5 min read

Why Managed Services Won’t Work for Retailers

Sarah Wheeler
Sarah Wheeler
Updated on
July 20, 2022

As retail media sweeps the globe (generating $50B by 2023), it’s easy to see why retailers want third-party ad solutions with built-in self-serve functionality for advertisers. Managed service providers (MSPs) offer lightly customizable self-serve UIs to retailers out-of-the-box and tap into an existing interconnected pool of brands ready to advertise on retailer platforms. They help advertisers easily launch and manage campaigns by offering a unified interface to operate across many retailers. In turn, they help retailers access advertiser demand immediately to quickly scale their retail media programs from ground zero to a revenue-driving initiative.

But MSPs aren’t built to scale and they aren’t built for retailers to own the advertiser user experience or advertiser relationship. Amazon, Walmart, and other major retailer media players would have never achieved the scale they have with a third party MSP controlling sellers’ ad experiences and cross-selling ads for other retail platforms in the same self-serve product. 

The alternatives to third-party MSP offerings? Build your own self-serve UI in-house, or customize off-the-shelf from an adtech provider who enables you to treat your advertiser ecosystem as a walled garden. This article discusses why that’s important and how to build a scalable, future-proof retail media platform.

Why self-serve ad buying is important

Think about the top ad platforms out there: Google, Facebook, Amazon, Twitter, etc. These companies have scaled to billions in ad revenue thanks to self-serve ad portals, where advertisers can simply input a credit card, set up campaigns themselves, and pull their own reporting.

Facebook campaign set-up
Example: Facebook campaign set-up

Granting advertisers direct access to launch campaigns on their platforms allows self-serve publishers to scale their ad programs quickly. The alternative is building out large sales and ad operations teams, which becomes expensive and burdensome. Self-serve simplifies this by offloading the invoicing, campaign management, and reporting to the advertiser.

Self-serve also drives new advertisers who may have avoided a manual buy, either because of the work involved or because they didn’t hit a minimum spend threshold.

The benefits of self-serve through a retail media network

These retail media networks go hand-in-hand with MSPs, offered by companies like Criteo and CitrusAd. The success of MSPs and their self-serve UI offerings is clear as they continue to dominate the market. Criteo hit $2.2B in revenue in 2021 and their competitor, CitrusAd, was acquired by Publicis Group in 2021.

There’s no debating these solutions have value, as they enable retailers to spin up retail media programs quickly while also providing turnkey access to advertisers. MSPs give retailers instant access to a self-serve ad portal that they can direct advertisers to. There’s no need for retailers to create massive ad operations and sales teams (or build the technology from scratch) when the networks will handle most of this themselves.

The MSP benefits, in turn, from a retailer bringing new advertisers to their networked ecosystem. With unified self-service ad tools across the MSP’s marketplace of retailers, advertisers are encouraged to purchase ad inventory from many retailers in the MSP ecosystem. 

MSPs are also attractive because of how familiar retail advertisers, agencies, and DSPs already are with their self-serve UIs, making for an easy learning curve and quick onboarding. 

For those testing the viability of retail media, these solutions are a no-brainer.

Why managed service provider UIs don’t work long term

A low-resource and cost-effective solution is understandably attractive, especially to small or mid-sized businesses, and launching a program quickly sounds good for business, right? In reality, MSPs could cost retailers one of their most valuable assets: privacy. Managed services are networked, meaning not only can they share data but they can also sell it to willing buyers -- including competitors.

In recent years, there have been numerous high-profile instances of managed service UIs selling private data to optimize advertisers. Such was the case for GoodRx, who settled a $1.5 million lawsuit with the FTC over the disclosure of private health information with third-party advertisers. In 2022, the aforementioned Criteo also came under fire for GDPR consent breaches and faced a $65 million fine

When retailers work with a MSP’s UI, they may save some money upfront. But they also run the risk of incurring big costs down the road -- both in lost revenue and lost trust. With such a risk, you’d think that these MSP’S would perform optimally for retailers. This isn’t always the case. 

On top of the privacy risk, you may also discover that the user experience and branding of a managed service UI isn’t ideal. If agencies/advertisers dislike this generic UI, there’s nothing the retailer can do to create a better user experience. Not to mention, if a retailer uses the same UI as hundreds of other retailers, it can be hard to gain any competitive advantage for their retail media program.

In other words, retailers sacrifice privacy, control, and flexibility for quick revenue. At a certain point, as the program makes millions upon millions, retailers inevitably realize that they have outgrown the MSP solution. Managed services may work great short-term, but eventually, these retailers will want to see revenue numbers like Walmart ($2B) or Instacart ($1B). And to see numbers like Walmart and Instacart’s, you need to build ad tech like they did – in a way that protects your valuable data and is tailored to your business. 

Instacart ad tech growth
Instacart ad tech growth

It’s time to start building your own retail media network

The limitations above only worsen over time. It may sound daunting and time-consuming, but building your own retail media network is the only way to future-proof your revenue and set yourself up for long-term success.

Building it yourself also enables you to upgrade your self-serve portal and offer an experience that truly delights your advertisers. Such benefits include:

  1. Safeguarding your data. Creating your own retail media network eliminates the privacy concerns that come with managed services. 
  2. No revenue share with the third-party vendor. A 5% rev share adds up when you are earning tens of millions, or much more, through your platform.
  3. Full control over the user experience and branding of the UI. You can create an interface that is intuitive, seamless, and on-brand, potentially making your platform more interesting to advertisers.

You don’t have to start from scratch

The good news is that you don’t have to build your own retail media ad network completely from scratch. Using an API-first ad platform with an off-the-shelf self-serve tool is a future-proof and cost-effective middle ground for retailers who want all the privacy and control of their own retail media platform, without the lofty drain on resources. 

Kevel’s retail media APIs make it easy to build in-house ad platforms, complete with native ads like sponsored products; first-party data targeting like past purchase behavior; and a beautiful, custom-labeled self-serve UI you can direct advertisers to. 

The best part? With Kevel’s flexible self-serve alternatives your data is always protected. Kevel’s ad APIs can help you create your own walled-garden for total control.

To learn how retailers like Everli and Flink launched with Kevel in just weeks, contact us today.

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