- Walgreens is rolling out a new advertising arm to compete with Amazon and retailers like Walmart and CVS that have been beefing up their advertising businesses.
- The retailer's ad business is built off of data of its 100 million loyalty card members that tracks when people shop and what they buy.
- In addition to selling ads on its own properties, Walgreens' pitch is that it will also sell co-branded programmatic advertising and ads on Facebook and YouTube.
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Walgreens is the latest retailer to make a bigger bet on advertising.
The retailer is launching a new business called Walgreens Advertising Group to sell advertising on its online properties and other websites.
Retailers like CVS, Instacart and Walmart have been expanding to advertising in search of a new revenue stream. They're hoping to chip away at Amazon's dominance with so-called retail media budgets that brands spend to promote products. EMarketer estimates that retail media will be a $17 billion market this year.
Walgreens has long run an advertising business with in-store and digital promotions but this move formalizes its advertising business. Luke Kigel, VP of Walgreens integrated media and head of Walgreens Advertising Group, said Walgreens would also directly pitch brands and agencies for the first time.
"We've been working with brand partners, but we haven't talked about the capabilities," he said. "We haven't had a distinct point-of-view in the marketplace with media agencies and the industry."
Kigel said that Walgreens has run "hundreds" of campaigns but wouldn't name any specific advertisers.
Walgreens is entering a crowded field, but it hopes to differentiate its ad business with data from its more than 100 million loyalty card members that includes information on when people shop and what products they buy. The retailer also processes 1 billion transactions with the loyalty program, capturing 85% of purchases.
The focus on first-party data makes Walgreens better prepared for looming changes by Google, Apple, and others to kill off third-party cookies, he said.
Read more: Inside Amazon: Everything we know about the e-commerce giant's growing advertising business
Walgreens Advertising Group only handles managed services, meaning that advertisers have to work directly with a Walgreens rep to buy ads.
Its pitch is also that advertisers can use Walgreens' loyalty data to create audiences for targeting purposes and a demand-side platform for buying programmatic ads on publishers' websites and social ads on Facebook, Pinterest, and YouTube.
The retailer says it's also selling creative services to brands and providing advertisers with stats showing what people did before or after seeing an ad.
Some retailers, like Walmart, are building their ad businesses in-house. Others, like CVS, use third parties.
Kigel said Walgreens would use a mix of both. Publicis-owned data firm Epsilon is behind the programmatic piece of Walgreens' ad business, and Microsoft and Adobe are also helping power Walgreens' ad business.
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