Retail Week | Should retailers follow Amazon and sell ads on their websites?

By: Lauren Smartt

20th August 2019

“Retailers are realising they have data that brands are really curious about” Our Director of Digital Strategy, David Bedford gives his opinion to Retail Week on whether retailers should follow Amazon and sell ads on their websites.

Article: Amazon has amassed a £10bn-a-year business from letting brands advertise on its website. Should other retailers follow suit? 

Where shoppers start their shopping journey is changing. Amazon, not Google, is where most product searches take place – between 2015 to 2018, 54% of product searches took place on the retailer’s website, according to analytics firm Jumpshot.

Amazon has pounced on the opportunity this brings and has developed its own in-house advertising division. Today, the online retailer is the third-largest advertising platform in the US, behind Google and Facebook. Last year, it posted $10.1bn in revenue in its ‘other’ category, which primarily relates to sales of advertising services.

Advertising group Publicis chief executive Steve King says Amazon is “clearly a very strong challenger to the duopoly of Google and Facebook in digital advertising”.

But Amazon is not the only retailer looking to capitalise on the volume of shoppers searching for products on its website. Earlier this year, Walmart held its first pitch meeting to woo consumer good giants including Unilever, Coca-Cola and Procter & Gamble to shift advertising spending to its platform.

“The ‘Amazon effect’ is driving a shift in the mindset of retailers to think more like media publishers”

Sherry Smith, Triad Retail Media

The grocery titan has also brought its website advertising in-house, consolidated advertising sales for its stores and website under the Walmart Media Group, and acquired an ad tech start-up, Polymorph Labs, to help it serve targeted online ads using shopper data.

Google UK director of retail and technology Martijn Bertisen thinks more big retailers will look to monetise their website and customer data in future.

“Brands and retailers are starting to collaborate on how they reach customers in much smarter ways. Smart retailers are building their own media businesses in a much more transparent, scalable way,” he says.

“In the US, Walmart, Target and Best Buy have set up significant media businesses to monetise not just their owned and operated assets, but ultimately monetise their users.

Walmart website

Walmart wants to convince consumer goods giants to advertise on its website

“There is definitely money shifting from more traditional channels like TV and print to Amazon and other channels that provide more transparency. The retailers that win in that space will be able to unlock incremental money.”

Sherry Smith, chief executive of Triad Retail Media, which manages digital media for some of the world’s biggest brands, agrees: “The field is absolutely wide open right now for retail to continue to rise as a leading channel for brands to connect with people.

“Retailers offer an extremely powerful value proposition for brand advertisers, as they know the exact products people are researching and buying at any given moment. The ‘Amazon effect’ is driving a shift in the mindset of retailers to think more like media publishers in order to attract bigger brand dollars.”

What types of ads could retailers offer?

Brand advertising could take many forms on retailer websites from banner ads to sponsored products to native advertising and email marketing.

Native display ads – advertising content that looks native to its environment – are particularly effective and drive a two-times greater conversion and return on ad spend compared to a standard display advert, says Smith, so could be a good option for brands on retailer websites.

She also thinks there are opportunities for brand storytelling. “Many retailers are creating shoppable areas of their sites that host content like recipes, DIY tips and more. This is a great place to leverage their social media channels with brands and keep them within an ecosystem where they can make a purchase without leaving the site,” she adds.

Accenture digital marketing expert Amir Malik believes all retailers with a loyalty scheme, a website and lots of online traffic should consider the implications of repurposing their data for third-party brands.

“Every business with a website and an app has become a media owner,” he says. “Retailers need to realise that they are not just product businesses, they are data businesses.”

“I don’t feel like a lot of retailers have their ducks in a row around their own data to gather it, create actionable insights for other businesses and act on it”

Ed Greig, Deloitte Digital

Malik says the biggest potential for retailers lies in the insight retailers can offer brands through their customer data.

Walmart says its advertising division can connect the dots for advertisers and determine if a shopper saw an advert for a particular product online and went on to buy it in one of the grocer’s stores. Malik believes this is an opportunity that more retailers could exploit.

“The transactional experience has historically been over a till and disconnected from the Internet of Things, but transactional data is now being stored and registered in the context of online interactions, which can then be registered to specific individuals.

“You are building a purchaser profile on a consumer with behavioural and buying trends you can identify over a period of time, which can deliver really profound insights,” he says.

