Online advertising is going through a sea of change. No question about it. When you read that Apple, Amazon and now retailers are all selling ads it’s really an example of history repeating itself once again.
For starters, retailers have always sold “advertising” but it was wrapped up as merchandising allowances, promotional spending, slotting allowances, and sponsorship. In most cases the “advertising” was designed to offset costs for things like Sunday newspaper circulars that applied “co-op” money to basically cover the costs of the printing, or for the in aisle displays, dump bins, shelf talkers and more. CPG (consumer packaged goods) producers would provide discounts applied to the monthly bill, or supply free product (plus outs) to offset the cost. To the CPGs it was all part of the COGS (cost of goods sold) and factored in.
As the world shifted to digital, the ad spending slowly moved from the real world to online. CPG companies dabbled with some money spent online, dipping their toes in the water on piggy at a time over the last 30 years. As Google, Facebook and Twitter began capturing more eyeballs and the ability to deliver targeted ads and as the concept of paid social media rose, more money flowed from traditional advertising to online spending.
It was only a matter of time before the online retailers who are both clicks and mortar woke up. Now they are becoming their own advertising networks, selling space, time and inventory just like they did with the hated, but paid for slotting allowance at retail.
For years pharmacy based retailers like CVS, Walgreens, supermarkets and fast food chains have all been implementing loyalty programs. While fast food is largely relegated to only being able to co-market their online and app ad space to the soft-drink companies, their value is in cross promotion with entertainment brands and sports franchises and leagues. For the supermarkets and retail drug stores, the whole world is their oyster.
Let’s look at how much customer power the retailers have and you’ll quickly see that ad revenue will shift from Facebook, Twitter and Instagram to the retailers’ sites as well as the role Google and Apple will play.
Google and Apple-The app stores are the key to the Apple and Google model. The API’s allow for all kinds of tracking, registration, browsing and purchasing data to be collected. As retailers move the customer out of the app and to their web pages for purchases to avoid the app store “tax” of 33 percent for in-app purchases, that’s where the “advertising” comes into play. But before all that happens the API’s for content insertion allows the retailers to push ads in their app, powered by Apple and Google, with the app store giants supplying the underlying ad serving technology and offering the retailers a network effect.
The Retail Site-for retailers like CVS, Walgreens, the supermarkets and car care companies like PepBoys and others, the ability to use digital space for static banners, animated clips, video commercials is all right there for them on any web page. Interstitial content -what you see as you go from searching for toothpaste, to the page with all of the brands and sizes listed become supercharged offers. When incorporated into the loyalty program, all of your purchase and search data is automatically structured to make sure the offers you receive are highly personalized. Your ability to tailor the offers you receive, down to the brand and products you get presented become more and more relevant. Lastly, as the retailers have apps and emails to push the offers out, the idea of true digital couponing, with targeting, while you’re in the store is there.
By becoming their own ad sales force, the retailers move into the world of direct marketers, where CPMs are higher than run of network advertising. This allows them to do more just in time purchasing, and in many ways become more Amazon-like, and for some more regional chains, the ability to work with Amazon and use their ad serving technology and local delivery networks to move the deliveries along. This is why Uber is also getting into the ad serving and delivery business, as are all of the shared delivery services.
For retailers, the question is not will they have their own ad networks. The elephant in the room is all about the platform they decide to use. Back in the heyday of programmatic advertising, agencies and brands had to pick the programmatic agency to push advertising. Services like Rubicon worked great as they picked off the remnant space of the ad networks and pushed the advertising out at the prices determined by the advertisers much like Google Adwords works, going across many sites.
Retailers won’t want to work with Amazon as they sell everything, or Google, as the chains want to keep their data to themselves. The platform that can be enterprise grade, hyper scalable, and able to keep the data siloed just for the retailer or group of retail shops, as well as for the independent merchant needs to come to the forefront.
And when that happens, retailers will be able to have their own ad platform to sell to the brands they have to sell and go well beyond what they do today.