Last week, Real-Time Daily’s Tyler Loechner wrote about the in-house dilemma brands are facing by saying: “It has become quite the catch-22 for many marketers: They want to keep as much control as possible, and the best way to maintain control is via in-housing. However, they may not have the required skills to in-house effectively.”
Let’s rephrase this as a problem statement and then illustrate a straightforward solution theme: How should marketers go about maximizing control (ownership) and also push the trading buttons with confidence and competence (operations)?
Market actions point to the truths and fears
Back in September 2014, WPP CEO Martin Sorrell questioned “whether [brands] will be able to apply technology successfully.” Flash-forward, and we now see brands either doing it or considering it. And according to Alex Kantrowiz, reporting on data from Index Exchange, “in-house spend is the fastest growing category in the programmatic ecosystem, the data shows, beating out spend from agencies, trading desks and tech company managed services, which are all falling in share.”
We can also look at venture-backed ad tech companies, ever-pressed for revenue growth and extremely focused on establishing direct relationships with marketers. This shift in thinking puts agency prosperity at risk, which can easily spill over into other growing segments of programmatic innovation such as TV, radio, OOH, etc.
While it might sound dire, the market is actually presenting a brief window of opportunity for first mover agencies and in-house marketers to solve the catch-22. In a company newsletter, Brian Wieser of Pivotal Research said it best when referring to the unprecedented number of media agencies being put into review: “If there is a silver lining for anyone it may be that a media agency group playing a 'hot hand' or with a particularly compelling pitch may be positioned to gain more share this year than has ever been the case.”
Step 1: The brand must own its tech stack. If the current agency or managed service approach is not optimal for brands, which is causing brands to go in-house or seriously explore the possibility, then what might a “hot hand” look like?
Perhaps the answer is hiding in the current programmatic setup. For example, if today brands rely on middlemen to operate opaque trading stacks, thus ceding control, then brands can gain control by assembling their own stack and owning the contract with the vendors that make up the stack.
Let’s start with the status quo agency trading desk. It’s generally one-size-fits-all. The agency assembles its stack (could be built, bought or partnered) and shoves all client budgets through it. We might call this the Henry Ford approach because “you can have any color as long as it’s black.” The agency will likely claim such a set-up allows buying scale, and this scale somehow benefits clients. But if surplus value is actually created, then the brand should know exactly how much accrues to the agency's pocket compared to the brand’s intended objective.
Programmatic Resource Planning is about Tech-Audience Fit
In a classic post, from Marc Andreessen, he says “the only thing that matters is getting to product/market fit.” He thinks about the life of the startup as two distinct phases: before product-market fit and after. Andreessen believes the things a company does before and after are very different, which is generally test & iterate vs scale & optimize. Once the product fits the market, a company is able to step on the gas and spend to promote a product that will actually sell.
Brands can use this simple framework as a way to understand and practice programmatic resource planning. The only semantic difference is to break it down into before and after tech-audience fit.
Before tech-audience fit is when the brand tests & iterates through many ad technologies that may or may not have value on their own or when connected to other technologies. With literally thousands of technologies in the market, probability says there exists at least one ad stack combo that will outperform whatever the agency uses for all clients today. The key is to carve out real media budget and test the most promising trading technologies that fit what the brand wants to achieve. As a rule of thumb, the stack should be assembled against four constraints:
After tech-audience fit is found, the objective is to push as much budget as possible through the machine, thus driving down marginal cost and maximizing the desired outcome. Hot hand agencies will be the ones that can demonstrate top performance by optimizing media budget on the brand-controlled stack. This is exactly where agencies can maximize their value as knowledgeable media buyers, optimizers and operators. Marketers can use this approach as a stepping stone or they can just go for it and build an in-house team to push the buttons. Either way, control is gained in line with the risk level the marketer is willing to take.