Retail Websites Pile on the Ad Tech, but May Be Repeating Publishers' Mistakes

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A row of product ads appear on Walmart.com.
A row of product ads appear on Walmart.com. Credit: Walmart
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Look under the hood of most major retail websites and you might think you're looking at the back end of a top tier publisher.

E-commerce sites seem to be doubling down on ad tech, as large retailers look to capture more data on shoppers who visit, especially those that don't make a purchase at checkout. But are retailers overlooking the lessons that publishers learned doing the same thing? Many news and entertainment websites spent the past few years larding on ad tech to improve their targeting and tracking capabilities, only to slow down their sites and spur the adoption of ad-blocking software.

"I think you can look at the retail sector as the latest version of the publishing community to go through this challenge," said Chris Copeland, president at Yieldbot. "Retailers run the exact same risks as the rest of the publishing community, which is they sacrifice latency and speed in an attempt to better monetize."

"The challenge they are now getting into is one the core publishing industry went through the last two or three years, which is, 'What am I doing to speed? What am I doing to user experience?'" he added.

Many large retailers are successfully generating ad revenue from marketers eager to reach their visitors, who are reasonably considered to be in a shopping frame of mind.

The growth of the ad business on retail sites was spotlighted with two acquisition deals this month, just nine days apart: HookLogic's sale to Criteo and Triad Retail Media's sale to the WPP unit Xaxis.

HookLogic and Triad are both in the business of serving display ads on the websites of mega retailers including Walmart, eBay, Sam's Club and Staples.

"Triad and HookLogic created a business with what retailers had that wasn't a business already," said Jon Bond, founder of marketing consultancy company Tomorrow. "Retailers like the idea of selling digital ads because it's a lot like what they already do non-digitally, which is to try and take as much money from vendors as they already can through slotting fees and co-op. This is almost another version of that."

The number of ad tags on the desktop website of Kohl's when viewing a couch (top) and The New York Times when reading an article about the election (bottom). Credit: Ghostery

Retailers are even beginning to follow publishers into using header bidding, a programmatic technology that often leads to increased revenue by calling for bids on ad inventory from all comers at once rather in a sequence that stops at the first decent offer. "I would say retailers weren't the early adopters of header bidding, but they are starting to now," said Andrew Casale, president and CEO of Index Exchange.

Index Exchange has about six retailers using its header bidding product including eBay, he said, adding that it's in "talks or mid-integration with dozens more."

But unlike slotting fees to shelve certain products, ad tech can drive up website page load times, driving away impatient shoppers. Some retailers are seeking help bringing order to the tangle of code now running on their sites.

"We do business with a lot of retailers specifically on this issue," said Scott Meyer, CEO of Ghostery, whose services include fighting latency for websites by evaluating each of their ad tech partners. "It's almost like retailers actually have the same problems as publishers. Performance matters a lot. The more stuff you add to a site, the slower it gets. And in retail, more so than publishing, the speed of the experience matters more than anything else."

Ghostery's retail clients have doubled in the past year, according to Mr. Meyer, who said it works with 12 of the top 25 retailers and half of the top travel brands.

Publishers generally still employ more ad tech than retailers, but the gap may be closing.

In an unscientific test, Ad Age used Ghostery tech to capture the number of JavaScript tags in play when viewing a couch on the desktop version of Kohls.com and when reading an election article on The New York Times' desktop site. The results: Kohl's made 269 calls compared with 325 on NYTimes.com. Some tags handle tasks such as measurement, but most are more directly ad-related.

E-commerce players have also begun dabbling in efforts such as Accelerated Mobile Pages, which loads mobile web pages near instantaneously by running very few tags, for certain areas of their sites.

1-800-Flowers' Celebration Passport, which is roughly equivalent to Amazon's subscription free-shipping service Prime, lands on an AMP page so users aren't crippled by slow load speeds when learning about the product or checking out. The company's philosophy on speed was cemented when it added Apple Pay to its mobile checkout: Sales for those items increased 14%, a person familiar with the move told Ad Age.

AMP itself has plans to incorporate mobile payment options like Apple Pay into its infrastructure in the near future.