Home Ecommerce Why A Marriage Between Retailers And Demand-Side Platforms Makes Sense

Why A Marriage Between Retailers And Demand-Side Platforms Makes Sense

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RetailAre brick-and-mortar retail chains setting their sights on demand-side platforms (DSPs)?

The rumor that Tesco’s customer insights subsidiary, Dunnhumby, will acquire Sociomantic, a DSP provider, adds fuel to the possibility. And whether or not the rumored acquisition is true, industry experts expect to see more retailers working with DSPs.

If the deal occurs, Dunnhumby will gain a DSP that it could use to help Tesco and its other clients strengthen online targeting capabilities with ecommerce and shopper data. In addition, Sociomantic has bulked up its mobile, revenue-management and CRM capabilities, giving the British analytics firm additional advantages.

“My hunch is that Dunnhumby would do a combination of things [with  Sociomantic],” said Maureen Little, SVP of business development at Turn. “That could include enhancing the marketing capabilities of Tesco, building an ad business or adding it to a tech lab.”

The pressure to catch up with the personalization techniques, ad targeting and other capabilities of online retailers continues to rise for brick-and-mortar stores. While product test labs are not new, some retailers are building labs dedicated to bridging the gap between online and offline environments.

Walmart was the first retailer to open a tech lab, WalmartLabs, in Silicon Valley. Since 2011, WalmartLabs has made numerous enhancements to the retailer’s services, such as enabling the website’s search engine to guess a customer’s intent behind search terms, a gift recommendation tool that suggests gifts based on an analysis of a friend’s Facebook activity and a mobile app. The app includes a budgeting tool and guides users to products in Walmart stores.

Target and Kohl’s have also opened test labs to develop mobile apps and improve their online search and social media offerings. Tesco opened an innovation lab in London in January to learn from the ideas, products and services of start-ups and SMBs, according to the company.

Are DSPs the next hot technology for these labs? Several trends are driving investments into DSPs.

The growth of big data and the race to drive more revenue via a company’s user data has made DSPs an increasingly lucrative space. Turn recently raised $80 million in Series E funding, bringing its funding total to $145 million, and MediaMath reportedly earned $180 million in net revenue in 2012. Business Insider estimates Sociomantic’s acquisition price ranges between $175 million and $200 million.

Brian Wieser, a senior research analyst at Pivotal Research Group, said it makes sense for retailers to incorporate a DSP’s technology into their offerings.

“I think that we will see retailers work with DSPs more and more, as is the case for all marketers, but … I suspect some will build out the technology themselves [or] simply license established technologies,” Wieser said.

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In addition to brick-and-mortar retailers, ecommerce companies are also investing in DSPs. Amazon built its own DSP and, while it is not an ecommerce site, Tencent unveiled its own DSP last year, which it could fold into its partnership with JD.com, one of China’s largest online retailers.

Dave Pickles, co-founder and CTO of The Trade Desk, agreed with Wieser, however, that few retail companies have the resources to build or buy their own DSP. Even an insights firm that has access to a large amount of first-party data like Dunnhumby would find it more effective to partner with a DSP rather than bring the technology in-house, Pickles argued.

“It costs too much to run the gear,” he said. “You need a partner that is … focused on helping you do what you do best.”

Regardless of how a retailer decides to work with a DSP, “ad tech is finally coming off its island as digital gets to be a bigger force,” said DataXu CEO Mike Baker.

“It’s the moment of convergence between online and offline commerce. The moment is at hand where we may start to see these worlds come together.”

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