Constant change is the norm in digital advertising. As programmatic continues to evolve from disruptive technology to mainstream transactional vehicle, it’s not surprising that more focus is being paid to who, exactly, should ‘own’ the channel.
From Netflix to Geico, several major brands have swapped the traditional outsourced agency model for an in-house approach, drawing on internal capabilities to handle all aspects of campaign development and delivery. Moreover, with a survey by the Association of National Advertisers (ANA) showing almost half of brands are home to in-house agencies, there are signs this may be a growing trend.
Could this mean programmatic is destined for an in-house-only future?
Chief motivators for moving in-house
The main reason brands are taking programmatic in-house is the lack of trust and transparency in the digital ecosystem. P&G and Unilever are just two examples of brands who have publicly voiced frustrations regarding fraud, supply chain opacity and brand safety challenges. Meanwhile, the increasingly crowded digital ecosystem has at times facilitated and then obscured practices that have ranged from unethical to much worse. All of this has led a number of brands to believe bringing the entire operation in-house is the best route back to control and clarity.
Added to this, there is the perception that in-housing programmatic will reduce costs. As adoption of programmatic has increased, so has its share of digital ad spend: currently 28% globally. Understandably, brands are keen to ensure such sizeable expenditure drives strong returns, and many see taking control of campaign management — especially media buying — as an effective way to do so.
Internalization in practice
The reality of going in-house, however, often falls short of expectations. First, the buying isn’t necessarily more cost-effective. As established digital advertising players that trade in large volumes of media, agencies have significant buying power with publishers, partners and technology providers. They frequently receive rate discounts not available to new market entrants and generate savings they can pass back to brands. Plus, the insight agencies amass through handling multiple brand clients is a prized asset as it relates to strategic deal-making and supply path optimization (SPO), with agencies able to help brands choose partners that offer the best value.
On the issues of transparency and control, it can be argued that rather than dismissing agencies altogether, a potential solution is more open communication between agencies and buyers about fee structures and media economics. Brands should demand clear, measurable and transparent practices, and work only with the agencies and technology partners they can hold to account.
A second barrier to successful in-housing is amassing the requisite talent and tech. While modern brands have an advanced level of digital capability — particularly CMOs, who must be masters of multi-channel campaign measurement and budget allocation — it can be easy to underestimate the complexity and scale of programmatic execution. This can mean efficiency gains are less than anticipated: in addition to investing in a billing system and finance team to manage budget workflows and reconcile invoices, brands also need an ad serving team to manage traffic operations.
Even more fundamentally, taking programmatic completely in-house requires a sufficient number of trading and analytics personnel to oversee implementation, optimization and troubleshooting. These functions require well-trained experts, who can be both hard to find – particularly for brands in further-flung locations – and expensive to retain.
A potential way forward: A hybrid approach
Brands’ desire to get closer to programmatic is a positive development – every dollar that flows through the ecosystem ultimately belongs to a brand, and that brand should have visibility into how the system works. It’s good to see that they are taking greater control over the supply chain, becoming more familiar with programmatic, being involved in the decision making process for technology partners and setting clear benchmarks for each of those partners to follow.
And, as they have become more involved, some brands have successfully brought all programmatic in-house, while others have attempted to do so and ultimately opted for a hybrid model over cutting all agency ties. For the latter group, this approach allows for greater control while also continuing to leverage an agency’s expertise and infrastructure to help make smart decisions about choosing technology partners.
For example, Vodafone has opted to split activity three ways: taking two-thirds of its total media buying in-house, while splitting the remaining third of its media buying business between one agency and an ongoing consultant. In another case, Mazda is retaining its agency but taking more direct control of its bottom line by setting outcome-based payment terms.
If anything, the biggest change on the horizon for agencies is likely to be diversification. While some will continue to run programmatic campaigns from start to finish, others may see the balance of execution and strategy realigned, with stronger emphasis on consultation. For many, close collaboration between agencies and brands will remain vital to ensuring success in all aspects of programmatic advertising: implementation, SPO, planning, buying — and whatever change comes next.