Over the last two years, several large brands have decided to take programmatic buying either partially or entirely in-house. When deciding whether your company should follow their lead, there are seven key questions you need to consider.
1. Does your organization have programmatic buying experience?
Have you dipped your toes in programmatic waters before, or are you new to the game? If you are not already a heavy programmatic user through some other relationship, I’d suggest not jumping right into the driver’s seat with an in-house solution. I make this recommendation for several reasons, not the least of which is that your organization has to know, to its very core, that programmatic works in order to overcome the obstacles associated with the remaining questions below.
2. Are you willing to invest significant time & money?
The amount of time and money you might be fronting depends on what you hope to get out of your programmatic solution and the level of complexity in your organization. If you are a one-brand, one-product company that just wants to take on your own site retargeting — the startup time and costs would be on the low end. If you are a multibrand, multiproduct organization looking to boost acquisition, conversion and retention across a range of touch points — the startup time and costs will be considerable.
Although total costs vary according to the above factors, let’s assume an average first-year startup cost of $100,000. You also need to hire a fairly well-paid, full-time employee (FTE) who dedicates all his time to managing the initiative. Finally, you need to utilize 20 percent of existing FTEs’ time in the IT and marketing departments, and another 10 percent of existing FTEs’ time in the human resources and legal departments.
3. Are you willing to accept some ongoing risk?
You are not going to build your own technology to tackle programmatic buying. It is a fool’s errand, considering how many tried-and-true solutions already exist in the marketplace.
However, with each of these solutions, you commit to some level of spending through their systems. If you fall below that threshold during one of your non-advertising windows, these solutions still charge their standard fees. Depending on the volume, the technology and the complexity of your organization, this could either be negligible or very large. As an example, assume you will be required to pay a minimum monthly fee of $25,000 for using the programmatic solution to execute against committed media budgets of $250,000 or more.
4. Are you willing to build a dedicated team?
Contrary to popular belief, humans are an integral part of a successful programmatic buying solution. People set the key performance indicators, the strategy and the framework for the machines to follow. People also need to be responsible for making a variety of decisions and course corrections that algorithms are unable to handle (at least for now). Once you have committed to the time, personnel and risk listed above, you need to make sure a team is in place to keep the wheels on the tracks. If you only have one person working on programmatic buying, what happens if she gets sick? If she goes on vacation? If she leaves the company?
At least a two-person team is recommended to handle your efforts — one FTE to get the programmatic buying system launched and take leadership of it, and another FTE to work within the system once it is built. This allows for some redundancy so that things don’t break should one of those two be removed from the equation. However, the larger the effort, the larger the team. As it relates to programmatic advertising, another good rule is to staff one person for every $1.5 million spent through the system. Your organization’s staff count may be greater than that if the spending is diversified across a large number of brands, products or campaigns; if there are multiple software systems to manage; or if you have a lot of turnover on the team.
5. Are you willing to forge the right partnerships?
Part of the reason you need one full-time employee to manage this process from the get-go is because a lot of his time is spent determining the right partners of the moment for your organization. While almost endless, some of the key partnerships include:
- Data management platform (DMP)
- Demand side platform (DSP) — if separate from the DMP
- Third-party data partners
- Tag management partners
- Attribution partners
- Ad serving partners
- Verification partners — for viewability and brand safety
Once you have the right partners in place, it’s necessary to revisit other options on a regular basis, as new companies and technologies evolve, and mergers and acquisitions reshape the marketplace.
6. Are you willing to learn from data gathered during programmatic campaigns?
The promise of programmatic advertising isn’t just performance. It is performance plus insights. Information gleaned from the fast data of the programmatic world can lead to new discoveries for product development, consumer segmentation, creative messaging, capital investment and more.
However, all that data requires regular analysis and communication throughout the organization. Add some extra time (about 5 percent of existing FTEs’ schedules) to the plates of product development, consumer research, brand management, creative development and executive management.
Some people in the industry (myself included) argue that organizational learning is the only reason to take programmatic in-house as a brand. Otherwise, there are plenty of solutions that deliver performance at an acceptable price. If that’s all you need — hire them!
7. Are you willing to maintain the investment?
All of the points above become ongoing prerequisites after the first year. Plus, there is one final requirement: Regularly seek outside consultation to make sure you are following best practices and not missing anything that could be a game changer.
Because of the reams of data involved, programmatic is a breeding ground for false truths. It is also a rapidly evolving industry that is still in its infancy. It is necessary to consult with outsiders on a regular basis to debunk myths, offer fresh perspective and get important updates on what others have learned while conducting their own programmatic efforts.
Given this, and related to all of the points above, can you consistently commit to the following?
- A dedicated two-person (or larger) team
- 20 percent of existing FTEs’ time in IT and marketing
- 10 percent of existing FTEs’ time in HR and legal
- 5 percent of existing FTEs’ time in product development, consumer research, brand management, creative development and executive management
- $3,000,000 or more in programmatic spending annually
- $50,000 in ongoing consultation fees
If your organization answers yes to all of the above — as several multinational organizations have already determined — then bringing programmatic advertising efforts in-house could be a wise decision.