Retail Media Networks - The New Publishers & Ad Networks

Kraftisms #2 - Established Commerce Companies Using Tried and Trusted Tools

“Technology is nothing. What's important is that you have a faith in people, that they're basically good and smart, and if you give them tools, they'll do wonderful things with them” —Steve Jobs

Kraftism of the Week:
Tools for Your Toolbelt

My career has never taken a straight line. I wasn't the person who moved up the corporate ladder step by step. Instead, I focused on setting up semi-autonomous organizations, empowering leaders, and jumping in wherever needed. This approach led to continuous growth, despite not following the traditional “path” in search of the “next promotion.”

Early on, I realized that career growth isn't about titles or promotions. It's about having the right tools for new challenges. Every six months, I choose three tools to focus on - skills or experiences I want to gain. For instance, learning to manage a P&L, leading a non-domestic team, or creating ad packages. Tools for my toolbelt.

I limit it to three to maintain focus. As I master one, I pour my energy into the remaining two. At the end of six months, I celebrate the journey - usually with a family dinner. Then, I pick the next three. My current three:

1. Build a network of senior executive recruiters. Having always been recruited by companies directly, this is a gap of mine that I’ve started filling as I seek out my next opportunity.

2. Learn to use AI as an ally (and not a crutch). I’m creating content - then using AI to advise me on how to make that content better.

3. Master the art of cooking chicken. I’m a beef and pork guy. It’s time to be more healthy. Is this work-related? Yes! My food posts on social media get 10x the likes of anything else I put out there!

This process has made me a more valuable team member, always ready with new tools in my belt.

Applying the Kraftism:
The Retail Media Networks Playbook

Similarly, Retail Media Networks are hiring top leaders with toolbelts built up over years running publisher and ad network businesses - and arming them with the opportunity to learn a new tool: launching a media business at a company whose primary business is not media.

What are RMNs?

Retail & Commerce Media Networks (colloquially bundled into the acronym “RMNs") and their proliferation are among the hottest topics in the trades. I’m convinced there are more sessions at events - and more specialty conferences - on RMNs than on AI, privacy, and identity combined.

On my Listening Tour, I’ve met with leaders from several RMNs, ad tech companies that power those RMNs, and advertisers who buy from RMNs. Leaders such as Elizabeth Neubauer-Donovan, Quentin George, Brian Gleason, Mark Grether, Mark Donohue, Mike Petrella, and so many others. For those in the industry who may have had their head buried in the sand (such as on a beach post-Cannes enjoying the sun!): RMNs are efforts by commerce and retail companies such as Amazon, Target, eBay, Walmart, Marriott, United, Uber, PayPal, Western Union, Block, and more, to monetize their properties (digital and in-person) and data assets with advertising - on and off site, digitally and out of home, based on their unique purchase-based relationship with their customers.

This is real… and money is moving to the RMN space in droves. But it isn’t new. It isn’t a fad, but it isn’t technological innovation, either. Instead, it’s known publisher and ad network tech being implemented at companies for whom advertising businesses have long been considered somewhere on a scale between afterthought and anathema. But all that’s changing as these retail- and commerce-focused companies go through business innovation.

Retailer and commerce companies have been taking “co-op” advertising dollars from their suppliers since the early days of the supermarket, charging for eye-level shelf placement or marketing “endcaps” at the end of each aisle. Digital retailers have been selling the digital equivalents - in effect, digital endcaps and premium positioning - for some time. Up until recently, these companies (with a few early-adopter exceptions such as Amazon, Target, Realtor.com, and eBay) kept this to a minimum to protect the “purchase path,” the set of pages that lead to an actual commerce transaction. Every RMN executive knows: get in the way of the purchase path and watch the company shut down all advertising efforts without blinking twice.

RMNs are Publishers…

On their own sites, apps, and venue-based platforms (such as televisions in guest rooms for hotel chains, displays in retailers’ stores, screens in a car for rideshare companies, etc.), RMNs look just like any other multi-modal publisher such as a broadcaster or diversified media company. They have content (in this case the purchase path) that matters and have the ability to add advertising - managing yield and optimizing just like any publisher today. In fact, these RMNs use many of the same technologies as publishers - an ad server (usually GAM), a DMP/CDP for data, a Consent Management Platform for privacy compliance, login systems to capture emails, yield optimization platforms, data reporting systems, and more.

Because the RMN often has very specific personally-identifiable data on their customers, they can utilize that data to create industry-recognized identifiers (Ramp ID, UID2, ID5, etc.). And because the advertising and purchase both happen in the same venue / on the same site, you get true closed-loop attribution and a measurable return-on-ad-spend (ROAS). This survives the “rest of the death of the rest of the cookies” signal loss our industry faces, providing clear advantages to RMNs. For endemic advertisers (such as manufacturers of products sold on a retail site), this is a key win. RMNs, however, have not cracked the code of selling to non-endemics - both because of the lack of closed loop value proposition and the potential user experience confusion.

… and Ad Networks

Most RMNs use their data to extend off-site onto the open web to increase revenue opportunities, considering the limited inventory on their own sites (in protection of the purchase path). Which means… they are ad networks. Yes, I said it. But I don’t mean that negatively. In fact… it’s a compliment. Because to create an ad network today requires true differentiation - and RMNs are leading the pack there.

