Strategies for establishing an ad enterprise
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In the ever-evolving world of retail, the name Amazon looms large. Its media scale is substantial, making it a challenge for many retailers to compete. However, a new approach emphasizes that every company, regardless of size, has valuable digital real estate that can be monetized.
According to the Winterberry Group Research report titled "Collaborative Data Solutions: The Evolution of Identity in a Privacy-First, Post-Cookie World," trust is a key factor in evaluating data collaboration solutions. This principle is particularly relevant for small retailers embarking on the journey to build an advertising business.
The first step in this journey is to conduct a thorough inventory of first-party data, such as purchase history, browsing behavior, in-store footfall, and demographic information. The goal is to identify monetizable insights that can solve real brand challenges and generate value repeatedly, such as product conversion analysis or promotion effectiveness.
Once the data is identified, the next step is to develop a retail media platform. This platform should enable brands and sellers to advertise on the retailer’s digital assets (website, app) and possibly offsite channels using the retailer’s proprietary audience data. The platform should incorporate features like programmatic ad serving, real-time auctions, and targeting algorithms based on purchase behavior and location to optimize ad relevance and performance.
To make it easier for a range of advertisers, including mid- to long-tail brands, to participate, the platform should provide self-service tools and API access. This allows brands to launch, manage, and optimize their own advertising campaigns at scale.
Ensuring privacy and data ethics is crucial in this process. Since first-party data is privacy-sensitive, the retailer should anonymize data and comply with regulations, fostering trust with both customers and advertisers.
The retail media platform should also enable measurement of advertising ROI through tracking online and offline impact, tying ad exposure to actual sales and customer actions. This transparency increases the platform’s attractiveness to advertisers looking to justify spend and optimize campaigns.
Starting small and scaling up is a key strategy for small retailers. Begin by offering smaller, high-value advertising products, such as sponsored product slots or targeted banner ads, to existing supplier brands. Gradually expand program features and advertiser base as the platform capabilities mature.
Starbucks could serve as an example of a company that has leveraged its data and channels effectively. Amazon's advertising business generated $7.95 billion in Q4 of last year, demonstrating the potential for small businesses. The journey to building an advertising business can lay the foundation for a new revenue stream.
In conclusion, small retailers should treat their transaction and customer data as highly strategic assets. By building an ad-serving platform with targeting and attribution capabilities leveraging that data, providing advertisers with streamlined tools and measurable results, and focusing on privacy and data ethics, small retailers can create a scalable retail media business model akin to Amazon’s. The lifecycle of building a retail media business involves a first-party data audit, development of a retail media platform, offering self-serve and API features, implementing closed-loop measurement and attribution, and starting small, scaling, and iterating.
- The evolution of technology in the retail sector has opened opportunities for small businesses to emulate the success of giants like Amazon, as shown by Starbucks, by building their own advertising businesses using their first-party data.
- To create a retail media platform that rivals those of tech giants, it's essential for businesses to prioritize privacy and data ethics, ensuring the anonymization of data and compliance with regulations while still offering advertisers measurable results.
- As small retailers embark on building an advertising business, they must adopt AI and advanced research methodologies to optimize their retail media platform, incorporating features like programmatic ad serving, real-time auctions, and targeting algorithms that contribute to the platform's scalability and attractiveness to advertisers.
