Ulta Beauty expands retail media network, welcomes non-beauty advertisers

Since its retail media network, UB Media, launched in May 2022, it has secured 300 brand partners and experienced a 35% annual increase in brand investment. Now, the beauty giant is partnering with e-commerce tech company Rokt to introduce AI non-endemic ads, allowing companies like Hulu and PayPal to present relevant offers to Ulta’s 44 million loyalty members while they are browsing. Non-endemic ads are not directly related to the products or services of the host platform, allowing advertisers to reach audiences outside their usual categories.

Rokt’s AI-driven system aims to ensure that ads feel less like traditional advertising and more like curated, rewarding experiences for Ulta shoppers, said Laura Cosgrove, vp of retail partnerships at Rokt. 

UB Media offers a variety of ad placements across digital and in-store channels. These include display ads on Ulta’s website, app placements and offsite media. A shopper could encounter an ad for Ulta or its partner brands while streaming content on streaming platforms, for example, as part of the targeted advertising that leverages Ulta’s first-party shopper data. Ads are chosen with AI, so, at least in theory, customers who don’t want to see unrelated ads won’t be targeted.

“In some cases, Rokt’s AI will determine not to show an ad at all,” she said. “Instead, it may drive the adoption of strategic first-party initiatives, such as installing the Ulta app, booking a beauty service or signing up for Ulta Beauty Rewards. The technology [weighs] the value driven by these initiatives against ad revenue, based on the customer’s likelihood to take them up.”

With the evolution of its retail media network, Ulta aims to gain an advantage over competitors. Target was one of the first to launch a retail media network, with Roundel in 2016 — it broadened its partner scope beyond in-house brands in 2019. Sephora, meanwhile, launched “Sephora Media” in the spring of 2022. The RMN leverages influencer marketing, display ads and audience targeting to boost brand visibility and share of voice. According to industry insiders, Sephora plans to expand its media offering in the next 12 months, potentially investing in more comprehensive solutions to enhance existing capabilities.

With retail media networks, brands often gain access to data beyond impressions and assumed sales boosts. As such, they can more easily track the impact of changes in ad spending and can leverage A/B testing to optimize clicks and sales. And they can make strategic budgeting decisions accordingly.

Retail media networks are expected to be worth $166 billion by 2025. And they’ll account for 20% of all digital media spending this year, according to research company eMarketer.

Ulta’s partnership with Rokt is designed to create what Brandi Pitts, svp of marketing and media at Ulta, calls an “elevated and relevant end-to-end experience” for consumers. The company declined to share how much it is investing in its retail media network.

For the first six months of the year, Ulta Beauty’s net sales rose by 2.2% to $5.3 billion, with a slight comparable sales increase of 0.2%, as reported in September. Due to lower-than-expected performance, Ulta has revised its full-year outlook, now anticipating net sales of $11 billion to $11.2 billion, with comparable sales down by 2%. Despite opening new stores, gross profit declined in the second quarter, and the company experienced decreases in net income and operating income, as well.

During the company’s investor day on October 16, CEO Dave Kimbell attributed Ulta’s challenges this year to several factors. The beauty category has returned to more modest growth levels, consumer behavior has become more unpredictable, and competition, particularly in the prestige segment, has intensified. To address these challenges, Ulta is focusing on new brand partnerships, expanding its loyalty program and offering personalized promotions. Additionally, demographic shifts, such as increased beauty spending by men, Gen Z and Gen Alpha, along with a growing Hispanic customer base, are seen as long-term growth drivers for the company.

In an industry where impulse buying accounts for 85% of online purchases, tailored ads can enhance guest loyalty while also driving sales and other company priorities.