2. In-housing, Programmatic and the Death of the Ad Agency?

Episode 2 of the Digital Distillery Podcast sees us meeting Utku Guendez, Senior Media Consultant from the Vienna Startup Refurbed.

Refurbed represents a part of the new digital marketing trend who are  hitting out on their own and in-housing various operations that would traditionally be managed by advertising agencies.

Following along with her talk, we explore the benefits and the risks of in-housing and how it is changing the identity and purpose of these traditional marketing roles.

We dip our toes into the deep pool that is Programmatic advertising (this wont be the last episode you hear on this exciting topic) and we meet Amanda Cohrs from the Programmanda podcast who gives us an overview of how it works, as well as offering her insight into the changing roles digital media and marketing.

As always you will find links below to articles referenced making this episode as well as further reading. If you would like to get in touch to give us some feedback, learn more about the event, or just say hi, you can go to the contact form on our website.

Alternatively you can email: podcast@the-digital-distillery.com

Further Reading


https://showheroes-group.com/blog/

https://www.anura.io/blog/how-does-programmatic-ad-fraud-work#:~:text=Programmatic%20fraud%20is%20a%20subset,fraud%20campaign%20to%20the%20next.

https://digitalmarketinginstitute.com/blog/the-beginners-guide-to-programmatic-advertising#:~:text=Programmatic%20ad%20buying%20is%20the,and%20sell%20online%20display%20space.

https://blog.relevant-digital.com/growing-trend-in-housing-in-digital-marketing

https://digiday.com/marketing/marketers-feel-growing-pains-house-agencies-become-necessity/

https://iabeurope.eu/

https://www.match2one.com/blog/in-housing-programmatic-advertising-2020-a-guide-on-how-to-succeed/

https://dmexco.com/stories/programmatic-in-housing-challenges-for-advertisers-and-media-agencies/

This episode is brought to you as always by The Digital Distillery.

If you would like to get in touch with us you can head to our website or email podcast@the-digital-distillery.com

You can follow us on:
Facebook, Twitter, Instagram & LinkedIn

Written, Produced & Engineered by Phil McDowell
Executive Producer: Nadia Koski
Project Leads: Dennis Kirschner

Transcript

The Digital Distillery Podcast

Vienna

Episode 2

What actually is Programmatic and how does one get it in a house?

Are advertising agencies in danger of extinction?

and why are Ferrets just so damn sneaky?

Find out as we head back to Vienna for the Digital Distillery. 

And welcome to Episode 2 of the Digital Distillery Podcast. 

I’m your host, Phil McDowell. This is the show where we break down all the key topics in the Digital Media and Marketing landscape that are featured at these exclusive events hosted by ShowHeroes around Europe.

If you weren’t there with us, last episode saw us Packing our bags

Boarding the train

And hitting the beautiful City of Vienna

For the return of the Digital Distillery Event.

Music

And if you did listen to the last episode you already got a bit of an introduction to the event, (and if you didn’t I highly recommend you head back to see how we got here) but what we didn’t yet talk about is how The Digital Distillery came into being in the first place?

Meet Dennis Kirschner

Now when Dennis, Ilhan and Mario started ShowHeroes back in 2016, they found themselves frustrated by the industry’s approach to events and the focus on shameless self promotion at the expense of genuine insight. 

They wanted to create something that allowed for the robust discussion and sharing of insight about the crucial topics and issues that the modern digital media industry is facing today. 

And so the Digital Distillery was born and began its European travels.

Starting to feel out the topics that were most important to the industry

Programmatic! The crux of today's Episode and the word buzzing in the ears of advertising agencies and marketing professionals worldwide. And in order to get there, let me take you back to our Event in Vienna.

...where last time we heard from keynote speaker Juergen Schmidt 

"Hi. Im Juergen"

about the Cookie-less future

And after he left the stage he was able to settle in and enjoy the rest of the show.

And after a quick break and some nibblies we were back to it

Next on the chopping block was Utku Guenduez, Senior media consultant from a Vienna based startup called Refurbed. 

(Clip Utku :24): Hi I’m Utku… 

Refurbed runs an online marketplace selling ‘renewed’ second hand electronics and other consumer items, with the aim of fundamentally changing the way that we consume these types of products. They do this by providing a sustainable but still secure and reliable alternative to always buying new, while also providing benefits you only get from a new product, like a warranty.

Now what’s special about this particular startup is that even when they were relatively small and just getting going, they were, and still are, strong proponents for something called ‘in-housing’, particularly when it came to their programmatic buying activities. 

