Hey Readers!
Welcome to the AdExchanger Commerce Newsletter.
This week, I’m examining how the era of standalone walled gardens and content fortresses has given way to new forms of ad platform partnerships.
I think of these partnerships as “sky bridges” because they aren’t open advertising integrations. Those on the outside can still only look on in envy. Instead, we’re seeing the biggest (and, uh, medium-est) online platforms piping data and ad budgets between them so as to recreate former methods of user-level targeting and attribution.
The reason this new era of ad platform integration is relevant to the Commerce Newsletter is because these sky bridge partnerships directly support online shopping and the new trend of retail media network (RMN) development.
This is true at the highest levels.
For example, Apple committed to a first-party retail agreement with Amazon, which is why Amazon can offer great deals on products like AirPods, iPads and Apple devices that typically don’t get discounted. But there is more to that partnership than meets the eye. Amazon also started blocking any third-party seller who sold used Apple devices.
Meanwhile, Amazon’s Prime Video and Apple’s iTunes music and movie purchases and subscriptions started to work across both platforms.
And now we’re seeing a similar dynamic play out among the second and third tier of advertising and data platforms, which also are building exclusive integration deals.
Instacart, for instance
This week, Instacart reported its first full quarter of earnings since IPO-ing last September.
Step one for Instacart’s ads business was to create ad tech for retailers to use on their own sites, CEO Fidji Simo told investors. Instacart’s tech is mostly used by small or regional grocers, although there are some bigger names, too. Think of it as an RMN in a box.
But there’s not much traffic there. Even some of the larger grocers that license Instacart’s ad tech, such as Publix in the southeast or Good Food Holdings on the West Coast, don’t have traffic or inventory that even comes close to scale by digital media standards.
Instacart is in the same boat. Even if it plastered its site and app with ads, it would still have to find inventory elsewhere to meet growing demand.
Which explains why step two of Instacart’s advertising strategy is to bring its data to other platforms, according to Simo, citing the company’s recent partnerships with The Trade Desk, Roku and Google Ads.
The imbalance of power
But these sky bridge partnerships that I’m referring to aren’t standardized across platforms, and it’s often the case that seemingly similar partnerships have critical differences.
These differences come down to the imbalance of power in each arrangement – which is why Instacart is such a useful example.
When Instacart is layered into Google Shopping Ads, it can be used for one-to-one targeting and closed-loop attribution. Google and Instacart can reconcile and target a single user and know if that same user converts on Instacart, according to two retail media agency buyers who use the integration.
Instacart’s partnerships with The Trade Desk and Roku, however, are fundamentally different.
TTD advertisers use Instacart’s data to create custom audience segments for things like “bought their category, not their brand” or “lapsed purchasers.” Roku, too, can use Instacart data to create post-campaign metrics, such as store-based sales lift or first-time buyers.
But those platforms aren’t using Instacart for closed-loop attribution. Instacart relies on its own purchase data to inform the audiences, but Roku and TTD aren’t matching ad impressions to people who made a purchase, the way Google can.
Amazon on the move
The other prime example (sorry, sorry) is Amazon.
Over the past year, Amazon has struck third-party ad partnerships with Pinterest, Facebook, Instagram and Snapchat that extend its shopping and fulfillment to those networks and provide those social nets with much-needed shopping activity.
But the deals are massively skewed in Amazon’s favor.
The social networks typically operate as walled gardens. TTD, for instance, doesn’t buy Facebook or Snapchat ads because those ads don’t have log files and aren’t open to programmatic.
But, for an entity like Amazon Ads, the walled gardens open up as if they were the open web.
Amazon can target into Pinterest, Snapchat, Facebook and Instagram with one-to-one precision. It can then reconcile those IDs to its own identity graph and other campaigns.
For the social networks, the advantages are that Amazon brings a lot of money as a demand partner and the platforms themselves are trying to habituate users to shopping within their apps. Amazon still controls the data, the customer access, the shipping and fulfillment margin – and everything else. Facebook doesn’t know which of its users became Amazon buyers or what they bought.
Whoa, right? But these special cross-fortress arrangements aren’t entirely new.
Before Apple rolled out its AppTrackingTransparency framework, back when the Facebook pixel was everywhere and worked smoothly, Amazon refused to carry the pixel because it would convey too much valuable and proprietary data. So Facebook created an Amazon-specific pixel that attributed sales but didn’t pass any other info.
That was a sky bridge, too.
The open web opp
For the most part, this growing web of large platform partnerships does nothing to support the open web or the broader ecosystem of open advertising technologies.
The whole point is that fortresses can “open up” to certain partners without opening the front gates to everyone.
But there are counter-examples. The Trade Desk, for instance, does have its Instacart integration, not to mention providing the tech that underpins Walmart’s DSP.
And last September, Criteo landed a deal with Shopify Audiences, which is Shopify’s ad platform integration product.
Since launching in 2022, Shopify Audiences has partnered with Google, Meta, Pinterest, TikTok, Snapchat and then Criteo. One of those things is not like the others.
“The open web is a huge untapped opportunity for Shopify merchants that’s often overlooked,” Shopify’s product VP, David Wurtz, told me when the Criteo partnership was first announced.
That’s a backhanded compliment, for sure. But for the open web, it’s better than being ignored.
