A Shifting Tide for Retail Media Networks and First-Party Data Owners

Back in 2020, when Google announced it would deprecate cookies, a wave of uncertainty transcended on the digital media landscape. Media buyers wondered what impact the loss of cookies would have on their ability to reach high-value audiences, while media sellers mulled over the potential risks to their valuable revenue streams. All advertising verticals across the ecosystem had to quickly figure out a new way forward.

With cookies set to exit stage left, first-party data would quickly become the holy grail for marketers. And almost nobody had a greater war chest of high-quality, first-party data at their disposal than travel brands.

For decades, airlines and hotels touted the benefits of loyalty programs. Accumulate as many miles or points as you can and reap the rewards: free travel, upgraded experiences, “status,” free Wi-Fi, etc. An influx of consumers signed up for these programs, and over time, have developed brand loyalties in the interest of extracting maximum value and new, shiny rewards (among other reasons, of course).

The benefit to airlines and hotels has been significant. In executing these programs, travel brands have amassed a powerful set of highly relevant first-party data that — perhaps most importantly — is unreliant on cookies. And many have nurtured and deployed this asset to drive material business impact. A December 2022 study from Sojern, a travel marketing platform, revealed that 86 percent of travel marketers felt this type of first-party data was effective in maximizing overall revenue, with 68 percent stating it helped to build stronger customer relationships. Travel’s investment in building out and gathering first-party data on its customers has become a blueprint for other industries.

The Retail Media Network Parallel

Today, there's a crop of companies going through a similar type of evolution. Retailers and brands are using retail media networks (RMNs) to build comprehensive advertising offerings around their valuable first-party data.

Retail brands have always had and leveraged first-party data in an intelligent manner. Whether it’s coupons and loyalty cards, direct mailing campaigns, or digital retargeting, the tactics associated with first-party data have been core to retailers’ advertising strategies for some time.

What’s changed over the last year, however, is that retailers are increasingly making that valuable data available to brands for media planning and activation, especially in off-premise environments like connected TV (CTV). Retailers and e-commerce brands such Amazon.com and Walmart have long made their data available for execution within their respective walls, but now we’re seeing RMNs push increasingly into new environments.

This is an enviable position for retailers to be in, especially with opportunities to deploy first-party data in premium environments such as CTV, where audiences are engaged and CPMs are high.

However, the picture isn’t all that rosy. Recent privacy laws and a host of other legislative proposals have led RMNs — and the ad industry at large — to be cautious in how they operate.

The Supply-Side Shift

Historically, data used for digital ad targeting has been appended to a data management platform (DMP), and then passed onto a demand-side platform (DSP) for execution. When a DSP receives a bid request with signals like a cookie or an IFA, it works to resolve the user via the segments that were retrieved from a DMP. If campaigns are actively looking to target those users, then the DSP will return calibrated bid responses based on its proprietary algorithms.

This real-time workflow has its purpose: it’s efficient and highly targeted. However, it also opens up the original data segment owner to look-a-like buildouts and a devaluation of data in the long run. These are two issues that are entirely untenable for RMNs.

Consequently, the application of data in the bid stream has begun shifting to the supply side. This has allowed first-party data owners, including — yes, you guessed it — RMNs, to generate deal IDs and private marketplace (PMPs), in which all sensitive information is stripped and obfuscated from being passed in the bid stream.

To illustrate, a RMN looking to monetize its first-party data for a sports campaign might create segments for all frozen pizza companies in its network, and apply that data on the supply side for deal packaging. In doing so, it generates targetable deal IDs comprising users who have demonstrated a high purchasing propensity for specific brands, like DiGiorno or Red Baron, and then take those out to market.

This approach is highly advantageous for RMNs and their advertising partners. Brands can still reach buyers of their own products or of competitive products (for conquesting), while RMNs don’t have to fret about sensitive info like IP or IFA being exposed upstream to buyers.

The Path Forward for RMNs

As privacy compliance continues to grow in importance, the control of identification signals (and thus, addressability), is going to fall to publishers and their SSP partners. More and more, the buy side will simply take inputs and resolve a bid price.

Like any emerging trend in ad tech, there's a lot of work to be done for RMNs. They know that they're the next emerging big player in the space, but whenever you're dealing with data there are a lot of factors in play. Privacy, collection, identifiers, and the buy-side-sell-side relationships are all pieces to a very complicated puzzle.

Will it get worked out? Yes! Will it come with a new set of expectations? Probably. However, one thing we do know is that RMNs have a lot of power right now and they're certainly figuring out how to monetize their first-party data in a sustainable manner.

Amit Nigam is vice president of product at Beachfront, a convergent TV advertising platform.