Retailers drive profits with digital retail media

(Source: Bigstock.)

Digital retail media offers huge opportunities for incremental income, but many retailers have yet to take advantage of this new revenue stream.

A leader in the field of digital retail media is global tech company PubMatic, whose Sydney-based director of commerce media, Apac, Brandon Lee, spoke with Inside Retail

Digital retail media refers to the advertising space and audience data that retailers can make available to brands to run digital advertising campaigns. Retailers can make their ad space and audiences available to both endemic and non-endemic brands. They can also make their audience data available to brands to run digital advertising campaigns on other websites and platforms.

The concept is not new – brands have been paying for promotional space on marketplaces like Amazon for decades. However, PubMatic takes the whole concept a significant step further, deploying programmatic technology that automates the booking process bringing greater returns to site owners and more targeted audiences to brand advertisers.  

“The automation process is an enormous opportunity for retailers,” explains Lee. “Digital retail media offers advertisers access to audiences who have demonstrated a clear intent to purchase, unlike audiences on many other digital properties. As a result, these audiences are in high demand, with many advertisers willing to compete to have their ad displayed on a retailer’s site. All this demand is great for the retailer but can be hard to manage – which is where automation, or programmatic technology, comes in. 

“PubMatic’s solution pulls together advertising demand from lots of different sources, allowing advertisers to compete in an auction with the one willing to pay the most to show an ad winning the opportunity to do so. For the retailer, this is a win-win – they only have to work with one technology partner, but they get the benefit of having lots of advertisers compete to show ads on their site.”

Automation boosts efficiency and returns

The programmatic element has replaced a previously somewhat manual process in which advertisers buy promotional space on websites. 

By consolidating demand from many different advertisers, the value of the space on a digital retail media site increases. That’s because the way PubMatic’s programmatic solution works is that advertisers are essentially bidding on space in the form of a real-time auction. If three advertisers all want to serve an ad to someone in the market for a new TV, they all bid to have their ad appear as a sponsored listing at the top of the list of search results for TV on a home appliances retailer. Programmatic technology conducts an auction and the advertiser that has bid the most wins the opportunity to serve their ad.

“And all of that happens in the blink of an eye,” explains Lee. “The advertiser who is willing to pay the most gets to promote their brand there. So at the top of the shopper’s search results for a television, they’ll see the sponsored listing posts from whoever was willing to pay most to be there.”

Expanding the reach 

One of the key benefits to a retailer of having a digital retail media proposition is that the margins are much higher than they are in the traditional retail business. 

“If you take a brick-and-mortar retailer as an example, the margin it makes on the batteries that it sells on behalf of Duracell is probably very, very small. But if that same retailer can offer Duracell advertising inventory and audiences, the margins are much higher,” explains Lee. 

Retail has long been exploring this concept of digital retail media, says Lee – and now the industry is seeing such media evolving beyond sponsored listings, which are by nature somewhat limited. 

“After all, there is only a finite number of sponsored posts that you can offer given you can only sell it to brands that sell goods on your site. What we are seeing now is that some retailers have started to embrace a more holistic retail media strategy. Some of them will be running display advertising, similar to the ad units you see on a news site with display ads at the top or down the sides, for example.

“They can see that it is a valuable space to advertisers, meaning there is a huge revenue opportunity.”

Monetising their audience data represents another huge opportunity for retailers. By working with technology partners like PubMatic, retailers can make their audience data available to advertisers to use ‘offsite’ – that is, to use it to target consumers on websites other than the retailer’s own site. This audience data is highly sought after by advertisers because it is all collected in a privacy-compliant manner – when users log in, they agree to share their data as part of the value exchange of using the retail platform. 

And, as mentioned above, audiences on retail sites have demonstrated a clear intent to purchase. Lots of consumers use retail sites to research before making either an online or offline purchase. When making audience data available, retailers will typically package together data to create audience segments – for example, everyone who has searched their site for a new TV. This segment can be bought by an advertiser and applied to their digital advertising campaign – meaning they can serve ads to these users both on the retailer’s site (perhaps via sponsored listings, or via an onsite display ad) but they can also target and serve ads to them wherever else they go online – such as onto a news site, or an ad-supported streaming site.

PubMatic’s solution for retailers consolidates all these new revenue opportunities into one platform – making it much easier for retailers to monetise all their valuable assets, and for advertisers to manage their campaigns.