Hello, and happy Tuesday!
This is issue no. 9 of the Nebulab newsletter, your favorite bi-weekly reflection about retail, DTC, and eCommerce technology.
The first (and second, and third) generation of DTC brands was a game of arbitrage: brands were betting they could acquire customers more cheaply than the LTV they could squeeze out of them. And for a long time, this strategy worked: many early movers built their empires on top of low-cost and highly accurate third-party data.
This strategy is now facing severe headwinds: systemic technological changes drove down data resolution, which in turn caused customer acquisition costs to soar to unsustainable levels. As a result, the numbers simply don't add up for many brands anymore.
What we see in response is a "direct-to-consumerization" of sorts in the advertising industry: rather than relying on third-party pixels to collect data across a myriad of retailers, advertisers are cutting the middlemen and purchasing data and ad space right from the retailers themselves.
Second-party data seems to be a promising path toward mitigating the downfall of initiatives such as Apple's infamous ATT or Google's upcoming Privacy Sandbox. Still, it doesn't come without challenges: the ecosystem is fragmented, and accurate cross-partner performance measurement is very hard. In this scenario, it's hard for small brands with lean teams and tight budgets to stay on top of their advertising game.
While most of these issues will resolve themselves as the industry matures, make no mistake: by and large, this is still a game of arbitrage. We just moved one step higher in the food chain.
What we're reading
The tech behind the data
Today's reads are about the promises and challenges of second-party data, and the technologies that make it available.
Why Meta pins its hopes to payments. Meta is pushing Shops hard in an effort to acquire data of their own rather than piggybacking off their advertisers. Their AI-based Advantage+ ads boast impressive performance, and more data can only compound that success.
Retail media's measurement problem—industry must solve standardization issue to meet growth projections. Second-party data means more publishers, which means more fragmentation, which means more friction for advertisers. Retail media operators must work together and develop a shared vocabulary for the industry to thrive.
IGA launches retail media network, seeks to rival national chains. Forward-looking initiative by IGA here. We strongly believe that the way to mitigate fragmentation is by standardizing, not centralizing. If multiple retailers come together under the same umbrella, they could pave the way for a more open retail media ecosystem.
Tech companies are racing to make retail stores as measurable as websites. One interesting element about RMNs is that, with many publishers, you have access to physical ad surface. For CPG brands especially, real-time, accurate measurement of in-store campaign performance would be a game changer for their omnichannel strategy.
AdExplainer: Data Clean Rooms. There's little talk about Data Clean Rooms yet, mainly because they're more of an implementation detail than an actual value add. They are an exciting concept nonetheless and provide an idea of what data arbitrage looks like in a more privacy-focused world.
We recently published
How to Make Your eCommerce A/B Tests Useless
You know what's even better than second-party data? First-party data. But for that data to be useful, you need to make sure you're not falling victim to technical glitches and statistical mistakes.
Our latest article about A/B testing unravels the complexity behind this practice, shedding some light on the most common pitfalls brands run into when running their experiments.
We also touch on what fundamentals you need to have in place before starting with A/B testing and discuss some more straightforward research methodologies that might be a better way to answer your questions.
Upcoming webinar
Bridging the Gap: From Product Vision to Product Strategy
Do you know the most common complaint about leadership from product teams? It's not salary. It's not workload. It's actually lack of direction. The solution: great product strategy.
This webinar with Patti Chan is for anyone leading digital product or eCommerce. You'll find that you're likely already doing product strategy, and you'll come away equipped with frameworks and tools to turn a 5-year digital product vision into next quarter's roadmap.
See you on Thursday, April 6 @ 9am-10am PT!
That's it for today!
If you have any questions, comments, or data clean rooms to sell, type [email protected] in your favorite email client—or any email client, really.
See you in two weeks! 👋
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