Is Programmatic Expertise Moving In-House?

Article ImageIn January, the global ad automation firm Kiosked released early insights from research that suggests that brands are pulling their programmatic and creative agency expertise inside. This is with an aim toward assuming more control of what's happening with this increasingly important element of their branding and marketing efforts.

"Programmatic" is a buzzword that has caught on during the last few years to refer to the ability to use technology to automate the purchase, placement, and optimization of online advertising. Basically, programmatic means automated. Initially, when the concept emerged, companies would typically look outward for assistance in leveraging the ability to be more strategic about ad placement, which helps to both save money and boost results. As brands have gained a bit of expertise in this area, some are pulling programmatic back inside, along with other aspects of agency expertise.

The decision of whether to bring creative within or turn to external resources has always been a topic of conversation in advertising circles, with a wide range of responses and solutions that often seem to have less to do with an organization's size and more to do with its culture, industry, and competitive positioning.

While advertising avenues have certainly grown and changed significantly during the past several years, the age-old pros and cons for in-house or outsourced are really still much the same. The benefits of generating creative internally include intimate knowledge of the company's culture, products, services, and future plans. There's also more control over the creative process and the materials produced, often less cost involved, and less risk of conflicts of interest or competitive issues.

However, there are benefits in favor of outsourcing this work. The value of a third-party perspective is important-sometimes (often!) staffers can be too close to the company and its products. Agencies also add expertise-particularly in a fast-paced digital environment, agency representatives tend to be much more up-to-date on technological issues, trends, and opportunities. They also bring broader client perspective-outside agencies have the benefit of working with a variety of clients whose experiences can enlighten their work.

Fast Co. Design's article, "Ideo, Silicon Valley's Most Influential Design Firm, Sells a Minority Stake," makes the point, "In the past few years, companies from Google to Capital One have begun investing heavily in design. A common approach is to scoop up design talent and bring it in-house as opposed to hiring independent, outside firms." It's a trend supported by Kiosked's research. Kiosked chief strategy officer and founder Antti Pasila explains that the increasing push toward programmatic is due to brands bringing expertise in-house, both in understanding the new environment and in order to leverage its potential.

There were several key findings from Kiosked's research. For instance, large companies are leading the move to acquiring ad agency experience. In organizations with 500 people or more, 100% confirmed that they had hired people with ad agency or media agency experience within the last 3 months. In fact, 33% of recruiters from large organizations had hired more than 15 people within the last 3 months that fit this description. Additionally, all respondents from medium-?sized organizations have hired at least one person with ad agency or media agency experience in the past 3 months, compared to 14% during the same period last year. 

Small companies, though, are slightly behind the curve; respondents indicated zero hires in the 4Q of 2014, and it's the same for 2015. Fifty-seven percent of respondents expect an increase in their recruitment activity from the ad agency sector in 2016. More than 58% of recruiters questioned noticed an increase in the requirements for an advertising skill set this year. Finally, the most important skill when hiring advertising professionals is creativity (30% of all responses), followed by project/campaign management (22%).

Ben Darche, director of client engagement with Digiday Content Studio, says, "I've been wooed by a brand trying to move their creative services in-house, and was at a leading SSP (supply-side platform) prior to my current role. On the programmatic side, brands like Kellogg's made news by building out programmatic trading desks in-house. Moves like this hurt agencies' already small margins, especially vis-a-vis the agency trading desks-one small bright spot for media agencies in the modern era, margin-wise."

Darche notes that Kellogg's still needs to use a demand-side platform (DSP)-it doesn't build its own. But, he adds, "The agency trading desk loses revenue, and, if you buy enough programmatic, it makes sense for a brand to bring that in-house."

Bringing creative in-house, Darche says, can be more challenging. While the big brands such as Apple, Google, and Facebook may be able to find-and pay-top-talent people to come in-house to take on their design work, smaller organizations will be more challenged to get the talent they need. "Most brands will fall far short of the creative talent they can find by outsourcing it to leading creative shops."

The landscape clearly seems to be more of a hybrid approach, based on myriad factors unique to each organization. As Michael Piperno, EVP of Imbue in Ewing, N.J., says, "While we have seen evidence of this shift, it hasn't impacted us much with our current client base. However, our firm has experienced instances where in-house teams choose to engage us for specialized services that they don't have capabilities for."

In addition, Darche suggests, "Shopping around for ideas from a multiplicity of parties is the way to go." He points to GE as an example of a brand that relies on dozens of agencies to innovate its marketing. In his opinion, the bottom line is this: "By bringing creative in-house, you're essentially saying your brand can nurture creative talent just as well as the best agencies. I don't buy it. Brands tend to not have that culture-and I can think of almost no examples of it working in the long run."   

Related Articles

A large chunk of ad spending is already being done programmatically. eMarketer predicts programmatic will make up 67% of total digital display ad spending, or $21.55 billion, in 2016. That's up from 2015, when it accounted for 59% of spending, or $15.43 billion, according to the researchers. The figures include programmatic buying for banners, rich media, video, sponsorship, and additional ad units showing on desktops, tablets, mobile, and other internet-connected devices. Programmatic advertising is creeping into more forms of media too, including television and radio.
When it comes to programmatic advertising, the rules of the game have changed. Late night wine and dine sessions, bargaining over CPMs, crying over insertion orders, and struggling for transparency of advertising performance seem relics of a bygone era as more and more advertisers make the shift to programmatic--well, all except the late night wining and dining. Where digital advertising was once associated with blind networks and distrust, programmatic advertising is becoming a favorite by offering advertisers transparency, efficiency, and control.