How privacy regulations could help — or inhibit — growth in retail media networks

Some retailers have operated their own retail media networks for years. However, more have recently created, overhauled and expanded their own data-driven sales platforms to attract new advertisers looking to reach shoppers — partially thanks to marketers’ increased appetites for first-party data to replace third-party cookies amid more stringent privacy standards. But even if the raft of regulations coming online in the U.S. further fuels the retail media boom, some experts say it leaves agencies to navigate further fragmentation and new legal gray areas.

Since California passed new privacy protections in the wake of the 2018 Cambridge Analytica scandal, a growing number of other states have recently followed suit with their own versions as Congress continues to explore federal legislation. In addition to the Golden State, other laws will take effect this year in Colorado, Connecticut, Virginia and Utah, followed by Iowa in 2025. Laws in Montana, Oklahoma, Indiana and New Hampshire have also each been signed and another dozen states have statutes or bills in progress. As state laws go into effect and consumers become more aware of how ad-tracking works, marketers and consumer advocates are closely tracking opt-in and opt-out rates of various data-sharing methods.

With the promise of offering more first- and second-party data and millions of intent-based shoppers, companies have built a host of new capabilities through in-house tools and new partnerships with social networks and ad-tech companies. For example, Dollar General announced a new partnership with Meta in March to help reach customers living in rural areas.

At Dollar General, growth is “exceeding our expectations,” said Chad Fox, the discount chain’s chief marketing officer. Rather than being just a retail media network, he said Dollar General’s strategy is focused on also being an audience provider, with between 10% and 20% of its media network being on-site while the rest is off-site, according to Fox. Since launching its platform in early 2022, Dollar General’s media network has expanded from 21 advertisers to 51 partners now, with plans to onboard another 100 advertisers by next year.

Even though retail media growth was driven largely by the deprecation of third-party cookies, some experts say the sector still lacks guardrails in ways similar to other parts of the digital advertising ecosystem. The fragmented landscape of privacy policies in different states and across various platforms also has some wondering if quality retail media data can be both scalable and durable.

There are also questions about how state privacy laws and industry standards address various types of sensitive data. Regulators such as the Consumer Financial Protection Bureau and the Federal Trade Commission have been increasingly focused on finding ways to protect consumers from potentially harmful business practices. Social networks have faced criticism for how they use sensitive demographic data for ad-targeting — signals that companies like Meta and Google have since moved away from — but some privacy experts wonder how retailers will collect, use and safely store financial information such as payment information and transaction records. Some retail networks and ad-tech companies say they don’t use personally identifiable information for ad-tracking, but the nature of e-commerce leaves some gray areas.

“This issue of sensitive data is going to drive more consideration and dialogue where I just don’t see anything close to standardization yet within the industry,” said Arielle Garcia, chief privacy officer at the IPG-owned media agency UM Worldwide.

Agency execs also wonder how easily consumers will manage privacy controls across various retail media networks and how those preferences will affect ad-targeting and measurement. However, fragmentation is causing more concerns for advertisers than for retailers, said Adam Skinner, CTO at Publicis-owned CitrusAd.

“You’ve got to be cautious where your data is going as a retailer,” Skinner said. “You start to play down the walled garden strategy when you start to ship data to third-party sources like Pinterest and Facebook. You don’t know where your data is going.”

The number of people actively managing cookie settings seems to be increasing over the years, said Jennifer Kohl, VMLY&R’s executive director and head of U.S. media. According to Kohl, around one-third of people are consenting to only necessary cookies, another third are selecting certain ones and the remaining third don’t seem to be making any changes. Although companies have been on alert about data privacy for a while, she said more clients are worrying that new laws might be more “heavy-handed” when it comes to rule-making and enforcement.

“I would hope that over time it’s driven more by the consumers than the lawyers,” Kohl said. “I think there’s a tolerance of data being shared by consumers.”

The challenges faced by retail media might not necessarily outweigh their benefits, argued Gartner analyst Mike Froggatt. In addition to the fragmented retail media landscape, he said advertisers are also seeing their own opt-in rates drop in places like California and that most brands are limiting ad buys to just three or four retail media partners. On the other hand, he said retailers also potentially offer customers unique advantages by giving them concrete offers like discounts and personalized product recommendations.

“With the value of privacy, people don’t realize its value until they’re told,” Froggatt said. “So maybe they think it’s worth it for a coupon, but maybe then not worth it if getting spammed with a lot of emails.”

Rather than rely on personally identifiable information, some retail media networks and their partners are prioritizing search intent and shopping filters. Kroger’s media network doesn’t rely on demographic info but instead on past purchase behavior and other signals, according to Michael Schuh, vp of media strategy and product for Kroger Precision Marketing.

Brian Gleason, chief revenue officer of Criteo, an ad-tech company working with retail media networks, said the legislation “helps commerce media immensely.”

“The value of their data becomes even brighter in the sense that if you have bad actors in an ecosystem — and I think that’s what we’re trying to eliminate with some of this legislation — it puts the value on the retailers and their media opportunities,” Gleason said.