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Why Do Marketers Take Their Programmatic Investment Teams In-House?

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In recent years marketers have taken their programmatic media buying in house. Netflix, P&G, HP all run their own programmatic investment teams.

In recent years marketers have taken their programmatic media buying in house. Netflix, P&G, HP all run their own programmatic investment teams. This programmatic in-housing effect is happening. If you are an advertiser here are some points to consider when taking programmatic in-house.

The ecosystem is big. At $25B in spending for 2016 programmatic ad buying represents 73% of all media transacted in the US. According to eMarketer (from statistics released in 2015). Facebook takes in $8.50B in display ads, while only $3.81B is transacted on Google. These are net revenue numbers. To round out the group Twitter has $1.92B share and Yahoo has $1.27B share.

We’ll start a series of blog posts about how to develop programmatic infrastructure in-house.

The first step is defining exactly why we want to bring in programmatic investment.

There are three good reasons.

Transparency

This is key and becomes more relevant every day. When media is run through the programmatic ecosystem it’s key to know the sites, apps, pricing, audience targeting, time of day, day of week, platforms, operating systems and algorithmic targeting settings that make campaigns work for the enterprise. A big reason why agencies do this work today, and will continue to do this work for smaller advertisers, is because there’s a lot of tactical management that is necessary to make the campaign run, derive knowledge from the campaign, and infuse those learnings into future ad buying decisions. If you are a marketer there is a great deal of enterprise knowledge that’s being held outside of your organization. So, when your programmatic buying is happening within the walls of your organization the enterprise starts to develop learnings that impact digital marketing campaign, traditional marketing campaign, pricing decisions, creative decisions, market positioning and even broader enterprise wide decision making. In fact, when properly integrated programmatic ad buying should impact the entire organization because there is so much real world consumer data being transmitted back to the enterprise.

Pricing Efficiency

There are pockets of performance that will allow the advertiser to serve ads at a lower cost that drive the same performance, or even better performance. The nature of programmatic is still that real time bidding represents 47% of all programmatic expenditure, while the rest is delivered through programmatic direct channels. Here pricing is either guaranteed, delivered through non-auction buying on platforms like Facebook and Twitter, or where an API helps the transaction get fulfilled. An example of this is when a media buyer uses a self service platform to buy inventory on an app network at a set price. The platform is still programmatic because there’s data and maybe even algorithmic decisioning. Alternatively on Facebook some ads are allowed to be bought on a static CPM. So, if the marketer has that programmatic channel setup in house then the investment managers get to see all the performance details and can compare performance and pricing across proxy metrics like clicks, video view rate and brand affinity lift, and sales metrics like purchases and membership sign-ups. When that media is run outside of the organization, like at an agency, or when an agency (or the advertiser) simply buys from a vendor partner it’s rare that the outside party will actually share those very tactical results.

There are a few reasons why data doesn’t get to the advertiser. The first is that media is marked up, so costs will be shown as gross costs after the vendor’s fees are added. In that case, even if the marketer sees line item or log file costs associated with impressions, it’ usually unclear how much of that media was bought for because in many cases the media is delivered with a non-disclosed mark-up.

Another reason why the marketer doesn’t see vendor transactions is because there’s a lot of data, and it takes a great deal of effort to share line item or log file data with a partner. A process should be in place to share that data via API access. The marketer should have a data system and analysts ready to look at that information to derive insights from it. In most cases this extra work is a tax on the vendor partner’s resources and will push to ensure this data is not shared, opting in favor of PPT reports and learnings. At the high level these are good, but in most cases the analysis made by the vendor partner won’t be exactly what the marketer needs. It may be equally as thorough, but without having full knowledge of in-house activities there may be obvious learnings that are missed because the analysis isn’t made within the advertiser.

Finally, the marketer doesn’t press for this data, and may not have the systems in place to actually make good use of the data.

So, without pricing transparency, along with frequency details and tactical performance details there are lots of data points that aren’t analyzed fully, and so pricing and performance opportunities are missed. If that media is run in-house the team can look for real time bidding opportunities, forge relationships with private marketplaces and know in detail which elements of the buy are priced for the best possible performance.

Holistic Strategy Deployment

This is probably the most important reason why marketers take programmatic in-house. It’s better for media buyers to spend time looking at marketing strategy, rather than haggling over CPMs, trafficking ads, and manually pulling reports. With labor costs in decline it takes fewer people to run large volumes of media dollars. With more automation programmatic ad buying lets your investment team look at data and performance to better define and execute your strategy, and it lets your leaders spend more time looking at trends. There’s still a lot to do, but the work is smarter work and it’s more conducive to refining performance.

For larger marketers it may be time to take programmatic in house so they benefit from full buying transparency, more pricing details and a more holistic investment strategy that lives within the enterprise.

Robert Brill

Robert is the CEO of BrillMedia.co, host of the LA Business Podcast, and host of The Great Reset on YouTube.

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