So before we get to programmatic itself, let's talk about what exactly ‘in-housing’is, why it’s starting to grow in popularity? And just what makes it ‘an advertising agency’s nightmare?

In-housing itself is a pretty straight forward concept and basically refers to an organisation acquiring and investing in technologies and knowledge for certain processes that would traditionally be outsourced to a 3rd party, like an advertising agency.

In digital marketing this can consist of developing or taking ownership of certain technologies, data, content production and of course the big one, ad space buying. 

According to the International Advertising Bureau Europe (IAB for short) this growing trend is seeing 54% of European Advertisers looking at in-housing programmatic buying this year, and 43% more are considering it for the near future.

This is obviously a shakeup at best and a nightmare at worst for external agencies who have traditionally been billing their clients for this kind of work.

Let’s come back to the impact of this in a bit, because the ears of the big digital elephant in the room are itching.

And we need to have a bit of a talk about the 45.36 kilogram Gorilla (er. sidenote: please forgive all the zoological references, I may have been having a bit of a Attenborough binge recently)

So what it essentially boils down to is this:

You, as a company, have a product to sell. You have particular types of customers in mind who you think might be interested in said product.

So you need to get your product in front of the eyes of that customer. In the analogue world, this could be for example on a billboard, or in a newspaper. This ad space can be rented by you for a certain amount of money dictated by whoever owns the space or it might, say, go to the highest bidder.

And so, in order to inform your decision of how much you're willing to pay, you can collect some available data. 

With a billboard you might know how many cars on average drive past everyday, or in a newspaper you can find out how many copies are generally sold. What you don’t know however is who is driving past or buying that paper and what sort of things they are actually interested in. To be fair with a newspaper or magazine maybe you can narrow this down a little based on the target audience of that publication but it’s pretty rudimentary.

But what if you could have heaps more information on the person behind the individual seeing your product? Things like their general interests, their age and gender, purchasing behaviour, how much disposable income they might have, all this stuff we discussed last time when talking about 3rd party cookies.

This is where programmatic comes into play.

Clip: Hi, I’m Amanda….

Programmatic buying is when you take ad space buying and instead of finding the available space, negotiating terms and bidding on the price manually, you use software to automate huge chunks of the process. And all this, faster than your brother's pet python can bite you twice before you even realise what’s happened.

(Aside: this is a true story where my little brother's pet Python Carlos decided one day that yours truly was the only person in the world he didn’t like the look of enough to ever bite…twice)

Now I can’t get as in-depth here as Amanda has in 19 full episodes on the topic but happily for us, I can give you a pretty good introduction straight from the horse's mouth.

SFX: Horse Neigh 

Clip: Phil. Sorry….I’m going to stop now

So you can see this is kind of a big deal. Think of say, going off Amanda’s market analogy, the difference between going shopping to a single place with set and limited options and prices, versus going somewhere like Amazon or eBay where the whole range is visible to you.

All you have to do is feed your programmatic solution information about your campaign, audience, and key performance indicators and the algorithm does all the hard work.

When someone clicks on a webpage, and before it even loads mind you, the program will analyse the content of that page, who clicked on it, and exactly how much their interests and profile align with your product, or in other words, how valuable are their specific eyes to you. 

It will then enter into a computerised auction and bid on your behalf for the ad space on that website, against all of the other programmatic robots.

And it will do all this in the blink of an eye. In fact, 4 times faster than a blink of an eye at around 100 milliseconds.

In addition to launching your campaign, doing your bidding

 And Placing your ad or video in front of the potential customer, it will also monitor your ad spend, click rate and general success of your campaign and suggest potential areas for improvement.

It is already completely transforming the face of the media industry.

According to the IAB in a study published in 2019, nearly half of advertisers were already using fully automated trading of advertising space and, to top it off, around 89% of advertisers using programmatic were doing so in house.

Seemingly yet another nail in the coffin for media agencies.. Or is it? We’ll come back to that.

Now apart from the blistering speed and labour saving implications that automating these processes suggests, the key benefit of this whole game is that it ensures that media budgets are being used intelligently and as efficiently as humanly…well…IN-humanly possible.

And the sheer amount of money being invested in programmatic and its continued exponential growth speaks volumes. In the US, spending in 2020 topped 75 Billion USD, and is predicted to soar to over 170 Billion by 2024, by then accounting for 91% of total digital advertising expenditure. On this side of the pond in Germany France and the UK, while the dollar figures are a currently a lot lower, the growth trend is going the same way with the predicted spendings between 2019 and 2023 doubling in the UK and tripling in Germany.

