#4: The rise of offsite media
A primer on ad targeting, data matching and offsite media
Introduction
Achieving retail media’s significant growth potential requires solving a number of challenges, which requires strong collaboration between retailers (publishers), advertisers (brands) and adtech companies. There is no better example of such collaboration being possible than offsite media. Brands are demanding it, retailers are rushing for it, and new solutions are emerging as a result of it. I provide below the foundations to understand the rise of offsite media.
Personalised targeting and the creepy cookie
The benefit of digital advertising over traditional advertising (e.g., billboards) comes from the ability to target the right customers for the advert and reduce wasteful advertising in the process. Targeting could be contextual or personalised. In contextual targeting, ads are shown based on what the person is browsing on the website and the organic results that come from it (‘the context’). It does not require understanding a person’s preferences as the ad does not vary by person. For example, if someone is searching for grocery supermarkets on a search engine, a relevant contextual ad will be from one of the supermarkets. In contrast, in personalised targeting, ads vary based on the person browsing.
Much of digital advertising, outside of search advertising, is based on personalised targeting. This requires knowing a lot about the person including what they engage with, their demographics, their location etc.1 Such information were historically collected by adtech companies using third-party cookies. These are trackers placed by adtech companies on websites and apps they did not own2, to track a person’s digital activity across the internet.3 I am sure most of you have had that creepy experience of seeing an advertisement on a website that was related to something you were searching for on another website. This is commonly known as re-targeting and it is just third-party cookies at work.
The shake-up
Owners of browsers and app stores set the rules for third-party cookies. The two key owners here are Apple (app store and Safari browser) and Google (Chrome and Google Play store). With the argument of increasing user privacy, both these companies are taking steps to reduce the effectiveness of third-party cookies. For example, Apple now requires apps running on its devices to get consumer permission before tracking their activity on other apps. This means without permission from the consumer, adtech companies cannot track what a user is doing on other apps. These changes significantly affect the data that adtech companies, outside of Apple and Google, can collect on an individual. This loss of information, also known commonly as loss of signal, affects the ability to personalise ads and therefore adversely impacts the efficiency of digital media.
Since this development, adtech companies started rushing towards retailers and marketplaces to form partnerships as they realised that these parties (also known as “first-party data holders”) hold meaningful data about their customers, including what they browse and buy from them. Such data partnerships are expected to help overcome the loss of signal from the deprecation of third-party cookies.
These data partnerships created a new media revenue stream for retailers – popularly known as offsite media. Offsite media refers to adverts put by advertisers outside of the retailer’s website and app (e.g., on the website of a newspaper), where the space for the advert is provided by another publisher (e.g. the newspaper) and the data for personalised targeting and measurement of the impact of the advert is provided by the retailer. It is also sometimes referred to as non-owned and operated (non-O&O) media as the digital space for the advert is owned and operated by another party.4 The revenue from such adverts is then shared between the publisher (inventory provider), retailer (data provider) and the adtech company that provides the technology for doing this, with the retailer typically taking 10-30% share of the revenue.
The new world of tracking consumers
The data partnerships also led to a new world of tracking consumers across the internet. To track consumers, adtech companies need a method to identify whether it is the same consumer browsing across different websites. Doing this requires matching some common characteristics of a consumer across websites (also known as ‘data matching’).
In the presence of third-party cookies, this matching was done using IP addresses as the common characteristic. With the onset of first-party data partnerships, adtech companies can now match customer data across the internet in two ways. First, adtech companies can now place their cookies across all their partners. As a result, they can obtain the same data across their partners that they could access previously through a third-party cookie on their partners’ websites (e.g., details such as IP address). Second, adtech companies now have access to more data about a consumer including their names, email addresses, potentially their physical address (along with data on what they browse and buy). As a result, customer data can now be matched more robustly using these new data. For example, matching customers through IP addresses fails to understand that it is the same person browsing on two different devices (e.g. a laptop and mobile phone) as both devices will have different device identifiers. However, matching based on a mix of names, email addresses and other personal variables solves this problem. Paradoxically, an attempt to increase user privacy is leading to more data being shared about users.
Closing thoughts
Personalised targeting is key to driving the efficiency of digital media. The effectiveness of personalised targeting depends on the richness of information that can be collected to build personal profiles. While third-party cookies enabled information collection previously, its imminent deprecation has led to a new world of tracking consumers across the internet, enabled by first-party data holders such as retailers. This has also created a new revenue stream of offsite media for retailers, who are rushing to unlock the revenue. Is the case so obvious for retailers? I will discuss this in my next post.
Google search engine likely uses both contextual and personalised targeting – the ads typically relate to what a person is searching for, but they can vary based on who is searching. On the other hand, DuckDuckGo search engine serves purely contextual ads. If you want more privacy, install the DuckDuckGo extension on Google Chrome.
Hence the name third-party cookies, as cookies are placed by companies that do not own the website or app. When cookies are placed by companies that own the website or app, they are called first-party cookies.
For example, Meta could track what users are engaging on other apps such as Amazon.
There are some offsite media channels which are owned and operated by the retailer – e.g., retailer CRM channels such as emails and push notifications. Hence, it is more accurate to use the terminology of non-owned and operated media than offsite media.