Asda sponsored product

Sponsored products appear on grocers’ websites

Malik says this information would be very valuable to advertisers as it allows them to think about messaging and customer targeting in a much more sophisticated way.

However, Deloitte Digital chief disruptor Ed Greig has reservations about how plausible it would be for UK retailers to monetise their data for third-parties.

“I don’t feel like a lot of retailers have their ducks in a row enough around their own data to gather it, create actionable insights for other businesses and act on it. It sounds like a lot of hard work and potentially another distraction away from what their main focus should be, which is using data for their own business effectively,” he says.

Greig adds that concerns around GDPR could put retailers off pursuing this strategy.

“GDPR could put this further down their list of things to do because of the uncertainty around the possibility of breaching – with that in mind, the risk versus reward metric does look a lot different,” he explains.

Appetite from brands

Nevertheless, advertising agency Cheil’s director of digital strategy, David Bedford, believes retailers are increasingly interested in unlocking this new potential revenue stream.

“Retailers are realising they have data that brands are really curious about. There is a real sea change where online retailers are realising the best way to monetise data is to offer ad serving and full media placement. It’s a compelling B2B play for them,” he says. “Amazon is setting the bar so other retailers will have to follow at some point.”

Bedford adds that for many brands, the possibility of their products coming higher on the list of a shopper’s search results would be something many advertisers would spend money on.

Advertising on a retailer’s website offers one compelling advantage for brands, says Debbie Ellison, chief digital officer of brand experience agency Geometry, part of the WPP group.

“Retailers with broad and varied inventory will be able to offer both rich targeting and reach; however, I wouldn’t discount the category leaders”

James Calvert, Lida

“By advertising on a retailer’s website, you are putting yourself in front of shoppers that are already predisposed to buying a product, so the propensity to convert is going to be higher,” she says.

Smith believes that retailers have a unique opportunity to win advertising spend if they choose to pursue this avenue.

“There are several retailer sites that have achieved massive scale with larger audiences than most digital media publishers. Amazon alone has over 100 million Prime users, while Walmart sees over 140m unique shoppers visiting and buying products on their site each month.

“Retailers have the ability to tap into exactly what people are buying both on- and offline; visibility into purchase frequency, brand preference, and spending habits.

“Merging these two elements – the scale of a retailer along with their data – allows media buys to become more effective and efficient resulting in greater [return on investment] for a brand or advertiser.”

Smith says many retailers have become sophisticated in using their data and can now build customer segments based on lookalike models – compiling groups of customers with similar characteristics – and customers’ propensity to buy that brands can use for promotions, new product launches and lapsed purchases.

Which retailers could benefit?

Due to the amount of data needed to appeal to advertisers, the UK’s biggest retailers and those selling across multiple categories are best placed to capitalise on this trend. 

James Calvert, chief data officer at customer agency Lida, part of the M&C Saatchi group, says: “Retailers with broad and varied inventory will be able to offer both rich targeting and reach; however, I wouldn’t discount the category leaders,” he says.

Amazon prime day

Amazon’s website has a much larger audience than most media organisations

“For example, Lastminute.com has created an independent media company, Forward, having started its Travel People service, enabling other travel companies to advertise across the group’s brands. Ikea or B&Q could do similar in home décor and building, along with the likes of Marks & Spencer, Asos or Arcadia in fashion.”

So, what technology would a retailer need in place to monetise their customer data and website?

Amazon recently bought ad server Sizmek to bolster its advertising capabilities, which will enable the online retailer to use its rich data on what people search for and buy to target consumers outside its walls.

Any retailer that plans to develop an in-house advertising division will need similar technology in place. Malik says retailers will also need to develop or acquire customer data platform (CDP) software.

“A CDP will allow a retailer to record attributes on a single customer at scale then segment those profiles into groups, tribes or audiences. This can then be used for insights and learning for brands, attribution or communication and targeting specifically,” he says.

Simplisafe’s UK general manager and former ecommerce director at Shop Direct and Missguided, Jonathan Wall, says retailers will also need to allow brands to track the performance of their ads on the retailer’s platform.

Monetising a retailer’s website and customer data is undeniably a significant undertaking but one that Bertisen is adamant could “unlock incremental money” with much more generous margins that those on offer in traditional retail. “All of a sudden, you could be running a new revenue stream at a 30% to 40% margin versus the 3% margin in retail,” he says.

It’s an opportunity that will be too good to pass up for some retailers.

Read full article on Retail Week