Macy’s is capitalizing on a big-time trend in online advertising. The retailer recently discussed with investors the growth of an in-house online media network that sells ads to brands. The Macy’s Media Network, launched in August 2020, has already generated $35 million in revenue. The growth of the network underscores how big retailers are becoming advertising partners.
The Macy’s Media Network
Here’s how the network works:
- An in-house Macy’s team offers advertisers digital formats like sponsored product, website display, and physical media ads.
- Macy’s draws on all the data it has accumulated about Macy’s customers (including customer behavior data from the Macy’s website – known as first-party data) to ensure that the above ad formats target customers based on their shopping habits. As Macy’s says on its website, “We connect our shoppers to your brands through a wide range of advertising services. And it’s all driven by data . . . First-party data helps us find your perfect audience, whether it be on or off our site.”
- The above ads appear on the Macy’s website or off it.
- Macy’s describes its audience as “Fashion-focused customers who LOVE to shop.”
If the above approach already sounds familiar to you — well, it should. Macy’s is following a model that Amazon has already mastered via Amazon Advertising and that Walmart is developing with Walmart Connect. In addition, retailers ranging from Kroger to Target are building their own networks in an attempt to put their own first-party data to work and generate more revenue streams in a digital-first world. The two clear leaders are:
- Amazon Advertising. Amazon benefits from its scale. Amazon is an enormously powerful search engine for shoppers. And Amazon uses artificial intelligence to create insights into how people search and purchase products across its vast digital inventory. That’s why Amazon has now challenged Google and Facebook to become the third-largest ad platform in the world.
- Walmart Connect. Walmart is just beginning to flex its muscle to provide advertising products that are similar to Amazon’s. What makes Walmart Connect stand apart is the way Walmart can also tap into shopping purchase behavior inside Walmart stores.
Why would Macy’s enter a market that is already becoming crowded? Because Macy’s, like any retailer with an ad platform, has something no one else has: its own first-party data. The data that Macy’s collects about its own customers gives potential insights into a targeted audience consisting of shoppers who are especially interested in beauty and fashion.
Here is what we believe will happen with retailer-based ad networks:
- They will proliferate. Retailers are under tremendous pressure to improve their margins. As more shopping behavior shifts online, it makes sense to wrest more value from their customer data.
- They will become more specialized. Macy’s, for instance, is focused on fashion and beauty customers. Consider how many other retailers could build up ad networks. Best Buy could offer services for advertisers wanting to reach consumers of high-tech consumer products, for example.
What Advertisers Should Do
We suggest that advertisers:
- Consider retailer-based ad networks as a complement to your existing digital ad strategy, not as a replacement. If your strategy focuses on Facebook and Google, for instance, don’t move your ad dollars over to a retailer network. Remember that Facebook and Google also already offer proven advertising products that capitalize on their vast user base. For example, location-based digital advertising tools help strengthen Google’s advertising services at the local level.
- Learn more about the ad products that might apply to you – and those products are evolving. For instance, Amazon recently launched Amazon Live, which makes it possible for retailers to use livestreams to sell products – part of the live commerce trend we blogged about recently. But if live commerce is not your cup of tea, ad products such as Display and Sponsored Brands may be more appealing.
- Work with an agency partner that knows the terrain. For instance, at True Interactive, we’re already helping businesses integrate Amazon Advertising and Walmart Connect into their digital advertising game plan. We offer complete management of all Amazon Advertising products – including Sponsored Products, Sponsored Brands, Sponsored Display, Video Ads, and more. We do the same with all Walmart ad products such as Sponsored Products ads.
Meanwhile, Macy’s expects more growth for its own ad platform. In a recent call with investors, Jeff Gennette, Macy’s chair and chief executive officer, told investors, “Looking ahead, we see a lot of promise in our ability to expand our monetization engine, while cultivating greater customer engagement with more relevant and personalized content and offers.”