So you want to take your programmatic in house?
With many marketers looking at taking their programmatic trading in house OMD’s Dan Robins sets out a few things they should consider before making the decision.
With the exponential growth of programmatic some brands are having conversations about “moving in house”, using their own trading desks rather than agencies’. Foxtel is a stand out success in doing so, plus a number of others have had rumblings.
Given much of the press conjecture, one could be forgiven for thinking agencies and brands sit on opposite sides of the fence from each other.
Some of this conversation comes with good reason. Technology is tearing down many barriers to entry, and the velocity of opportunities is only accelerating. Moreover, certain parts of agency-land, and the underpinning technology, has created mistrust by being opaque to the direct questions brands are really concerned about: where are my ads shown, are they actually seen and what is the real value of what is paid?
Behind the jargon, Dan makes an important point “As agencies, we should be earning the right to be a trusted advisor.”
More pub talk required.
Tim
Brands take note! When taking it in house be prepared to staff up appropriately and not pass the buck to the vendor/s.
Good article Dan.
Regarding a client or brand taking programmatic in-house, wouldn’t they need to bear the cost of a data subscription to the relevant audience measurement ‘currencies’ (e.g. OzTAM, Morgan, MOVE, GfK, Nielsen Online Ratings, CineTAM, AMAA, etc).
The most recent cost analysis I did (a while back) was that subscribing to all the ‘currencies’ was in the range of 8%-12% of a media agency’s cost base.
Do you think clients would stump up for that?
Dan,
I broadly agree with your post, I think there are a couple of important points that are relevant in this the discussion;
1. Marketers are being told that right now they have the ability to model and plan their media in a new performance focused manner through cross channel reporting, modelling, attribution, dynamic allocation.
When an agency will not give clients access to this granular reporting for their own internal BI, reporting and modelling teams, what does this scream of? Well, there is something to hide. This ignites frustration and curiosity of investigating alternative models, where the client has full single customer view. Agencies are challenged by conflicting models of markup and margin vs. professional service where the attribution modelling may actually call in the question the validity of
2. The technology IS delivering cross channel transparency that you refer to opaque. The transparency around Fraud, Viewability and Brand Safety are not really important when you have the technology giving COMPLETE visibility of media cost and performance, and that clients are then told that they can’t gain access to this because this is the ATD publisher data.
3. 1st Party Vs. 3rd Party Data – clients do not trust their agencies with their sales data in many instances to run modelling, let alone their cookies of their active cookies with a ATD business unit that conducts business as a network. Most (All in my experience) of the Data platforms require permission from the data owner to use their data in agreements. Not their agencies.
4.The motivation for clients to investigate in-house is that clients are of the UNDERSTANDING that agencies are making huge margins on programmatic media markup (What is paid by the advertiser Vs. what the media costs from the publisher). It is summarised by the question that has been asked at a number of events recently; “At what spend level is it viable to take programmatic in-house?” The answer is of course, “it depends how much your agency or trade desk are making” be that double dipping with the Media Fees + Trading desk margins.
This is exacerbated by brands talking to publishers directly, where the client may say, well, I spent Eg. $1m with you last year, and the publisher saying, No, actually you spent $600k. Another example where this conversation comes about would be the transition of skill from ATD to client-side where the known margins are of operation are known, not to mention the rebates, preferred publisher partners, and technology fees etc.
Imagine circumstances where the publisher and the technology vendor go direct to the client, they may get less (they could get more) of the media dollar, but their margin will not be pummelled by a global media agency group, their product however will be well represented and they can potentially become a strategic partner of the business – rather than both the publisher and the technology vendors contributing the media group’s margin in NYC earnings calls. (Omnicom & others state that their profit growth is directly related to Programmatic – Dan it could be any of the groups – it was the first one I found)
http://adage.com/…/omnicom-earnings-shed-light…/295496/
Add to this that the ATD’s now unlocking the larger TV, Radio and Outdoor budgets, no wonder marketers are investigating their options when so many questions remain unknown.
So no, it certainly is not viable for everyone to take a trade desk in house, but I think that you’re missing a few key points on why clients are investigating taking these services in house. It is at the very heart of it two models that are conflicting, not the brand and the agency, but the agencies and the technology companies. Transparency is there already on performance and media cost, it just isn’t visible to many/most clients unless they take it in house / hybrid to make that assessment themselves.
These are examples,
/y0z2a
I believe that number of clients moving trading desks in house will continue to increase.
As the level of client-side knowledge grows they will realize that a “blind network” buy which agencies have marked up by 200 – 400% is not the best use of their marketing budget.
It still amazes me that media planning / buying agencies, which are supposed to make independent decisions on client media investment, are aloud to buy from themselves.
It is a massive conflict of interest.
@Y0z2a – great comment. It is well known across the entire market how much the ATD’s are marking up fees – not just on media, but across the entire spend base. I don’t particularly like the option of marketers taking programmatic in-house, but given their options at the moment, I don’t blame them.
@Tom – 400%? You having a laugh mate? [Edited by Mumbrella]
The thing with these ‘anti trading desk’ thread commentators is they find the most extreme examples and try and then paint a picture that the entire industry works this way 100% of the time.
No one ever agrees on the positives around the automation and audience benefits that many clients are seeing. A more moderate approach from some of the naysayers would give their opinion more credibility.
Good article Dan. Measured and balanced.
@ Clueless. In some cases 400% is an understatement. I have seen a media plan with data being purchased at $2.50 CPM and sold on at $20 CPM.
@tom pull the other one mate! You stuck in 2008 buying from ad networks or what?