$142.5B 2015 U.S. ad spending for 200 LNA
When Dunnhumby, Tesco's data and consumer insights unit, purchased Sociomantic Labs in April, Dunnhumby CEO Simon Hay said the acquisition came from the realization that "we were a media player without really knowing it at all." Think about what that means: A data broker that is wholly-owned by one of the biggest retailers in the UK has made a move that will enable it to keep all of its data inhouse, and sell, rather than buy, advertising on its online properties.
Earlier this month, Walmart said it would be moving one step beyond Dunnhumby's model, not only using its Walmart Exchange (WMX) -- a digital targeting and buying platform -- to buy its own media, but also buying third-party media for its suppliers. Walmart is proving the idea posited with the Sociomantic acquisition: There is no compelling reason for a retailer at scale to cede control of its own data.
Retailers, especially online retailers, collect a huge amount of CRM data about their customers -- user behavior, items purchased and profile preferences -- that is collected exclusively in their stores or on their websites. Many retailers currently sell this data to publishers or behavioral data players, or hire consultants to analyze it and guide them through the best possible applications of what's been collected.
The largest of these companies, however, which have or can afford to conduct inhouse data analytics (or to acquire a company that can), might learn from companies like Dunnhumby and Walmart that there is true power in keeping the data they own to themselves. In short, data-owning retailers are poised to provide publisher- and agency-type service offerings, rather than simply relying on publishers and agencies.
Managing campaigns internally
With WMX, Walmart will be managing display campaigns on the Walmart properties as well as offsite properties. If a big packaged goods or electronics company that is sponsoring featured products on the Walmart website wants insight into how effectively its campaign performed, Walmart does not need to ask a third party for these analytics. This is similar to what Dunnhumby plans to do with Sociomantic.
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What makes Walmart's announcement interesting is that it will be leveraging this data to execute direct buys for some of its biggest sellers, and in essence becoming its own agency. By eschewing the traditional agency model and the intermediaries that exist therein, Walmart still retains its proprietary data, and also owns attribution and tracking, streamlining the reporting process for its clients and becoming an essential partner.
Look before you leap
I don't mean to say that every retailer can, or even should, buy or become its own demand-side platform (DSP) or agency. Smaller e-retailers should think twice before taking on the Dunnhumby or Walmart models, or else they risk getting in their own way. Essentially, brands not able to react fast enough to the data being provided to them risk not being able take advantage of the data in a timely fashion. If there are neither funds for an acquisition nor resources to create a publishing platform or ad network from scratch, it's best to stick to the status quo (relying on publishers and other third parties) -- at least for now.
But for those retailers that are ready to take the bull by the horns and own all aspects of their data and advertising properties, there are a few options available. First, they could make like Dunnhumby and acquire a DSP, thus enabling them to absorb the technology. Alternatively, the retailer could "acqui-hire" a company whose staff is capable of this kind of work, dissolving the purchased organization in favor of absorbing the personnel and key aspects of the technology into the existing platform.
For retailers like Walmart, which have the advantage of scale, resources, and response time, it's possible to build a bespoke publishing platform from the ground up. This ensures that the technology is built to work with the retailer's data set to target its customers effectively. Not all retailers of this size will want to take this approach; not all retailers of any size should. But we're seeing the beginning of a possible sea-change in the industry, for the first time.