Amazon has built a $31bn advertising revenue business on the back of its trove of customer shopping data
Third-party cookies used to be the building blocks of digital advertising. They captured interactions and preferences; powered personalisation, retargeting and tailored messages; they tracked conversion and attribution.
But in a post-GDPR world where consent, consumer preferences and transparency matter, browsers are giving up on cookies. Mozilla Firefox and Apple’s Safari browser have blocked cookies by default for some time. Google’s Chrome browser will phase out third-party cookies next year. That means advertisers must look elsewhere too.
With the cookie going stale, many business have spotted an opportunity to create advertising businesses based on their own customer data. So are we looking at a world where Google and Facebook’s digital advertising duopoly crumbles? Will it be replaced by a plurality of niche advertising marketplaces? There’s certainly room for more advertising businesses in a world without cookies.
The hotel group Marriott unveiled a media network last week that hopes to realise this potential. Marriot will let brands use anonymised customer data to display relevant ads to travellers on hotel websites and apps. In time, it plans to offer personalised ads on TV sets in their rooms, wifi portals and on digital screens in lobbies and bars. Marriott Media Network will be rolled out in the US and Canada first, before expanding to other markets.
Marriot is using Yahoo as a tech partner. Advertisers will book ad inventory on Yahoo’s ad portal, and Yahoo will match their data with Marriot’s customer data. And Marriot has lots of data: it has a loyalty programme with 164 million members.
An advertising network in the travel category presents marketers with a host of contextual opportunities. Travellers need transportation, gourmands want good food, tourists need to be entertained. So there’s scope for real utility around advertising to this audience. With a host of high end brands, Marriott can also offer advertisers access to high end travellers, interested in luxury products.
The Marriot group isn’t alone. Spotify, Walmart, Kroger, DoorDash and many more have all dipped their toes in the first party data advertising waters. But the poster boy for this sort of ad network is Amazon, which has built a $31bn (€29bn) ad revenue business on the back of its trove of customer shopping data. Google sells ads based on intent, Facebook on interests; Amazon can sell ads based on purchasing behaviour. It’s a potent offering. Amazon’s advertising success could be seen as a roadmap for niche media networks. But it could also be seen as another behemoth, more likely to squash burgeoning ad businesses.
Why? Well the main reason is scale. And unlike Marriot, Amazon doesn’t need tech partners. It has all the tech smarts it needs. In 2017 it made its software used to automate ad buying available to advertisers and ad tech firms – and now has around 600 advertising partners in its advertising ecosystem. This allowed it to branch out from ads that sell products on Amazon’s marketplace and court marketers that don’t sell products on Amazon. The pandemic and the subsequent rise of eCommerce can’t be overstated either.
That said, Amazon hasn’t been a passive beneficiary of global trends. The company hired heavy hitting sales reps, restructured its sales teams to court bigger brands and advertising holding groups, built ad tech to compete with Google’s ad manager and a data clean room called Amazon Marketing Cloud that helps advertisers understand how their marketing performs across channels such as search, display, video and audio. Amazon is also gunning for TV ad spends. Already selling video ads in Amazon Freevee, Fire TV apps, Prime and Twitch, it is soon to branch into live sports advertising with NFL’s Thursday Night football.
So while there are opportunities for the little guy in a post-cookie world, internet economics have always dictated that winner takes all – or at least the lion’s share. Any business looking to productise first party data and offer it to advertisers has to successfully position itself, and offer value or context that Facebook, Google, or Amazon can’t. They’ve got to make it hard for media buyers to ignore them by creating customer cohorts that are hard to reach through other channels.
And it’s only going to get more crowded in this space. Especially with big hitters like Disney+ and Netflix eyeing ad-supported subscription models. Ostensibly, this is to attract more users, with a lower priced subscription. But the cultural relevance of streaming programming has huge advertising potential. Not only are there particular shows that appeal to specific demographics, but there is opportunity to innovate around viewers behaviour.
Hulu, majority owned by Disney, has had ads since 2007. It offers display ads that appear when a user pauses their video. It also offers a ‘binge ad’ option, which lets users who are watching three or more episodes of a show watch longer ads earlier in the session, with an ad-free viewing experience later.
The good news: with the global digital advertising market projected to reach $566bn this year, businesses only need to secure a tiny slice of the market to generate high margin revenue. But it won’t be easy.