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Programmatic Trading Desk: To Be In House Or Not to Be, That Is the Question

May 16th, 2016   ||    by Monta Monaco Hernon   ||    No Comments

L’Oreal USA is the latest in a line of big firms rumored to be building up its own digital programmatic trading capability in one form or another. While Ad Age first reported the company would bring a programmatic trading desk in house, a subsequent correction cited a L’Oreal spokesperson who clarified that the approach will be a “client-led strategic partnership with our media agency supporting our decisions, the operations, technology, and relationships.”

The reasons cited by companies making this move include the desire to keep tighter control over first-party data, avoid high agency fees, and to combat fraud. Specifically, there has been a problem with so-called agency double dipping. AdExchanger cited an example of a financial services company that was paying 8 percent of its media budget to its agency, 30 percent to the trading desk, and 10 percent to the trading desk leveraged demand-side platform-managed services.

Additionally, a recent ANA study showed that fraudulent impressions account for 3 percent to 37 percent of buys depending on the marketer in question. Over the last several years, the industry has seen Procter & Gamble launch its Hawkeye initiative, joined by other Fortune 500 marketers like Unilever, Allstate, StubHub, and Netflix, who have taken some form of their programmatic trading desk in-house. An AOL state of the European video marketplace (released in November) showed that 95 percent of the brands surveyed either already had brought some of their programmatic video capabilities in house or planned to do so in the next 12 months.

What is Next?

Despite these reports, analysts and agencies say there won’t be a tidal wave. For starters, not all that say they are taking programmatic in house are actually doing so in totality. Even L’Oreal’s announcement was clarified to some extent after initial reports. AdExchanger notes that while digitally native marketers, like Google and Amazon, might truly be doing digital media in house, many marketers are actually just moving their programmatic to buy-side technology platforms, which isn’t the same thing. The reason? In house means an ad server, web analytics platform, demand-side platform, preferred marketing developers, data-management platforms and attribution methodologies.

Likewise, Ruud Wanck, CEO of GroupM Connect, told DigiDay that he doesn’t expect brands other than the “extremely digital savvy advertisers” to move programmatic in house due to the investment involved. There is a significant amount of data involved to do programmatic right; only the largest brands produce enough to justify the move. The proper personnel also is required, and many of the necessary tech experts are located in New York City and the Bay area, notes Mediavest executive. By going it alone, marketers also lose the expertise agencies have with regard to lessons learned across clients and choosing the best approach for meeting a particular advertising goal, notes LinkedIn.

TV Talk

From the television perspective, there has been a smattering of in-house news. NBCU, for example, announced earlier this year it would allow marketers to use ad-buying technology to purchase some of its linear TV inventory. This added to the already existing capability to incorporate data from set-top boxes into spot selection.

But in general, the arguments against an in-house digital programmatic trading desk hold true for television as well. One benefit of programmatic TV is that it facilitates cross-channel marketing. Rather than siloed data, a company should be able to cross-reference first- and third-party sources in order to gain a complete picture of the consumer across media platforms.

For more information on the benefits of programmatic TV, contact Videa.

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