The Birth of XMNs – Retail Media Networks (RMNs) for All
By Anil Mathews, CEO of Alphabyte
For the advertising industry, the massive paradigm shift away from cookies and third-party data is upon us. As someone who built a billion-dollar business capturing unique data from apps and websites, phone service providers, and Wi-Fi networks in order to provide data intelligence to clients such as Ford and Dunkin’ Donuts, I certainly recognize that the days of utilizing third-party data across the open web have sunsetted.
For advertisers, this means scrambling to find new, genuine ways to connect within the relatively walled gardens of first-party data. That can certainly make it challenging to deliver ads that resonate on a personal level — with a conversation or connection that makes consumers feel like ‘they get me.’ Therefore, it’s becoming even more important than it has ever been before to engage consumers with ads where and when they want to actually see new products or services.
Targeting Consumers Where They’re Shopping or ‘Window Shopping’
Increasingly, where consumers want to engage as they discover new products is not on Google or Facebook; it’s on an actual retailer’s website. In fact, 61% of U.S. consumers begin their product hunt on Amazon, and only close to half on a search engine like Google. This change in consumer behavior, combined with the deprecation of cookies, has led to the recent explosion in Retail Media Networks (RMNs).
RMNs represent the digital evolution of in-store aisle displays, or even coupons, but tailored for the online realm. They serve as a strategic platform for brands to position their ads directly within consumers’ shopping journeys. By leveraging these networks, brands can target customers at the precise moment of purchase intent, maximizing the relevance and impact of their advertisements. Similar to how a physical billboard captures the attention of shoppers in a mall, a RMN strategically places ads within the digital shopping environment, ensuring brands can engage with consumers in a contextually relevant manner.
This promises higher conversion rates, increased brand visibility, and, ultimately, a more effective advertising strategy in the post-third-party cookie era. Given this promise, retail media is expected to be the fastest-growing ad channel through 2027, increasing 20% year over year. In fact, by 2027, retail media could even eclipse social media as the second biggest advertising channel.
Retail Media Isn’t the Death of Ad Data, it’s the Birth of Better Data
But RMNs don’t have to end at the wall of Amazon.com. In a lot of ways, the data from these media networks will fill the void left by cookies with more reliable, personalized, first-party shopping data. Today only 10% of display ads across the Internet are powered by this type of data, but in the future, it’s very likely we will see a rise similar to programmatic, where retail media powers the majority of display ads.
Today, Facebook is the largest display advertising platform, but in a lot of ways, that is kind of ‘dumb data’ as they’ve lost the shopping signal with Apple and Google’s restriction on third-party data. Retail media provides attribution without cookies. Thus giving brands the opportunity to target buyers who have purchased similar products or at least within a similar category of products.
The use of this data may also finally end the firm lines between ‘TV is for brand’ and ‘digital is for performance’. Walmart’s recent acquisition of smart TV maker Vizio for $2.3B was a premonition for the pathway of retail media toward connected TVs (CTVs). The CTV business will instantly increase Walmart’s ad business with streaming inventory and the future ability for consumers to make purchases directly from TV ads. Meanwhile, brands will be able to tailor TV bidding for the first time based on purchases, inventory, reviews, and other shopping data.
RMNs Aren’t Only Reserved for Retailers
What might be the most interesting aspect of this paradigm shift to RMNs is that the opportunity doesn’t have to be limited to traditional retailers. Any X, Y, or Z brand with an engaged digital customer base can launch a RMN, or as I like to call in this case, an XMN.
Marriot made a splash a few years ago when the hotelier launched its XMN, which enables brands to advertise across TV screens in hotel rooms, its Wi-Fi portal, and other digital screens in its properties’ lobbies, gyms, and bars.
Meanwhile, Uber’s run at a XMN already has an annual run rate of more than $650M, and it believes it will be a billion-dollar business by year’s end. Does that mean every business with buyers and a captive audience on the Internet could be a profitable XMN? With the right technology, I increasingly believe, yes.
Sure, there are many challenges for smaller or midsized businesses. The advertising landscape is increasingly dominated by large players, creating a high barrier to entry for those without substantial resources. This is particularly acute in the realm of XMNs or RMNs, where the complexity and cost of building and managing such a platform can be prohibitive. The solution for many small and midsize businesses may lie in leveraging new technologies, such as AI, to democratize access to RMNs.
Today, AI and machine learning offer a bridge over the traditional barriers of entry, providing scalable, cost-effective solutions that can enable nearly any business to monetize its digital presence without the need for extensive infrastructure or deep technical expertise. These technologies can analyze vast amounts of data to provide insights and recommendations, while also connecting online and offline shopping experiences. The result is a more efficient advertising spend, higher conversion rates, and, ultimately, a stronger connection with customers.
As the digital advertising landscape evolves post-cookies, the opportunity for businesses of all sizes to participate in RMNs is expanding. By leveraging new technologies and platforms, these businesses can navigate the challenges of the new advertising era, by harnessing the power of their own data to create meaningful, personalized connections with their customers for both themselves and other brands.
