Sunday, January 29, 2023

From hotels to ride-hailing apps everyone’s getting into the digital ad space

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What’s driving a wide range of companies across different sectors to enter the digital ad space?

Any moment a consumer looks at a screen is now a moment that can be filled with advertising. Following the footsteps of Google and Facebook, many companies are beginning to build self-serve ad platforms that make it easy for ad buyers to purchase ads directly. The latest to enter the business is the ride-hailing app Uber.

Smartphones, e-commerce platforms and connected devices, including smart TVs in hotel rooms and tablets in cars and at airports, have all made it possible for any business — from networking apps to grocers and ride-hailing companies — to target customers with digital ad messages. U.S. ad revenues this year are expected to surpass $300 billion, a record, thanks in part to new companies jumping into the ad business.

Marriott plans a media network

Marriott International plans to shortly launch a media network to let advertisers reach its guests via the hotel group’s app and websites and, someday, the TVs in its guestrooms. Marriott and a few advertisers will test the media network in the U.S. and Canada in the next two weeks. The hotel group will use anonymized customer data from past searches and reservations performed on its sites and app to enable brands to display ads relevant to travellers. For example, a brand might show luxury products in the Marriott Bonvoy app to a guest whose past online behaviour revealed an interest in luxury travel.

Uber gets into the ad business

A few weeks ago, Uber said it plans to start putting ads in its ride-hailing app — a huge step for the company that to date has been largely limited to serving ads to its Uber Eats delivery app. Uber will become an ad platform, selling space inside its Eats app to restaurants hoping to lure in more food delivery orders. A recent Uber job listing  seeks an Uber Eats Ads Lead “to lead the team and efforts responsible for creating a new ads business that enables eaters to discover new foods and restaurants to grow their customer base.”

An Uber spokesperson confirmed to the media that the company would enter the ads business, telling TechCrunch, “We are exploring relevant ads in Eats.” Selling ads could help it improve margins on Eats, where it only takes 10.7% of gross bookings as adjusted net revenue because it pays out so much to restaurants and drivers.

The fresh opportunity in ads comes at a critical time when Uber is desperate to show its future potential in the face of a sagging share price that closed at $28.02 a few days ago, down 40% from a high of $46.38 in June.

Amazon’s US ad business to grow 33%

Amazon successfully navigated a similar expansion from marketplace to ad platform; eMarketer expects Amazon’s U.S. ads business will grow 33% this year to reach $9.85 billion and claim 7.6% of the total U.S. ad market, which makes it the biggest search ad player behind Google.

Uber could use any revenue it can get. This quarter the company lost $1 billion, with $316 million of that loss coming from Eats. But Eats’ revenue grew 64% year-over-year, showing it’s increasingly popular and could command enough user attention to make advertising lucrative. Ads also could serve as a wedge for Uber to move deeper into business intelligence services for restaurants. It could apply its data on food delivery demand to help kitchens to optimize prices, allocate staff and improve menus.

The average Uber ride lasts around 20 minutes, and executives see ample opportunities to sell ads that users will see as they consult the Uber app on their rides. Uber Eats ads are already a massive business, bringing in $350 million in annualized revenue from 170,000 advertisers in 30 countries globally. The move will help expand Uber’s ad business beyond sponsored listings on Uber Eats to serving ads for a much wider range of companies, across a broader range of channels — including email and on car top screens.

Uber’s expansion comes on the heels of the recently-announced merger between Kroger and Albertsons, which could create one of the biggest digital marketing businesses. The proposed merger of Kroger Co. and Albertsons Cos. would reshape the U.S. supermarket industry by combining its two largest operators. It also would create a big player in so-called retail media, one of advertising’s fastest-growing sectors.

Retail advertising poised for a boom

Retail businesses from Walmart Inc. to Uber Technologies Inc-owned alcohol delivery service Drizly have been developing advertising networks that use their websites, apps and even outside properties to show brands’ messages, often targeted by the data that retailers collect directly from their own customers. Kroger and Albertsons entered the retail advertising market in 2015 and 2021, respectively. Total revenue from retail ad sales in the U.S. will increase 31% this year to $40.81 billion, which is more than three times its 2019 total, according to market research firm Insider Intelligence Inc.

The growing business won’t only help large retailers build a new revenue stream, but it also will prove increasingly attractive to advertisers as an industrywide focus on data privacy makes targeting potential customers more difficult.

In-store advertising has long been a part of the experience at grocery stores and big box retailers, but significant investments in digital transactions and customer support during the pandemic have better positioned these companies to create their own ad networks. Those networks are becoming a competitive advantage at a time when Amazon is said to control 78% of retail media ad spend, eMarketer estimates.

Getting good at remembering what people like (via data tracking) and selling them things more precisely helps not only the purchaser of the ad but also the company serving the ads. This precision leads to more effective use of marketing dollars, though it can also raise privacy concerns. By building their own networks, companies can rely less on third-party data — and that’s become more of a necessity in the wake of privacy measures implemented most prominently by Apple.

Also Read: Metaverse spurs Augmented/Virtual Reality growth & the big shift from mobile to wearables

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