Retailers set sights on Facebook, Google ad revenue

BERLIN/CHICAGO (Reuters) – People with hay fever hate dust. That was the premise of a marketing drive launched by British vacuum cleaner maker Dyson with US retailer Target Corp.

Using data about its customers’ shopping habits, Target homed in on shoppers who likely had allergies and showed them ads for Dyson’s cordless V6 vacuum on social media and Target’s website. The result: sales for the vacuums doubled among shoppers who regularly purchase anti-allergy treatments and products such as Claritin or humidifiers on Target.com and in stores.

Data about real people and real behaviors “actually get a much stronger result because the fidelity of that data is so much richer,” said Kristi Argyilan, Target’s senior vice president of media and guest engagement.

Retailers ranging from Target and Walmart Inc. to grocers such as Tesco Plc are working aggressively to attract big advertisers to their websites in a bid to drive sales, according to interviews with retailers, packaged goods makers, consumer data firms and marketing consultants.

Specifically, they are selling more ad space, pop-up banners and search-bar keywords to consumer goods companies such as Kraft Heinz Co. and Procter & Gamble Co. These makers of everything from soup to shampoo are investing more to advertise on retailers’ websites where people who already have an intent to buy are guided to specific products using their individual shopping habits.

This online ad revenue offers significantly higher margins for retailers than selling goods in stores.

By carving out a space for themselves in the booming digital ad market, they are taking on Alphabet Inc.’s Google and Facebook Inc. and the $114 billion they received last year in global online ad revenue. According to research company eMarketer, Google and Facebook’s revenue accounted for nearly half of the global market in 2017.

Supermarkets have long charged brands to place products in the busiest parts of their stores, such as near the checkout counter.

As more shopping shifts online, ecommerce giants Amazon.com Inc. and Alibaba Group Holding Ltd. pioneered replicating that strategy on their websites by mining data to target advertising at selected customers or groups. Amazon ad revenue alone could jump to $6.6 billion by 2019 from $2.8 billion last year, according to JPMorgan.

While retailers have a long way to go before they come close to Google and Facebook digital advertising prowess, their instant access to data on what is selling puts stores in a strong position, said Joe Zawadzki, chief executive of MediaMath, which helps brands manage ad campaigns.

“To the extent that the retailer can help the manufacturer, it becomes a new revenue opportunity and a way forward for them,” he said. “We’re very much at the start of this.”

Alphabet and Facebook declined to comment. To be sure, retailers and brands for the foreseeable future will still be drawn to advertise with Facebook and Google given the internet giants’ massive customer base in order to drive traffic to their websites. And the Silicon Valley companies likely will make overtures to long-time clients of theirs to avoid losing business.

Retailers are offering a range of marketing options online, including banner ads, popups and money-off deals. As with Google, suppliers can pay for keywords to get their products listed at the top of any search.

Some industry observers expect voice aides like Amazon’s Alexa may one day let brands pay to be the first product recommended when a shopper asks to purchase an item such as ketchup, a feature known as “Amazon’s Choice.” Amazon told Reuters it has no plans to let companies pay for the distinction, “nor do we have plans to advertise on Alexa broadly.”