Woolies takes on media giants in ad trading

Woolworths is set to take on the media establishment with its own sharemarket-like advertising trading exchange. This will combine the retailer’s database of customer transactions with buyers’ online media behaviour to place ads in the $4 billion digital media sector that are more targeted.

Telstra, Coles, Foxtel and Qantas are also moving to marry detailed but “anonymised” profiles they have on individuals in their databanks with online behaviour to make advertising more effective.

RadiumOne forecasts that so-called “programmatic trading” on booming automated exchanges, called demand side platforms (DSPs), will top $500 million in Australia by the year’s end.

Woolworths and data analytics firm Quantium, in which the retailer owns a 50 per cent stake, are set to finalise details of their DSP around Easter. Like Coles, some expect the retailer will use its knowledge of specific customer purchases and their media consumption “footprints” to have suppliers funnel their online marketing budgets through Quantium’s advertising exchange.

“This is a sign the supermarkets are getting their digital mojo and they will start to use programmatic systems as a new way to leverage supplier value,” said one media executive who did not want to be named. “It’s sandwich money for the supermarkets but it’s the future. Through in-store beacon technology and near-field communications, they are going to close the sales loop completely.”

Quantium director Tony Davis confirmed the programmatic exchange initiative to The Australian Financial Review. He said consumer goods companies were lining up to buy through the Quantium-Woolworths DSP. A pilot is underway with a small number of packaged goods brands but Mr Davis would not name them.

“We are holding back demand,” he said. “Once people see what we have got here they are forming a queue. It is a very significant step if you can move from general geo-demographic targeting [in media] to targeting of [audience] segments based on their known transaction behaviour. Advertising’s job is not done at the point at which it has achieved an exposure [to an individual]. Advertising’s job is only done when it has affected a sale. Targeting customers and measuring advertising at the sales level has to be the future of advertising.”

Mr Davis said he was “not surprised at all that Telstra and others are moving to a programmatic future”.

Telstra spends 80 per cent of its annual multi-million dollar digital advertising budget through a programmatic initiative it developed with media agency OMD. Machine algorithms govern the entire process, serving specific online advertising messages in real time to individuals on the websites they use.

The explosive rise of programmatic trading has been driven largely by US technology start-ups and international media agency networks like Mediabrands, GroupM, Carat and OMD. But some large companies are now taking the entire process in-house, hiring dozens of data scientists to run the initiatives so they can retain control of customer transaction and media usage data.

Retailers and banks, particularly, are best placed to set-up in-house DSPs because of the detailed records they have on what people are buying. Loyalty programs like Woolworths Every Day Rewards and Coles FlyBuys are central to the success of in-house programmatic trading because they allow supermarkets to know precisely what people have bought. Banks too have detailed insight on individuals’ purchasing patterns from their use of credit and debit cards. Quantium’s DSP will match anonymised Woolworths supermarket purchases and transaction records from millions of NAB cardholders to serve specific ads to them online, mirroring what Walmart is doing in North America The US retail giant has 2000 people working in Silicon Valley in the @WalmartLabs venture.

Henry Tajer, chairman of Mediabrands, which works for Coles, said the biggest challenge for Coles, the Woolworths-Quantium DSP and other in-house initiatives is finding experienced data specialists to run them and having big enough buying volumes to justify the investment. “Scale is important for programmatic to be done in-house” he said. “We will see some of the bigger advertisers get good results but they need to have size.”

OMG CEO, Leigh Terry, which owns Telstra’s media agency OMD, agreed. “There will be a handful of companies that take it in-house and a handful of that handful who will do it successfully,” Mr Terry said. “There is such capital investment needed in the technology and investment in people that many won’t want to go it alone.”

2 February 2015
Paul McIntyre, The Australian Financial Review

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