What makes Klarna’s ad business different?

Understanding non-endemic retail media advertising This edition is made possible by SiriusXM Media. MAY 20, 2024 Retail media keeps expanding. Non-retailers like financial institutions are using similar approaches to retail media networks to target consumers. And non-endemic advertisers are using retail media data to reach shoppers. Today’s newsletter takes a look at some examples. Was this email forwarded to you? Sign up [here](. [What makes Klarna’s ad business different: ‘We’re a retailer and a payments company,’ CMO says]( [Retail media]( is traditionally dominated by, well, retailers. But as access to customer insights becomes increasingly important for advertisers amid cookie deprecation and mounting privacy laws, other industries are hopping on retail media’s bandwagon. Example: Klarna. “Historically, we’ve connected merchants and consumers through our payments and ecommerce services,” said David Sandstrom, chief marketing officer at the payments company. “But we have so much data that we can now connect them through advertising as well.” - Klarna will have 42.8 million US users this year, nearly a fifth (19.3%) of all digital buyers, per our forecast. - Because Klarna has access to purchase data across many different verticals, it gives the company a more well-rounded view of how consumers are browsing and shopping. - “We’re almost a hybrid between a retailer and a payments company,” said Sandstrom. “We know that someone has bought something from Gap for $49, but it’s not just the SKU—it’s the color, size, fabric. We have full granularity into what people buy.” Story continues below. This hybrid quality also helps Klarna provide advertisers with [attribution]( across the full customer journey, said Sandstrom. “We understand the full [funnel]( from a customer seeing an ad to having made the purchase.” Klarna recently partnered with PubMatic to give advertisers programmatic access to its [native advertising]( inventory via PubMatic’s self-service ad platform, Convert. - The partnership rounds out Klarna’s [media network]( which also offers sponsored search ads and affiliate marketing capabilities. - “This is a new venture for us. We expect it to grow quite significantly in terms of volume, but also in terms of data sets,” he said, noting that the goal is to be able to segment data by region, verticals, etc. However, Sandstrom urged advertisers not to over-personalize their ads and instead opt for relevancy. - “On our network, being super-personalized performs worse than being relevant,” he said. “What I mean by that is people tend to want to know what their peers are buying, they want to be inspired.” - For example, instead of targeting users with items based on past purchases (which may not be what a user is looking for), advertisers can use contextual cues or events, like the Super Bowl, or the Met Gala, to catch consumers’ attention. [Read online]( [What you need to know about non-endemic retail media advertising]( When retailers allow non-endemic brands to advertise, it benefits both sides. “Retailers can further monetize their data, while non-endemics, who have an appetite to expand their reach, are able to leverage that data,” our analyst Sarah Marzano said on an episode of the [“Behind the Numbers: Reimagining Retail”]( podcast. What’s in it for retailers: Opening up ad inventory to non-endemic brands is profitable, Marzano said. Adding a new revenue stream may be smarter than attempting to squeeze more dollars out of existing advertisers, especially amid tightening budgets. What’s in it for advertisers: The success seen from retail media networks over the past few years has proven the value of first-party data, Marzano said. And now, “non-endemics, looking to future-proof their advertising investments amid the impending deprecation of third-party cookies are able to take advantage of that data.” 3 best practices in running non-endemic retail media ads: 1. Make the products make sense together. Non-endemic partnerships only work if the products complement each other. The more relevant your products are, the likelier you are to capture consumers when they’re in the purchasing mindset. 2. Ensure the products have a shared customer profile. “If you are allocating real estate to advertisers that are really irrelevant to your customer base, then you run the risk of eroding the customer's experience,” on top of the risk of not seeing campaign results, Marzano said. A discount store, for example, may not want to display ads for luxury cars—even if it’s in the automotive aisle. 3. Triple check that the brands truly don’t compete. For mass retailers such as Amazon or Walmart, it can be a challenge to identify brands that are really non-endemic. That’s why we're going to see a lot of non-endemic activations go toward services including those in the financial, insurance, or health sectors—the type of things that truly sit outside of the retailer ecosystem but are certainly a part of their consumers’ day-to-day lives, Marzano said. Driving the trend: “Retailers who have more mature, developed [retail media]( networks are recognizing that they might be reaching a level of saturation among their endemic brands,” Marzano said. “So even though they might be looking at growth from those programs over the next few years, it's not as significant of growth as they might like to see.” - Last month, Walmart opened up its retail media business to non-endemic advertisers, starting with automotive, entertainment, financial services, quick-service restaurants, and travel. - Home Depot made the same move in March to expand its retail media offerings, betting on unique segmentation, based on customers’ home improvement goals, to draw non-endemic advertisers. [Read online]( Email sent to: {EMAIL} If you cannot view the HTML newsletter, [please read it in your browser here](. 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