True Or False – In-House Ad Technology Is Cheaper Than Hiring An Agency

According to the study conducted by the Association of National Advertisers, the percentage of advertisers who shifted from agencies to in-house advertising in 2017 has increased to 35%. Furthermore, it is estimated that by the end of 2022 around 62% of brands who advertise programmatically will do it in-house.

The survey has also revealed that the main driving force behind such drastic changes is the rising dissatisfaction with the current programmatic ecosystem. The lack of transparency and uneven money distribution within the chain results in great distrust between partners. Is it really cheaper to shift to the commision-free in-house model? And does the opportunity signify the end of the era of media-buying agencies?

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What’s Wrong With Agencies?

In the majority of cases, the brands don’t have sufficient capacities, expertise, and qualified staff to launch their own marketing department. The expertise is the key reason that makes brands seek an outside perspective. One of the greatest strengths of the agency specialist is understanding the industry inside-out, including the strategies for traffic attraction and latest industry trends.

At the same time, even the most flexible entity is not able to manage the work as smooth and fast as an in-house team. When hiring the agency, the brand needs to realize that the same specialist will also work on several side projects simultaneously. Thus, the launched marketing campaign often gets stuck on the stage when it needs to change course completely.

As a result of such slow maneuverability, the companies typically lose 50 to 80% of marketing budgets which also ends up in decreased consumer loyalty, media fragmentation, and general time losses.

Programmatic Didn’t Fix Old Problems

The algorithmic ad buying was expected to bring more clarity to the ad buying process by default but it didn’t. The issue is not in technology but rather in ad tech providers who define the prices on services independently.

The programmatic chain comprises numerous entities: platforms for advertisers (DSP), decisions for publishers (SSP), the digital marketplace (Ad Network), the data management platforms that facilitate programmatic targeting (DMP), etc. The broader the network of participants, the better are the chances to close the deals, nevertheless, every new one consumes additional money shares.

The problems start once the parties begin to question the subject of money distribution or try to determine if the fees charged within the system are fair.

An advertiser that starts a campaign on the demand-side platform only knows the total sum paid per 1000 impressions. How exactly the budget is allocated among parties inside the chain is unknown and leaves room for assumptions. Meanwhile, IAB (Interactive Advertising Bureau) proves that publishers only receive 50% of the money paid by advertisers for serving the ad, the other part is taken by ad tech vendors.

In an attempt to address the problem of insufficient transparency, many companies embrace an in-house programmatic approach. For the brands, in-house advertising appears to be beneficial in terms of clarity and control over the expenditures and user data.

That’s Why Brands Chose In-house

Expenditures and visibility. By shifting to the in-house programmatic approach, big brands like Procter & Gamble or JPMorgan Chase leave all the intermediaries outside the board. This way the company is able to save half of the budget which typically goes to waste because of the commission fees. The system also provides the brand with total visibility considering where, when, and how the ad is served.

Subscription for tools. Sometimes it seems marketing has developed a tool for every possible purpose: gathering, storing, and analyzing the data, along with revealing the traffic opportunities, finding the target demographics, A/B testing, and the list goes on. Subscriptions to every tool may cost a company thousands of dollars per year. Taking a programmatic in-house approach means these expenses are covered automatically.

Usability & market adaptation. The fragmentation caused along the process of data management can be easily avoided when information is managed in-house. The tools inside an in-house solution are suited to the individual needs of the brand so they don’t overlap. Such an integrated functional toolset allows the brand to consolidate the data in one place and apply customization every time the tools need to adapt to the new requirements.

Third-party data control. Programmatic media chain leverages enormous amounts of data for aggregating and processing the personal data used for targeting. Taking the data management responsibility in-house will help the company to safeguard customer information and eliminate potential data breaches.

Is This The End For The Agencies?

You may have an outstanding data management team and expertise, but the talents are the main assets in advertising. Oftentimes, the agency is the only place where qualified digital marketing employees can be found.

Despite all the criticism directed towards agencies, they will unlikely vanish from the scene in the near future. Media buying agencies will still make sense for brands that want to adopt the hybrid model that combines the strengths of the best industry minds with an unbiased in-house approach.

The Last Word

Even though perfection in the sphere of advertising is something the brands are still striving for, the good solutions are already here. The brands are choosing an in-house approach because it offers higher yields, fewer risks, better transparency, visibility, and freedom from intermediaries. Still, many brands are not hurrying up to quit the collaboration with agencies entirely and combine their out-of-the-box approach with in-house programmatic purchasing.

Author Bio: Irina Kovalenko is a Chief Marketing Officer at SmartyAds, a company specializing in developing cutting-edge programmatic platforms for ad buying and selling automatization. – Irina is an outstanding marketing professional whose deep knowledge and expertise are hailing from a multitude of disciplines and industries. Her background includes but is not limited to Ad tech, Inbound marketing and she feels deeply passionate about sharing her experiences and knowledge with the rest of the world.

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