integration provides a brand-safe environment where lots of people spend lots of their time. Moving to the open web and (for those aspiring to become best-in-class advertisers) the world of offsite video adds further nuances. With limited reporting available through YouTube, video is a tough nut to crack though. When done successfully, it can bear real fruit as high CPMs allow access to the big brand budgets.
Macy’s provides a great example of a retailer successfully leveraging offsite retail media. Launched in August 2020, the Macy’s Media Network offsite proposition includes programmatic display, video-connected television, online video, email advertising, in-store screens, package inserts and even the billboard in NYC’s Herald Square. Melanie Zimmermann, VP of the Macy’s Media Network, said: “I believe that we have found the secret sauce… Now that we can speak around the metrics, it’s all about automation, and of course, continuously refining the approaches we’re using.” Macy’s Media Network generated $105m in net revenue across its offerings last year.
The size of the prize this side of the pond is just as significant. Sainsbury’s are realising £72m in revenue for on and offsite digital media in FY21/22, and this is expected to reach £130m in the next four years. It is estimated that Asda, with a similar market share, is generating over £45m. Companies such as Walmart, Target, Albertsons, Kroger, Walgreens, Nordstrom, CVS and Best Buy have all launched their retail media networks, and others are quickly following suit.
BCG call retail media “The $100 Billion opportunity”, while others call it “digital advertising’s third wave”. Whatever the catchphrase, it’s becoming clear that those who fail to ride the wave risk falling behind and, at worst, perhaps even going under.
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