How the right CDP Scales Revenue and Margin for Retail Media

So far in this series of posts, we’ve talked about how the CDP has developed. We’ve seen it go from the domain of data science to putting the organisation’s data in the hands of the marketing team. But there’s another sector where that same shift is just as important; retail media.

There’s been a lot of noise about retail media for a few years now, as retail brands look to monetise the massive amounts of data they collect about their customers. There are two basic models. Retailers can sell targeted advertising on their online properties. Advertisers can use data from a retailer to target advertising on sites not owned by that retailer.

Until recently, the retailers with the most customers, and therefore the most data, have dominated the space. Amazon is the leader, then the big US grocery chains. But other sectors are getting involved. Travel, finance and media brands all have a wealth of customer data, and they too are grasping what’s now a commerce network opportunity. At the same time, commerce media is spreading beyond the US into the rest of the world.

The problems of scaling down

But this growth comes with problems. As the market has developed, specialist vendors have emerged to provide the technology stacks required. But that specialist technology can significantly cut the margins retail media can deliver. And it’s particularly problematic in the case of offsite retail media. Businesses might be spending 70% of their revenue on Facebook media, for instance, leaving them a very small 30% margin on that business. And they’ve still got to factor in ad ops, the data costs, plus all those technology costs.

This might be less significant in the huge market that is the US, but in regions like Europe you’re having to deploy these networks country by country. That means the revenue opportunity is already down to 15% or 20% of what the US can deliver, but still with substantial technology costs. As a result, there’s a whole wave of activity in the market to reduce those costs, so that retail media can become a profitable business.

As a brand embarking on a commerce media journey, you want to be sweating your technology infrastructure. If that includes tooling that gives control of the organisation’s data to the marketing team, it could also be powering your retail media business. A CDP that ticks all the boxes in terms of the media activation and audience boosting that we’ve talked about in previous blogs, can automatically deliver all the capabilities that a commerce media business needs. Immediately, you’re spreading the cost across more of the business.

The problems of scaling up

The other area where infrastructure costs have a major impact is in data collaboration. The Nirvana for data owners is moving beyond managed service retail media and all of those issues around margins. Simply licensing your data to advertisers means 100% pure margin. And every brand out there wants access to that sort of data so they can push it through their own agency channels.

The challenge is the hefty technology fee on each of those collaborations. It becomes very difficult to make this scale, and for the advertisers to make the business case stand up. They’re not only having to pay for the data, but this significant technology cost to make the collaboration work in a privacy protected way. So how do you unblock some of this friction so you can scale these collaborations up?

The big data warehouses all now have cleanroom technology solutions. As we’ve said before, that’s great if you’ve got a big IT team with data analysts who are hands-on doing technical queries. But the value really comes from being able to activate that data and the insight it delivers. You want to be able to activate that into your Facebook campaigns, for example, and measure how effective that is.

So we’ve taken all the tooling in our CDP and added that on top of the cloud clean rooms. That solves the scalability problem, because the clouds can just scale up as required. They don’t need to charge tens of thousands of pounds to do so, they can just add an increment on their compute charges. At the same time, you’ve got a UI that makes this usable by the business. So business people can log in and set up collaborations without it costing a lot of money.

Investing in the right Data Platform within your existing data warehouse infrastructure creates a single solution that benefits both your internal marketing teams and your retail media business. This shared infrastructure helps amortise costs, delivering the efficiencies needed to scale a profitable and competitive commerce media operation.