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Retail Media Makeover: The promise of AI and automation for next-level advertising solutions

The growth of retail media networks (RMNs) continues to accelerate amidst a shakeup in the media industry.

AI and changing consumer behavior are driving significant changes in the advertising industry. For example, search is undergoing a transformation with the introduction of ChatGPT, and Google has launched its own version called Bard to compete in the market.

TV and streaming video are currently experiencing a massive shift as consumers increasingly opt to cut the cord on cable. Simultaneously, media companies are unbundling services, offering consumers a growing number of content options.

As media companies and streaming players shift their focus from subscriber growth to profitability, they are introducing new subscription tiers that include advertising.

These market evolution and dynamics bode well for RMNs, as they provide clearer purchase intent and a connection to rich, first-person sales data for advertisers. However, to capitalize on and maintain this advantage, RMNs will need to invest in their products and capabilities.

Looking ahead, it’s essential to consider where RMNs might invest to drive growth, particularly with the growing importance of AI and automation.

Here are a few areas to consider.

The basics: dynamic audience builds for advertisers driven by AI

One of the primary reasons brands choose to advertise with RMNs is the access to new customer audiences that have a clear tie-in to sales.

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Brands cite access to audiences as the second most important factor when working with RMNs
Source: McKinsey

Providing access to new audiences that meet advertisers’ goals is a crucial capability for retail media networks. However, scaling custom audiences and providing them to brands on a 1:1 basis becomes challenging as the volume of campaigns on a platform grows.

Advancements in AI will make the identification and building of customer audience segments much easier for RMNs in the future.

For instance, it’s not difficult to imagine AI tools in the not-too-distant future that will simplify the process for advertisers to select campaign parameters (such as goals, duration, geography, impressions, etc.) and build custom audiences using data from the retailer’s broad customer base.

This contrasts with many current campaigns that rely on numerous audiences generated by retailers, which may not always be tailored to each campaign’s specific goals.

AI-generated audiences will only become a reality with the necessary investments that come with building a media company, rather than being merely perceived as “found money” for retailers aiming to boost their bottom line.

As the retail media market increasingly adopts AI-driven models, advertisers’ spending that goes beyond trade spend will accrue to the largest networks equipped with the tools to provide more customization for advertisers, starting with audience targeting.

Deeper data integration with third-party (“offsite”) media to improve attribution models

More and more RMNs are entering partnerships with media channels to leverage their sales data, enhancing attribution quality for advertisers.

Best Buy announced a deal with Roku earlier this year, and Walmart recently announced a deal with NBC Universal.

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Walmart’s new deal with NBC Universal will enable it to try RMN-powered within livestreaming sports, such as the English Premier League

For many RMNs, integrating first-party sales data with third-party media offers a path to connect point-of-sale data with a comprehensive view of a customer’s media consumption and exposure.

This, in turn, allows RMNs to drive more value for advertisers—and charge more—by helping them understand the impact of marketing tactics across various media types and messaging.

However, one challenge in this emerging model is the lack of consistent ways to measure return on ad spend (ROAS) across RMNs. Addressing this particular gap, Albertsons Media Collective recently advocated for more universal measurement standards.

As retail media networks mature and retailers discover more ways to leverage their valuable sales data, integration with data from other media channels may become crucial for their growth. This will help them break away from being perceived solely as another trade spend vehicle for advertisers.

More in-store activations with data to understand sales impact

In-store activations and the unlocking of additional “onsite” inventory holds substantial untapped potential for retail media networks.

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Source: eMarketer

However, the challenge lies in preserving a great in-store customer experience while confidently measuring the impact of ads throughout the customer’s shopping journey.

Early indications show that retailers are pursuing this course as an avenue to increase media sales. Kroger is expanding smart screens for its coolers. Walmart is adding offerings through in-store radio as well as enhanced product demonstrations.

In-store activations represent an emerging space with significant potential in the coming years as retailers become better equipped to connect ad exposure directly with sales.

By considering these areas and leveraging the power of AI and automation, retail media networks can undergo a transformative makeover, delivering improved solutions and unlocking new opportunities for advertisers.

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