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Why Retailers Are Becoming Online Media Players

10/27/2011 11:47:00 AM

For years, major retailers have created new revenue streams by transforming existing assets into paid media channels — e.g., product in-store signage, TV display ads, co-op circulars, etc.

That practice isn’t likely to change, but there’s a new asset retailers are increasingly looking to convert into a profit-making media channel: website visits. (See: Figure 1)

tranformingweb.jpg

Earlier this year, Amazon quietly announced it was entering the online advertising game by using its consumer data to deliver targeted advertising on third-party sites across the web.

Amazon has an unfathomable amount of consumer shopping data — which items consumers looked at, purchased, compared, abandoned in a shopping cart, etc. — and it’s now available to outside advertisers looking to reach these consumers using online display ads.

Amazon isn’t the only major retailer experimenting with this type of consumer targeting.

Best Buy’s online cookie program segments their 30 million online shoppers into consumer categories based on the pages they visited on BestBuy.com, allowing partners to target these consumer groups with display ads across large publishers such as Yahoo, MSN and AOL.

More recently, Walmart became the latest major retailer to buy into this online trend when it agreed to buy the “key assets” of mobile-social ad network OneRiot in September. OneRiot uses data from social networks, such as Twitter and Facebook, to deliver more-relevant advertising to consumers.

By purchasing OneRiot’s technology, Walmart now has the ability to match consumer interests with the most relevant product ads from Walmart and/or their co-op partners.

These types of retailer-enabled media opportunities are coveted by online advertisers looking to find in-market consumers who are already interested in their products and reach them with relevant ads across the web. For example, electronics manufacturers would be interested in serving ads to consumers who were shopping on Best Buy for both their products and their competitors. Using Amazon data, home audio companies can target consumers who recently purchased big-screen TVs.

These are just a few examples of how retailers are leveraging their online data for better ad targeting while simultaneously increasing revenue. But the message is clear — both online and bricks and mortar retailers are looking to digital media to further profit off of their consumer bases. As online usage continues to grow, other retailers will look to follow suit. Large online and bricks-and-mortar retailers like the three mentioned above will continue to invest in building or buying media companies to transform their data into profit, but the barriers of entry for smaller retailers are falling away.

Many retailers do not know that they already have one of the biggest assets necessary to begin: their website data. Previously, it would take a major investment to build the infrastructure to enable targeting around online retail data. At the same time, smaller retailers with limited site traffic would have trouble packaging their user data for profit. A smaller audience limits scale, and the ability to reach many consumers across the web is a big factor in decision making for major advertisers.

But if retailers control their data and package it in a usable way, they can tap into this valuable revenue channel.

There are white-label solutions available today that help retailers profit off their data, complete with online data management solutions, ad targeting infrastructure, built-in privacy compliance and even an in-market sales force.  Over the next few years, you can expect to see small and big retailers alike leveraging these solutions as they become formable media players.

Jay Habegger is the CEO of OwnerIQ.

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