Retail Media: The Ultimate Guide
“Retail media” is one of the most important advertising trends in 2024.
Many retailers, however, either don’t monetize their site/app at all, or rely on ad networks to serve imperfect banner ads at the expense of user experience. Such ads also slow down page load times, impacting sales substantially.
Fortunately, retailers are increasingly launching retail media ad platforms for integrating user-friendly ads that target using first-party data, search terms, geo, and more. These ads include sponsored listings in search results, brand ads within homepage carousels, and even in-store ads on digital screens like smart TV displays and freezer doors.
This article takes a deep dive into what retail media is, why you should monetize with it, and how to launch your own retail media platform.
What is retail media, and who uses it?
Retail media means monetizing your digital space, whether online or in-store, by allowing your partners to promote their products throughout the user’s browsing experience. Target’s retail media platform, for example, enables vendors like Coca-Cola, Keurig, and Apple to buy premium ad placements across Target’s site, app, and in-store screens. Retail media is effectively the digital version of Shopper Marketing.
Many companies have retail media offerings, such as:
- Amazon: Amazon’s retail media ad product, including their Sponsored Products in search results, is booming. In Q2 of 2023, it saw a 23% year-over-year growth and totaled $9.51 billion.
- Walmart: Walmart’s retail media platform, Walmart Connect, is also quite successful, with 95% quarter-over-quarter revenue growth in Q2 2021.
- Chairish: Smaller marketplaces can also monetize with retail media. Chairish, a vintage furniture and art marketplace, launched a retail media solution in 2016 that allows their sellers to pay for promoted listings in search results.
Why monetize with retail media?
Retail media is a growing industry with high revenue potential for retailers that adopt it. With 67.4% of ad spend going digital and a valuation of $629.9 billion as of 2023, it’s time that all retailers launched their own retail media ad platforms.
Indeed - why not have vendors pay for premium website and in-store visibility? Such ad units you could offer include:
- Sponsored Listings: When users search for products, a relevant vendor can pay to be at the top of the search results. For example, if someone searches for soda, Coca-cola can pay to be the #1 result. This is especially valuable if a competitor, like Pepsi, would have been the #1 organic result.
- Homepage Carousels: You can add a rotating carousel of sponsored products on your homepage. Below, Thomas pays Walmart for premium product placement on the homepage.
- Drop-down menus: As users browse, ads could appear in the navigation tab. For example, Crayola pays Walmart for featured product photos on the arts & crafts drop-down.
While retail media is traditionally associated with website or app ads, you can also integrate these ads into your in-store experience too, such as:
- Refrigerator/freezer screens: These smart screens can display ads targeted to whomever is walking past.
- Check-out aisle screens: Often, in check-out aisles, there are screens over the cashier. Why not advertise here?
- Audio ads: There is usually background music playing in stores. You could offer ads targeted by day/time, weather, geolocation, and more in between songs.
- Other screens: If you have any other digital screens — such as model phones, TVs, and so on — you could integrate ads that users would see when they test or walk past them.
- Beacon ads: If your store uses beacons, you could send ad alerts to users who have your app downloaded on their phones.
Retail media not only generates new revenue, but also enhances the user experience, especially if you incorporate first-party data into your targeting, such as browsing history, purchases, and other data you’ve collected on them.
More targeted ads means more relevant shopping experiences for users, as well as increased product discovery. Meanwhile, vendors appreciate this targeting because it leads to more ad-driven purchases.
What targeting do retail media platforms offer?
Successful retail media programs employ advanced targeting options to deliver the best results for their advertisers, like:
- Day/hour: You can target ads based on the local day and hour. If someone visits your site in the morning, for example, Keurig may choose to bid more to win that ad placement.
- Geolocation: You can target brands/products based on the user’s location. Local products could be targeted just to relevant shoppers.
- Weather: Adding weather targeting lets advertisers show ads based on the user’s local weather, something of interest to, say, a raincoat or sunscreen manufacturer.