Ad networks that just aggregated inventory without adding value went out of business long ago. Even the first wave of data-powered ad networks (e.g., Bizo, Magnetic, Sojern, and Sizmek) had difficulty surviving independently, as they utilized generic non-deterministic data. But with the customer-based data held by these RMNs as the core, the data-powered ad network (or as they are called today: curators) is thriving once again.

Yes, the whole “but RMNs have better closed-loop attribution built in” frequently-stated value proposition is as much hype as it is true at the same time. They do… on their sites and apps, sure. They have this benefit off-site, as well, but only when the end-publisher also has an email login (converted to a common hashed/encrypted identifier) to match. Even without that, there is enough signal (and the RMNs work with open web and app publishers to connect that signal) to provide better attribution connectivity than publishers - or buy-side systems - have alone. After all, attribution is everything to a marketer, and rightly so.

The third party ad tech community has the tools in place to power these data networks, allowing RMN tech teams to focus on “glue-tech” between systems and with their legacy customer data. Advertisers love that they can utilize real data to target (and in many cases, can tie that to purchases) - data that only the retailers have. Many of the commerce media companies also have digital out of home (DOOH) opportunities, CTV opportunities, and more, providing immersive multi-modal experiences to garner the interest of advertisers that do not focus on IAB ad formats alone.

What all ad networks need, however, are publishers on which to run ads and brand activations. Quality content in trusted environments, lending goodwill to the advertisers within it - trackable, targetable, and biddable (so not in walled gardens). Thus the wave of partnerships has begun, connecting data sets and creating unique offerings for the RMNs to bring to market while bringing a new revenue stream to media companies.

On the tech side, just as AppNexus powered the early data ad networks with its “data bidder” technology (the ancestor of “Xandr Curate”), a suite of tech companies are now offering “curation platforms” to RMNs and others, which help gather inventory together and let a curator add their data to another publisher’s inventory for a programmatic markup. Some of these tools are on the buy side (e.g., Criteo, TTD, MediaMath), some are on the sell side (e.g., Index Exchange, Pubmatic, Microsoft/Xandr/AppNexus, Media.net, and Criteo thanks to their CommerceGrid offering). Some systems are performance-centric (e.g., Criteo, Media.net) and some are full-service buying systems (e.g., Digital Remedy). And let’s not forget clean rooms (e.g., LiveRamp/Habu, InfoSum) to match advertiser and retailer data - joined by that all-important customer email address.

In the End, It’s All About the Customer

What makes this all so attractive to the advertiser is the RMN’s relationship with the customer. Note, I didn’t say user. I didn’t say consumer. The RMN executives I speak with focus instead on the concept of customer. I was visibly struck by the power of something said by Mark Donohue at Western Union: “We first had to build 170 years of brand and service trust with the customer to earn the right to introduce brands.” Because that is how retailers think.

Publishers often claim to focus on the consumer/customer experience (and some do), but to an RMN’s parent company, that experience is everything. The customers have a brand loyalty that cannot be risked - ever. In a Marriott room, having Marriott and an airline co-branding content will register to my ad-overloaded senses in ways that the airline alone would not… because I’m a loyal Marriott customer - and Marriott knows that, and won’t let advertising get in the way of that loyalty. If I’m sending money to my family in another country, and my family there can only take cash… Western Union is more than just a destination - it’s a lifeline, and what it recommends matters.

This focus on the customer is why so few of the RMNs sell their data in the data exchanges (although some do - and more will over time as each figures out the right way to monetize without violating customer trust).

Challenges and Opportunities

All of this comes from the perspective of RMN and tech leaders - people who have grown up in advertising and adtech. But the hardest part of their job is not the technology. It’s helping the rest of the company, often massive multi-billion dollar organizations, see the value in adding advertising to their environments. To see the value in utilizing the purchase data in new ways. To see the value in “lending relationship capital” to endemic advertisers. What makes all this hard… why the RMN process is seen as innovation within these retail and commerce giants… is because, even with all the benefits and opportunities, the revenue has often been seen as a rounding error to the parent companies focused on core commerce. Legal departments don’t understand why the data needs to be available for targeting and attribution to third parties. Interface design teams create new apps or website launches… forgetting to put ad slots into them.

This involves that new tool that these RMN leaders have had to develop: changing hearts and minds. And to answer that need, consulting services have sprung up to help. Leading the pack is Quentin George’s group at McKinsey. The reason why? McKinsey’s specialty is changing corporate hearts and minds to take on new processes and products. Corporate executives trust McKinsey recommendations (and the consulting group helps put both the business and tech plans together). Every RMN exec I speak with says the same thing: the hardest part is managing internal inertia to not do the very things that will make RMNs successful. But with the help of advisory firms like McKinsey, this is changing.

The part that most interested me as I went through my Listening Tour meetings is the clarity that this is not a zero sum game. The RMNs are tapping new money - budgets that haven’t traditionally gone to digital advertising. They are running the advertising on open web publishers and apps, acting as a new demand source for media companies. The RMNs are using third party tech, rather than re-inventing the technology wheel, in turn fueling the adtech ecosystem. Endemic advertisers win, too, because of the ROAS measurement. All this makes the RMN movement symbiotic to the rest of the ecosystem.

I find it fascinating that the tools we all have developed over the last decade work to power these RMNs. I had “understand RMNs and curators” on my list of sought-after tools over the first six months of 2024, and I am definitely celebrating what I’ve learned along this journey.

Andrew

(Note: The graphic above was made utilizing GPT Plus - One of the things I’m learning in this Tour is the value of when to use AI, when not to use AI, and the importance of calling out when I do.)