A growing number of major advertisers are bringing their programmatic media buying in-house. Kellogg’s and Netflix made the jump in 2014. Several Fortune 500 brands have followed suit over the past few years. So what’s driving the trend?
A recent World Federation of Advertisers (WFA) report found that global brands want greater control and transparency, with 90% of advertisers reviewing and resetting both business models and contracts to achieve those goals.
More than a fifth of companies surveyed now use in-house or some form of “hybrid” models, in which the advertiser directly owns and manages some of its programmatic relationships while leaving others to its agency. Just two years ago, these hybrid models were hardly used by WFA members. Says WFA Global Media & Digital Marketing Lead Matt Green:
The rise of in-house, hybrid models and independent trading desks demonstrates that the original trading model left much to be desired.
The second generation of trading models is now being built and while agency trading desks still take the greatest share of digital spend there are now real alternatives being developed that give brands more control over data and technology alongside the wider push to ensure greater transparency.
In the wake of last year’s ANA media buying transparency report, it’s no surprise that many brands are rethinking their programmatic relationships. For some advertisers, getting greater control over their data has been a motivating factor. Information-sharing between the brand and the media buyer is another.
Likewise, the potential for improved optimization, data storage, the onboarding of sensitive offline customer data, and real-time strategic campaign updates can all be enticing reasons for an advertiser wanting to move programmatic in-house. No one knows more about a brand than the brand itself.
If bringing programmatic in-house has been a conversation among your own brand’s marketing or C-suite leadership, it is important to first determine your company’s desired end state. Specifically, be very clear about which of those motivating challenges your organization is trying to solve – and if going full in-house is the best way to achieve that objective.
What In-House Programmatic Really Means for Advertisers
Brands considering bringing some or all programmatic media buying in house must understand that it is not a quick fix or a one-time project. It is a journey that may take several years, during which your end goals may need to be adjusted.
It is important to adopt a test-and-learn approach to what is most critical in your strategy. Figure out what your goal is, then adjust your strategy incrementally to achieve it.
For example, if increased transparency is your goal, work with your agency to see if they have a transparent model for programmatic buying. If data portability and ownership or cost savings are important to your organization, set up a direct deal with a demand-side platform (DSP), while letting your agency team manage the media buying efforts on your behalf.
Perhaps you do buy media at such scale that there are potential further cost savings with traders who sit in your organization, or you want to use data points you are not comfortable sharing outside the organization. In either of those scenarios, then bringing your programmatic team in-house may make sense.
Setting goals, working towards them, and iterating throughout the process will ultimately deliver the most success for your brand and organization as a whole. As you better understand your trading environment, you will be able to see the critical data points you need to make the right strategic decisions on your next step of the journey.
An Overview of Programmatic Buying Models
There are a number of different models for programmatic relationships. Here’s a summary of those models and some of the pros and cons each provides to advertisers:
Fully agency-owned and operated
The most primitive of the arrangements, brands in this model work with ad networks or have undisclosed media mark-ups by the agency team. The pricing is usually on a flat CPM, or the dynamic CPM includes a large margin that the advertiser is unaware of. This relationship may also be a black box in terms of content distribution and where the advertiser’s inventory is running. You are also unlikely to have direct access to your audience data or the ability to audit your campaigns.
Advertiser uses agency platform for analysis
The transparent trading desk balances increased insight with potentially increased rates. These renegotiated contracts have emerged as the front-runner for advertisers.
The ease of working with the agency to manage the strategy and media is still in place, while brands gain more visibility. In exchange for paying for staffing costs, advertisers receive the clearing price of media and all margins associated with third-party data and platform fees.
Advertiser works with third-party trading desk, not owned by the same agency group
Similar arrangement to the above, with the trading desk operating as an independent party. This trading desk may or may not be managed by the agency team. The client often has a direct relationship and separate budgets for the third-party trading desk, and can operate independently from the rest of the media mix managed by the agency-of-record.
For more sophisticated advertisers, an early step to owning your programmatic contract is to own the relationship with the DSP suppliers.
Under this model, the advertiser meets with the major suppliers to determine the best platform fit (often in conjunction with a third party), and then contracts directly. The advertiser then licenses its seat in the demand-side platform (DSP) to the agency, and pays their staff to manage the program.
Here at Infinitive, we’ve seen this model become increasingly popular as it gives the advertiser full transparency on costs, data ownership and audit capabilities without having to take on headcount to support it internally.
Advertiser operates under a regional or global model
Similar to the above, advertisers can choose to work with either one trading desk or DSP provider globally. Brands can also work with partners in each region where specialization may provide better access to data, inventory, targeting, or support depending on regional offerings. While most major DSP players serve the global market, some advertisers may find better success with different DSPs in different regions.
Fully advertiser-owned and operated
The most extreme version is to take both the contractual ownership and the managing of media buying in house. So far, this has only been feasible for large advertisers, and typically those located in either London or New York where there is access to talent to staff these roles. It is also appealing for digital-first companies to adopt an in-house model. These organizations have vast and often easily accessible data that can be applied to media targeting directly.
4 Steps Brands Should Take to Determine Programmatic Strategy
Understanding the different models for programmatic relationships is crucial for making any strategic decisions.
1. Know your options -and goals- for change
As we laid out above, knowing your organization’s goals is the first step to any discussion about in-sourcing programmatic. If you are considering making the move to either a fully in-house or “hybrid” programmatic model, you should first identify what change would look like for you.
Conducting an assessment to see where your organization stands and creating a roadmap that aligns with where you are will ultimately streamline the process. You need this insight to allow your brand to make the best decisions. As part of this assessment, you should also determine where you would like to be in the future.
What are you trying to achieve: increased transparency, data control, ease of reporting, or first-party data uploads? Are you seeking to decrease costs, or find organizational efficiencies? Set your priorities, and then iterate where necessary.
2. Consider how you would find the right talent
Having the right people with the right skills is absolutely critical for successfully in-sourcing programmatic, as we’ve previously explored. Programmatic trading resources are typically easier to source in locations with large agency trading desks – London, New York and Chicago.
In addition to finding the right people, you need to assess the cost of bringing programmatic in-house. It’s as much a people investment as a technology one. Determine whether your company has the appetite to have these individuals on your payroll. The ongoing overhead expense may outweigh the benefit of sitting closer to your media dollars.
3. Understand your technology landscape
Make sure you understand the full breadth and complexity of the technology platforms involved as part of your in-sourcing decision-making. This will include everything from DSPs and data management platforms (DMPs), to ad servers and visualization/analytics tools. It also includes any proprietary or additional third-party technology your brand may need to integrate with your media systems.
Meet with platform vendors to gather intelligence on the different offerings and opportunities in the space. Ensure the future vision of your brand will continue to be well-served if you manage these technology relationships directly. Infinitive conducts these types of assessments, RFPs, and benchmarks for many of our clients to ensure they have a complete picture of their programmatic technology.
4. Get comfortable with an iterative, incremental approach
Moving programmatic strategy in-house is not a one-size-fits-all model. Taking the time to develop the right strategy for your brand is crucial.
As many have documented, depending on your brand’s overall goal the benefits may not outweigh the various costs. It is important to stay true to your strategy. That includes accepting that the final step on the spectrum may not be the right place for your brand.
A hybrid, iterative approach may allow for the transparency your brand desires, while providing the security and expertise of working with a trusted agency partner. Identify your goals, execute against them, and seek help from trusted partners when you need it to make sure you have the right strategy and approach for your organization.
Rebecca Bogatin, an Infinitive digital media expert, contributed to this piece.
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