Programmatic Maturity and the In-House Dilemma

A Look at Programmatic Maturity and the Question of In-House Control

Since its appearance on the scene over a decade ago, programmatic advertising has been giving marketers the power to expand the effectiveness and efficiency of their campaigns, through the use of automation, powerful third-party platforms, and digital tools. As the programmatic sector gains in maturity, players on both the buy-side and sell-side are making strategic shifts of their own, to keep pace with changes in customer behaviour, legal frameworks, and technological capabilities.

One of the changes that many organisations are contemplating is whether or not to bring the control and implementation of their programmatic marketing completely in-house. While such a move can bring benefits, as we shall see, this is a step that can’t be taken lightly.

A Look at Programmatic Maturity

In what analyst Jerome Underhill calls the “first cycle of programmatic”, brands achieved gains in both process and marketing efficiency, on a wave of targeted advertising and reductions in wasted spend that reached its peak in 2018. That year also saw the EU’s General Data Protection Regulation (GDPR) come into effect, throwing a greater spotlight on matters of consumer privacy and data governance.

A report from European consulting company Capgemini revealed that companies who meet GDPR compliance standards are outperforming non-compliant companies across a wide range of metrics. This is driving a shift in the advertising technology market, with more vendors offering built-in tools and adtech solutions that help brands maintain compliance.

(Image source: Capgemini)

As we enter the “second cycle of programmatic”, IAB Europe together with a number of industry players and their customers are investing considerable time and resources into developing a unified transparency and consent framework that will apply to the host of advertising technology solutions driving the sector in 2020 and beyond.

Those technologies include a number of creative media and techniques, as brands and marketers seek new ways of creating and sustaining high-quality digital customer experiences that can surprise and delight consumers who have grown accustomed to (and weary of) the familiar look of most digital advertising.

This digital ad fatigue and a desire for personalisation is fuelling a need for programmatic marketing that can serve ads featuring products, messaging, and creative content that’s distinctly customised to each consumer. Dynamic creative optimisation (DCO) solutions based on machine learning now offer this, enabling advertisers to easily and automatically deploy campaigns that connect with consumers on a global scale.

Programmatic’s second phase of maturity has also seen a number of mergers and acquisitions, such as Amazon’s purchase of Sizmek’s ad servers in 2019. Industry consolidation is positioning players in the adtech market to deliver more end-to-end advertising solutions.

As Programmatic Matures, Brands Face A Dilemma

For programmatic buyers, while the consolidation of adtech is good news in the sense of integrating and simplifying technology choices, it introduces the risk of monopolies with price fixing and increased costs, resulting in less control for advertisers, and fewer platforms to choose from. And as adtech matures, brands are looking for more standardised ways of measuring the effectiveness of advertising that makes its way through the ad exchange.

A lack of measurable value, concerns about the quality of advertising media quality, brand safety, viewability, and ad fraud are leading many advertisers to become anxious over where their ads are being placed.

Budget consciousness, a need for greater transparency, and the desire to have more control over data are all driving a trend for brands to bring programmatic talent in-house.

In-House Programmatic: Control and Compromises

As of 2019, it’s reckoned that nearly 47% of advertisers have already started advertising programmatically without relying on third-party ad agencies. In the Asia-Pacific region, 60% of marketers already have dedicated programmatic talent in-house. While cost control and greater governance over data and intellectual property are key factors in making this decision, there are other considerations which come into play.

It can take anywhere from 12-18 months to set up a complete in-house solution, with some observers putting this time frame at two years or more. In-house programmatic schemes require a centralised data infrastructure, a connected ad tech setup, change management, and having the right expertise.

Skills acquisition can be particularly challenging, as organisations face the option of either hiring external talent, or collaborating with agencies to train existing employees for the required roles. Brands considering a move to in-house programmatic should take advantage of their current partnerships with agencies and tech companies, to help smooth the way. According to a 2018 report by InMobi, 90% of brands are seeking to adopt programmatic in-house, despite the fact that only half of them have anything other than a rudimentary understanding of what programmatic advertising actually is. Up to 20% of European advertisers failed in their attempts to bring programmatic in-house. Brands like Vodafone and Intel are among those that have had to scale down their in-house ambitions in the light of operational realities.

In truth, there’s no “one size fits all” solution. While in some cases, it may be better to take back control, in other circumstances it’s better to leave it in the hands of experts. The appropriateness or otherwise of in-house programmatic will depend on the structure of your organisation and level of skills, the resources you have available, and other factors.

Many of the traditional holding groups and digital media agencies have introduced consultancy services, offering advice to brands that are looking to go the in-house programmatic route.

A hybrid operating model may even be the best option. Recently Nestlé admitted that while it has taken greater charge of its online media buying, it’s still calling on its relationships with a network of agency partners. Arrangements like this give advertisers and agencies the opportunity to be more agile, and adopt a “test and learn” approach in arriving at the best custom solutions.

Taking a hybrid approach also opens the door to the possibility of new relationships. While agencies may suffer some losses, successful cases of in-housing can enable all stakeholders to take advertiser-agency partnerships to the next level.

The maturity of the programmatic marketing sector and the issue of in-house advertising control will be hot topics at Programmatic Pioneers Summit EU 2020, which takes place at Twickenham Stadium, London, from 1-3 June, 2020. Download the agenda today for more information and insights.