A recent retail media advertising survey by IAB Europe was released on December 13th, 2022. The study found that retail media is one of the fastest-growing sectors within digital advertising, and IAB Europe forecasts that retail media ad spend will reach 25bn euros (about 21.4bn pounds) in Europe by 2026.
To understand the opportunity, IAB Europe and its member company Xandr, now part of Microsoft, surveyed more than 800 buy-side stakeholders on their current use of retail media and their strategic focus for the year ahead. Results show that retail media plays a key role in advertising strategy, as 92% of advertisers and 74% of agencies already partner with retailers to reach customers. Of the small share not yet engaged with retail media as a channel, 88% of advertisers and 77% of agencies plan to do so in the next 12 months.
Retailers own valuable first-party data
First-party data is data that is collected and owned directly by the website owner, in this case retailers. It is clean, reliable, and rich with information. Perhaps most important of all, it is the right kind of data that brands require from the sales point of view.
Many brands, especially those that rely on retailer distribution, simply do not have enough of their own first-party data to activate. For others, their data is scattered or siloed, making it difficult to personalize effectively. That is why retailer first-party data is so attractive.
All of this first-party data enables personalized advertising that customers will still want even after third-party cookies go away. It also enables the measurable performance brands are increasingly interested in: because the advertising and sales happen within the same environment, brands can link ad spending down to the SKU level.
Where the opportunity is
Data, in particular first-party data, is a key opportunity within retail media, largely driven by the deprecation of third-party cookies. More than a third of buyers cite this as a key driver of retail media adoption, and the majority are already working on their first-party data strategy. While 91% of buyers have a first-party data strategy in place, 49% are still working toward scaling it.
As with any new channel, retail media has its challenges. The study found that a third of respondents cited scale and integration with other advertising technologies as their top two barriers. Buyers want to purchase their advertising via one or a few technology partners, and the lack of retail media ad tech integration remains a stumbling block.
Daniel Knapp, Chief Economist at IAB Europe, commented on the factors driving growth: “Retail media in Europe is already an 8bn euro (6.8bn pound) market and growing double-digit despite economic headwinds. The pandemic-induced rise of e-commerce, paired with retailers’ first-party data in a world of signal loss, and the ability to combine ad exposure and conversion into a single platform are key market drivers. We see further potential for off-site retail media to integrate the retailer’s role more widely in the upper marketing funnel.”
Paul Longo, Global Head of Retail Media Sales at Microsoft Advertising, added: “Our research with IAB Europe shows how third-party cookie deprecation has accelerated the adoption of this channel, since it offers the benefits of first-party data with closed-loop attribution. However, there are still pain points related to scale and technology that are creating challenges for retailers and brands.”
Closed-loop measurement is only as good as the data feeding it. Talk to our team about connecting retailer and brand first-party data to your ad platforms.