This article originally appeared in ad exchanger.

Three Trends Signaling Permanent Advertising Budget Shifts to Retailer Ad Platforms

Brands reimagined their media plans during the pandemic, and many must now reconcile their previous approach with emerging digital ad opportunities they tried and adopted in that time. It’s not a coincidence that we are seeing a rise of retail media networks, such as Walmart, Target, CVS, Instacart and, of course, Amazon, since brands see the value in reaching online shoppers and grocery customers.

It’s worth noting that these retail ad platforms were born out of necessity. The shift from in-store shopping to ecommerce cut into retail profit margins. Customers expect free shipping, so retailers are now responsible for costs to the end consumer, and often coming back. To help relieve their profit margins, retailers are monetizing web site and app traffic with the launch of ad platforms.

Consumer brands must place their bets right now. And there’s no sure thing. Will online grocery shopping deflate when states and stores reopen?  Are 2020 budget shifts the new normal?

I predict that new digital ad platforms, and retail media in particular, are still gaining steam, and that traditional advertising channels will not re-earn budgets from marketers who have tried data-driven alternatives.

Data is an Obsession

Every advertiser knows the saying, “Half the money I spend on advertising is wasted; I don’t know which half.” Traditional advertising platforms tend to provide ‘soft’ metrics that leave brands wondering, versus the concrete data they derive from digital platforms.

However, retail ad platforms provide richer data, such as impressions, clicks, online conversions and attributed in-store sales, to demonstrate that a campaign actually performed. To marketers, these direct KPIs are an addictive drug, creating a virtuous cycle of always-on campaigns.

And while offline advertising typically locks brands into fixed rates, digital platforms have much more flexibility. Advertisers can set and adjust custom budgets for items and keywords, and everything can be adjusted at a moment’s notice. This was an advantage that helped online ad platforms keep budgets flowing last year, when budgets were often being cut.

Retailer Ad Platforms are Walled Gardens in a Cookieless World

TLDR: Third-party cookies are going away, and it will no longer be possible to track customer journeys across the web or devices without permission from the individual.

Most companies are unprepared for this loss of data. Only 3% of participants surveyed for a “Digital Dialog Insights” study conducted by United Internet Media believe companies are prepared for the end of cookies. A vast majority (71%) lack knowledge of alternative tools.

We’re entering a new era of consumer awareness around privacy, and the rules of the game will continue to change. However, platforms such as Facebook and Google will be less directly impacted, as they’re still allowed to track their own users.

Retailer ad platforms will flourish as well, despite not having their own media properties beyond their store site, because they’re also walled gardens.

Retailers can still collect and use data from loyalty programs, customer engagements inside their stores and on their sites. This makes retail ad platforms more valuable than ever before. In fact, one important source of growth will be from non-endemic brands that use the platforms not to sell items off store shelves, but just for the improved targeting and audience insights.

Manufacturer Profits are Sky High and Climbing

Manufacturers that quickly shifted to digital media from Out-of-home (OOH) advertising, theatrical releases, in-store retail media and traditional television advertising, are seeing sales increases ahead of their peers. Additionally, reductions in brick-and-mortar retail marketing due to lower foot traffic have freed up dollars for data-driven alternatives.

As ad spend shifted to digital platforms, advertisers became accustomed to the clear ROI metrics — especially from retail ad platforms. Brands will turn a critical eye toward ad spend that yields lower ROI; And the advertising platforms that helped preserve profitability in a crisis will continue to win, at least until traditional media proves it deserves that spend instead.

Vaccinated shoppers will return to physical stores, but online shopping isn’t going anywhere. New habits have been formed that deliver more speed and convenience. The coming years will beget not only more retailer ad platforms, but increasingly sophisticated targeting capabilities, performance metrics and in-store attribution models.  When you consider how digital ad platforms can use data from what’s happening inside, brands that choose to invest in these insights will be richly rewarded.

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