6 Things to Consider When Taking Programmatic In-House (Part 1)
In January 2017, the World Federation of Advertisers released a report stating that nearly 90% of global brands were reviewing their programmatic strategies, seeking increased control and transparency in their business models. This trend isn’t new, taking media and campaign management in-house has always been a tendency across all buying channels, and with the staggering growth in programmatic over the past few years (eMarketer estimates 78% of display ad spend will be programmatic in 2017), the conversation has naturally extended into the space. But what exactly are the advantages of taking programmatic in-house? And what are the implications? In this blog post, we explore both sides of the coin, to present the essential factors to consider when taking programmatic buying in-house.
First, we must consider why brands are increasingly interested in internal programmatic buying:
1. Financial gains & cost savings
The online path from advertisers to publishers, and ultimately audience, is complex. An advertiser’s digital dollar can go through multiple channels and platforms, be appended with measurement technology and augmented with audience data, before ultimately landing with the consumer. A recent ANA study found that 28 cents out of every dollar went to a “programmatic tax” of demand-side data and transactional fees. Breaking down the 28 cents: 6 cents went to agency fees, 12 cents went to “execution costs” (such as DSP, verification, and ad serving fees), 9 cents were attributed to third-party targeting costs, and 1 cent to miscellaneous fees. An advertiser might think that they bid 1$ on an impression, but in the best case scenario, they were bidding 72 cents. Furthermore, 95% of the data analyzed for the study was not executed by an agency trading desk, which would amount to additional fees for the advertiser. The ANA study ultimately noted an added 45% to the average cost of display inventory and 35% to the average cost of video inventory. It’s no wonder then, that advertisers want to recoup as much of their initial investment as possible. Bringing programmatic in-house allows you to cut costs and increase the value of your bid directly to the publisher by removing as many intermediaries as possible.
2. Accountability & transparency
Trust in programmatic is at stake, with the aforementioned convoluted digital supply chain compounded with verification issues such as fraudulent, risky, and non-viewable impressions. Integral Ad Science’s H1 2017 Media Quality Report found that ~48% of impressions sourced programmatically were unviewable, and up to 11.5% of impressions were fraudulent if purchased without ad fraud prevention technology. By taking control of their programmatic buying, advertisers gain increased transparency into where exactly their impressions show up and if they are viewable to a real person, thus gaining full accountability for their spend.
3. Long term business strategy
Right now, when evaluating internal and external digital marketing management, it seems like brands must choose between teams with hyper-focused business knowledge versus agency teams with marketing expertise and industry trend knowledge. But businesses that are thinking ahead know that fostering in-house digital expertise blends the best of both worlds: proximity to the business and understanding of the brand/organization/vertical, and a deeper grasp of the ins and outs of digital advertising.
All in all, these three factors present a compelling argument for forward-thinking businesses that want to reduce costs, gain greater transparency, and bring the strategy closer to the business with their programmatic buying. But as you’ve probably noticed by now, programmatic buying is not simple, and there are many financial and operational factors to consider if you want to maintain the performance and quality that top agencies and intermediaries provide for brands. We’ll cover this in our next post – stay tuned for the last three factors to consider regarding programmatic in-house.