Digital Essays 2021: Democratising digital advertising with first-party cookies and retail media, by ArabyAds’ Gulrez Alam

By Gulrez Alam, chief investment and strategy officer, ArabyAds.

As we are nearing the end of third-party cookie tracking, retailers globally are gradually turning themselves into big media companies. The breadth of first-party data retailers have access to, and the increasing dependence of brands on this data to reach out to their audience, has propelled them to the pole position to become the heavyweights in the digital advertising space. As a result, Amazon, Walmart and other retailers are set to give stiff competition to Google and Facebook, who have dominated this space for so long.

Let’s look at some numbers to understand the growing clout of retail media. In 2020, Amazon generated more than $14bn in revenue from retail media, making it the leader in this space, followed by Walmart. In the United States alone, eMarketer predicts that retail media advertising will increase by around 28 per cent year-on-year to reach $23.92bn in 2021. According to global management consulting firm BCG, big retailers are already racing towards a $100bn high-margin annual revenue prize in retail media.

While for many brands retail media is solving their first-party data problem, for retailers it is the source of an additional revenue stream in the already thin-margin e-commerce business. The ability to monetise data through advertisements has vastly helped the e-commerce giants to mitigate the high costs associated with online shopping like free delivery, easy return, heavy discounts and other expenses while maintaining top-notch customer service.

Brands benefitting from retailers’ first-party data

First-party data is data that any website or app collects from its audience and is critical in understanding consumer behaviour, segments and trends, and delivering tailor-made offers to customers. It is regarded as the most valuable, relevant and accurate data and gives these businesses a competitive advantage as they have exclusive ownership of it. Moreover, the privacy concern stays minimal because it is user-initiated and accepted.

Retailers know any brand’s customers better than the brand itself. They have access to data on the consumer’s interests, purchase behaviour, brand preferences, shopping frequency and much more, which is a gold mine for the brands trying to tap the potential of these customers’ interests.

Moreover, what makes it lucrative for brands to increase their digital advertising budgets on retail media is the subsequent change in the consumer shopping journey. Shoppers have increasingly started searching for products on marketplaces. A recent survey found that nearly one-third of consumers in developed markets start their online shopping searches on marketplaces instead of search engines.

Furthermore, while any search engine can track what the user is searching for, the products and services they are interested in, it cannot determine the consumers’ intent to buy. It will not have the data of whether the user purchased what they were searching for or any other similar information. On the other hand, retailers know exactly what the shopper was searching for on their platform, what they have bought, what items they could have purchased, their spending propensity, and every minute detail about their entire consumption pattern.

The need for more retail media networks

In my opinion, the concentration of digital ad spending with a couple of tech giants is not an ideal scenario for the future of the advertising world as it gives an undue advantage to such platforms to dictate terms and win them monikers like ‘necessary evil’ in industry parlance.

In the absence of third-party cookie tracking, brands will continuously look at ways to increase their partnership with retail media networks because they provide brands with highly personalised targeting capabilities, and effective ways to measure the ROI on their spending. Furthermore, the flexibility of tracking down the spending to the stock-keeping unit (SKU) level has added to the growing popularity of retail media among digital brand marketers.

In the coming years, we will see a lot of big retailers across the globe and in the MENA region coming up with their own retail media networks and democratising the digital advertising space.

Our retail media platform, Ritelo, is helping retailers or marketplaces in the MENA region by offering this technology to build a custom retail marketing platform that can help them create a scalable brand-funded media business.

Many retailers I have spoken to in the recent past believe that retail media will disrupt the marketing and advertising outlook going ahead, and it will only benefit from all the uncertainty surrounding the future of data privacy and security.