Open Mic Predictions 2023 Media Planning and Buying

Why retail media networks are the future of first-party data collection

By Nancy Hall, CEO

IPG Mediabrands


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January 23, 2023 | 9 min read

With significant retailer revenue streams and rich first-party data, it’s little wonder that the scale and spread of retail media networks show little sign of slowing. For The Drum’s 2023 Predictions Deep Dive, Matterkind’s Nancy Hall (US CEO), takes stock of the current RMN marketplace and looks forward to some evolutionary advances we’re likely to see in this exciting media space.

A shopping bag from a retail media network

The privacy-centric landscape of digital advertising has proven to be fertile ground for the growth of retail media networks (RMNs). The eventual deprecation of third-party cookies, Apple’s App Tracking Transparency framework, and tightened international privacy regulations have all confirmed first-party as the backbone of customer insight. And RMNs are a gold-mine of authenticated first-party data, seasoned with demographic information and detailed buyer behaviors.

What are retail media networks?

RMNs are essentially ad networks set up by retailers. They allow brands to reach the retailers’ customers with relevant, personalized advertising across a variety of its digital channels – from ecommerce sites to apps and social channels – all powered by the retailer’s first-party data.

With this high-quality data, the opportunity for brands to advertise while shoppers are in purchase mode, and the considerable revenue stream for retailers, it’s little wonder that RMNs are flourishing. Just look at a some of the key numbers:

  • In 2021 a quarter of US retailers reported revenues exceeding $100m from their media networks.
  • In 2023 retail media advertising spend is expected to top $52bn.
  • 56% of businesses think retail media networks can help brands find and connect with new customers.

Skyrocketing success stories notwithstanding, RMNs are still in the early stages of their evolution. They’re still developing, refining ever more impactful platforms for customers and brands alike. Consequently, some network-specific variations are inevitable. For brands seeking to include the networks in their marketing mix, as so many understandably are, this means there are certain minor obstacles to navigate.

Navigating this new space: a quick guide

RMNs represent an exciting opportunity for both revenue and reach, for retailers and brands, so naturally everyone’s looking to get in on the act. The art of the possible is still being explored in this space and so everyone has their own take on establishing best practice. As with all digital frontiers, standardization develops over time, not overnight. Here’s a mini roadmap to the RMN status quo.

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Audience overlap and messaging frequency can vary across platforms. Shoppers use multiple retailer dotcoms and sign up to multiple loyalty programs, which puts them in multiple RMN audiences. Consequently, controlling the frequency with which individuals receive brand messaging requires careful management.

Also, RMNs tend to be built on different tech platforms and so offer a range of different features, performance metrics and reporting cadence. This means that establishing like-for-like comparisons between the individual networks can be a bit more of a challenge. Brands have to work hard to make data-driven advertising decisions or to run multiple retail media networks in one holistic campaign. But, again, the reach and first-party data are clearly justifying these endeavors.

Meanwhile, and again reflecting the early stage of RMN development, several retailers are yet to fully augment their media networks with multi-channel audience extensions. But as RMNs mature, this increased reach and scale in the open web and beyond will be the natural evolution of the space. It’s coming – check back in six months and see if it isn’t.

Then there’s stock. Dynamic connections between advertising and stock levels are still being ironed out. This means there’s still a possibility that a brand will run ads on a retailer’s dotcom without knowing whether there’s sufficient stock to cover the campaign duration. Challenging, but avoidable with close inventory management. And with retailers prizing user experience (UX) so highly, avoiding this stockout scenario will soon be RMN table stakes.

6 key characteristics of RMN 2.0–4.0

Like countless technologies before them, RMNs will inevitably grow past the fragmented inconsistencies of early deployment to a more transparent, standardized approach. It won’t happen overnight. Instead, I see the RMN taking a number of evolutionary leaps.

Retailers looking to monetize their networks fully need to make it easier for buyers to make informed decisions and measure their advertising ROI. Right now, it’s still the Wild West in some corners. Here are six evolutionary steps we can expect to see in the retail media network space in the coming years:

1. Standardized measurement and insights

These form the bedrock of the digital advertising space upon which strategy, budgets, customer experience, and ROI are built. Evolution of the RMN space will see the standardized metrics, measures, and insights required to compare networks, analyze customer behavior, predict trends, nurture, and drive conversions.

2. Omnichannel audience extensions

In RMNs 2.0 and beyond, expect audience extension out in the open web, across multiple channels and platforms as they compete for brands’ advertising. Every opportunity for increasing reach will be explored, from search and social, into programmatic streaming TV, CTV, digital out-of-home, and even dynamic in-store media. This desire for audience extension is also likely to prompt a proliferation of retailer partnerships with technology businesses – already in evidence, for example, with the Walmart hook-up with The Trade Desk.

3. Holistic, multi-RMN campaigns (without the headaches)

We’re going to see the emergence of new platforms and private marketplaces with the capacity to run holistic multi-RMN campaigns while eradicating challenges surrounding audience overlap, messaging frequency, and optimization.

4. Clean rooms

We’re likely to see increased usage of these secure, protected environments to combine retailer and brand data in order to build out advertising audiences and run lookalike modeling. Clean rooms will also enable brands to select or exclude specific audiences, specific customer characteristics, or even individuals to service the needs of specific campaigns.

5. Stock levels and advertising dynamically linked

Technologies are emerging that are designed to overcome the current dislocation between advertising and stock levels.

6. Rise in non-endemic advertising

To date, RMNs have tended to be the preserve of endemic advertisers – those whose products are available from the retailer in question. As RMNs scale up and standardize, however, the value and relevance of their data and inventory is likely to attract more non-endemic advertisers – a potential new revenue stream for retailers to explore.

Of course, retail media networks are only part of the story. New media networks across a range of other verticals (including hospitality, entertainment, and transportation) are already springing up. And why not? The option to harness new first-party data – to reach engaged consumers – is pretty close to the Holy Grail of advertising. It’s an exciting journey ahead.

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Open Mic Predictions 2023 Media Planning and Buying

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