In 2018, more and more media buying and marketing teams are being asked to draw up proposals and plans for taking the programmatic portion of their budgets in-house. While the claim behind this strategy is to innovate and take control of a brand’s programmatic future, the economics might point to something besides a complete in-house strategy as the way to go.
There are also different ways of in-housing. For some brands it means setting up their own agency trading desk and using that to deal directly with demand side platforms (DSPs). For others it involves bringing on board an ad tech partner or an agency of record that will be part of setting the strategy, but also responsible for pushing all the buttons when it comes to ad buying execution.
But let’s start at the beginning, why is in-housing taking off in the first place? The short answer is that marketers came to realize that a large share of their budgets were not being used to buy ads, but to fund the 5000 companies that have become part of the ad-tech LUMAscape. While in-housing doesn’t solve for all of that undisclosed share of the budget, it does force marketers to demand a more open or transparent business model from their agency or ad-tech partners.
Recent surveys suggest that more brands are having a serious look at bringing programmatic in house. A report from Infectious Media indicates that many marketers (more than 4 out of 5) want increased control over their programmatic efforts, but fewer than 2% of respondents have actually taken the steps to make it happen. It’s no wonder why brands have been scrambling to figure out the best way to manage their programmatic budgets.
The Challenges to Bringing Programmatic In-House
So what has been the challenge for advertisers to bring programmatic in house? We’ve narrowed it down to what we think are the four most obvious issues.
- PROGRAMMATIC TECHNOLOGY IS COMPLEX:
Requires a unique skill-set, technology in-house requires an expert or multiple experts at the helm. - A FRAGMENTED ECOSYSTEM:
Unlike other forms of digital advertising such as search, the market is not dominated by a single player but instead there are endless sources of inventory, numerous DSPs, multiple programmatic models to navigate. Marketers have to string together six to eight specialized solutions to accomplish their programmatic buying goals. - TALENT POOL IS RELATIVELY SMALL for programmatic experts, with most professionals based at agencies in tech hubs such as San Francisco or New York.
- In addition to programmatic execution, brands also need to consider factors such as PLANNING, ANALYTICS AND BRAND SAFETY. Most of which are enabled by 3rd party platforms and require expertise.
With most companies only being able to afford one or two internal programmatic experts, it seems that the budget has to match the resources necessary.
Brands must be spending at least $20 million programmatically before they even consider taking programmatic in-house, in order to generate a high enough level of savings to make the transition worthwhile.
– Wayne Blodwell, CEO of The Programmatic Advisory
The Solution is a Hybrid Model
At the end of the day most marketing and media buyers want the ease and safety of a single solution for their marketing services. As much as having more control and transparency over programmatic media buying seems more cost efficient, the required investment in talent and expertise to navigate the ecosystem should not be overlooked.
The advantages of going direct make sense; control over their own first party data, disclosed contracts and platform logins, but until larger players absorb point solutions in the ad-tech LUMAscape your budget needs to start at something like $20 million to make the investment worthwhile. Frankly not everyone is ready to jump in at $20 Million, so for those of you who are not there yet you should consider a hybrid model where you own the contracts and data and your agency partner, like us, owns the rest, at least for the foreseeable future.