• by Seth Ulinski , Op-Ed Contributor, June 17, 2014

It’s no secret that global brands are opting to bring programmatic media buying in-house. The list of companies doing this includes Fortune 500 companies such as P&G, Unilever, and Netflix. In addition to the immediate impact on the client-agency-vendor ecosystem, there are some equally interesting developments taking place in the larger technology landscape.

First, let’s look at a few of the risks that marketers must consider when they take programmatic media-buying in-house.

Media Risk, Brand Risk, and ROI

Although on the surface it might make sense to “in-source” a business function such as advertising if it can be automated through software, the process is not without significant risk in the form of media dollars which can be spent (and potentially wasted) with the click of a button -- there are no mulligans. As anyone who has been in the AdOps seat will tell you, trafficking campaigns requires attention to detail (i.e., tactics, budgets, testing creative, etc.) Brands must also be fully up to speed on the good/bad/ugly that live in the world of ad exchanges that have been making headlines -- showing the majority of advertisements to bots plus a few instances of negative adjacency will quickly put a damper on even the best-performing campaign. Last but not least, an internal team will need to drive an ROI that exceeds that of the previous agency or agency trading desk (ATD). This is where financial teams will calculate investments in resources such as headcount versus agency fees to determine viability. Who’s up for an ATD versus in-house bakeoff?

If the above elements are fully understood, addressed, and properly executed by in-house specialists, there are a number of benefits.

Transparency, Speed, and Business Intelligence

Transparency continues to be a hot button issue, as many marketers are left in the dark when it comes to being fully abreast of how their agency partners are investing media budgets. Clearly, there are a myriad of variables in a digital market full of nuances and point solutions, and being 100% transparent with a media budget is no small feat (to that end, some clients may not want to know how the digital sausage is made). The factors above,combined with increased demands by clients, have led some agencies to be slightly less than above board with things such as resource allocation and/or fees.

Speed is another consideration -- as removing a middleman expedites the transfer of data and knowledge, which can be crucial to livelihood of an enterprise. Rather than a chain of command that includes email strings, and meetings upon meetings, adjustments should be made in a more timely manner. This can add to the bottom line of an individual campaign and potentially impact a company’s 10-Q or even 10-K.

Business Intelligence, or the art of synthesizing data into information that can ultimately improve strategy and execution by the organization, is another important factor. The digital industry has an abundance of data -- how an agency or ATD team interprets data might be different than that of an in-house team. It’s great to have someone hand you a neatly packaged story, but what if the story is skewed, inaccurate, or completely misses the mark?

Enterprise Software and Services

Finally, moving programmatic technology in-house becomes increasingly interesting for enterprise software and IT services companies. I have written about this trend for a while, and it has accelerated in recent months with SAP and Oracle making acquisitions in the ad tech space. Meanwhile, peers such as IBM, SAS Institute and Cognizant have made investments in digital marketing technologies and are likely keeping a close eye on the in-house adoption rate of programmatic software. As more Fortune 500 companies take programmatic functions in-house, the more interesting acquiring programmatic ad tech companies will become.  To help fuel this movement of bringing ad tech in-house, systems integration specialists (i.e., Accenture, Unbound) are at the ready, versed in weaving together disparate platforms -- a feat that ATDs have accomplished on behalf of digital agencies to date.

In summary, the handful of global marketers that have taken programmatic operations in-house will serve as a litmus test for some, while other marketers will be better served to allow their respective agencies/ATDs to continue managing programmatic efforts. If the in-house movement proves to be relatively successful, look for continued investments/acquisitions from SAP, Oracle, and their competitors in the enterprise software sector.