- Ad Frequency capping: Add this to ensure your users don’t see the same ad over and over.
- First-party data: As mentioned above, you could personalize ad experiences based on data you have on shoppers, such as demographic (gender/age), behavioral (browsing and purchase history), and more.
- Search targeting: Let advertisers choose what search terms they want their sponsored products to be promoted for.
Options for retail media solutions
There are multiple ways you could launch a retail media program, effectively boiling down to “build vs buy.” Below discusses those options:
1. Retail media networks:
When to consider this:
- You want quick access to advertisers. Networks bring demand and connect you with advertisers, without you needing to pitch the program directly to your vendors.
- You need a fast launch time. You can usually implement these in days.
When to think twice:
- You want full customization. These are more of a plug-and-play solution; you’re limited to just their offered features, nothing more.
- You want transparency and control. Integration is simple and drives revenue, but you often lose control over who appears and have limited direct relationships with buyers.
- You don’t like revenue sharing. These solutions operate under an opaque rev share model.
- You want to do in-store advertising. There’s no digital-out-of-home targeting with a sponsored product network.
- You want to harness your first-party data. Walmart and Amazon are making billions from their ads by using first-party data to target. This is not something that’s possible with an ad network.
2. Build your own solution:
Amazon, Walmart, and Instacart built their own retail media solutions from scratch without using a third-party ad network. Building requires vast resources and time, but has its benefits.
When to consider this:
- You want something you own 100%.
- You want control over what features are prioritized. Since you are building it, you get to decide what features to design.
- You don’t want to pay vendor fees.
- You want transferable first-party data targeting. With an ad server built in-house, you can use data collected online for your in-store targeting, and vice-versa.
When to think twice:
- You can’t wait years. Every day your platform isn’t live means lost revenue, and building from scratch can take years.
- You don’t have engineering resources. Amazon, Facebook, and others all have hundreds of ad engineers to build and optimize their ad products.
3. Build faster with The Retail Media Cloud™:
An alternative to building from scratch is using an ad infrastructure platform that provides all the tools to launch a full-featured, custom ad program in weeks, not years. Similar to how Twilio cuts down the time to launch a custom communications platform, these solutions provide the best of all worlds: the customization of an in-house build with the ease of third-party software.
When to consider this:
- You want to quickly launch a custom retail media ad platform. Using a Retail Media Cloud™ built off of an API-first platform lets you build what you want, on your terms, in just weeks. You get the flexibility of an in-house build, but in a fraction of the time and cost.
- You want pricing transparency. These often employ SaaS pricing, based around # of ad requests, and don’t take a percent of media.
- You want all the benefits of an in-house build. Unlike third-party retail media networks, the Retail Media Cloud™ comes with all the benefits of building from scratch: no ad blocking, first-party data activation, DOOH targeting, and more.
When to think twice:
- You don’t have advertisers. The Retail Media Cloud™ provides the tech, not the demand, so you’ll need existing advertiser relationships.
- You want to launch in days without engineering help. Integration with infrastructure software does require some engineer resources, and it’ll likely take a few weeks.
Chairish, for instance, uses Kevel's Retail Media Cloud™ to quickly launch their retail media platform and integrate sponsored listings:
How much can I make with Retail Media?
Your ad revenue is dependent on many factors, including your traffic size, product, amount of ads, fill rate, etc. Below provides our analysis of average CPMs for various units, as well as educated guesses on the CPMs that major retail media ad platforms drive. (“CPM” stands for “cost-per-mille” and refers to the revenue you make for every 1,000 ad impressions).
How to begin
Your competitors are growing rapidly with retail media platforms. If you’re looking to launch one quickly — but would prefer the customization of an in-house build — you can use Kevel to design one in just weeks.
Kevel is the leader in ad infrastructure APIs and has helped eCommerce brands like Klarna, Bed Bath and Beyond, and Cornershop build flexible retail media ad platforms in a fraction of the time and cost as doing it from scratch using the Retail Media Cloud™.
Let us know how we can help you start today!