Quite simply put, the system works. It does away with the traditional hit or miss campaign design and is incredibly efficient in terms of both time and resources.

Of course if you want to use programmatic effectively it's not just a matter of pushing a button. As smart as it is, like all algorithms, it can be hilariously dim if its parameters are not set up optimally.

If you want to get the best out of it there are a few key things you need to put the old fashioned manual work into.

The first is that you need to know your marketplace. If you don’t know the kind of people on the other side of the screen whom you want to attract, you just won't get very far.

The second is that you need to set clear goals for your campaign. These should be specific, measurable and attainable. After all you need to have clear targets in mind if you want to hit them.

SFX: Arrow hitting a target

Thirdly you need to keep a human touch in mind. 

Just because programmatic is based on algorithms and bots, it doesn’t mean that it can or should be completely devoid of humanity.

Interview: Amanda talking about the human touch needed…

Depending on the particular service you use, you will have more or less options to manually manage certain parts of the activities where it makes sense to do so for your campaign. The robots will take care of all the bidding and whatnot, but you will still need to allocate skilled marketers to plan, control and optimise your buying and find the perfect balance between human and machine.

Fourth is to protect your brand from ‘algorithm logic’. As we all know from Science Fiction and more immediately from things like youtube, you can run into problems if you give an algorithm free reign to reach its ultimate ‘logical’ conclusion. 

Take the Youtube example. We have all unfortunately experienced that one time you click on some bizarre clip out of morbid curiosity, only to find yourself being led down a rabbit hole of more and more extreme craziness.

In programmatic, this means that unless you are careful, your ads could be showing up on sites that promote things you don’t want your product associated with. Fake news for example like coronavirus conspiracy theories, sites proving that the earth is flat or Elvis’s personal blog. Not really a great place for your ads to be if you want to maintain credibility in your industry.

Number 5 is to watch out for programmatic ad fraud. Now this is a big one. Basically it is a subset of standard ad fraud where someone can manipulate the system and take advantage of your advertising for their own financial gain.

These sneaky little ferrets (to be clear no offence meant to ferrets by the way, its just that their name is literally derived from a Latin word meaning ‘little thief’ so I figured it fits) have a range of angles in which trick the system including website spoofing, ad stacking, pixel stuffing, click fraud…..ok ok I am starting feel the need for a dedicated episode on this topic and its pretty big and really interesting.

The point here is that programmatic ad fraud is a risk that needs to be taken seriously and protected against. There are some manual steps you can take as well as using an ad fraud protection solution to stay safe. If you want to look into this further I’ll put a link in the shownotes.

Another often overlooked aspect for the organisations is cost structure assessment. Shifting to in-housing means this needs to be weighed up all over again. Even though switching to programmatic itself does generally mean that due to the inherent efficiency of buying, costs are significantly reduced, organisations still have to consider the cost of hiring new staff, training, investing in new tools and platforms and as such it is hugely important to carry out an extensive cost benefit analysis.

So this is all starting to look like another cat out of the bag for advertising agencies.

SFX: Cat Meow

First their potential loss of effectiveness once the cookie crumbles (again, see the last episode), and now even smaller organisations beginning to go in-house and invest in their own programmatic buying. 

Will programmatic in-housing send agencies the way of the dodo?

Well the agencies themselves at least wouldn’t quite agree.

Audio Clip Discussion [5:02] I find your division of labour wasteful…shots fired

They are generally happy to admit that the landscape is changing but will say that they will remain as relevant and necessary as ever.

The main argument is that they will still provide immense value because they deeply understand how marketing technology works and are mindful of clients’ needs, even the things the clients themselves aren’t aware of. 

Clip: Interview - Amanda talking about the role agencies in the future…

They say that they can ensure that all tech platforms and marketing tools are used as efficiently as possible, and that they simply have the advantage of scale. They are already performing these similar roles for multiple clients and therefore have better insight into the whole thing.

Audio Clip: [Utku 7:28] Programmatic in housing is NOT the nightmare of agencies

Although back with Utku at Refurbed they are pushing the in-housing idea, Utku doesn’t entirely agree that it is in fact the end of the line for agencies.

Audio Clip: [Utku 7:34] They have to reposition themselves…

They simply may need to adjust how they perceive their own purpose and in which essential skills and insights they still hold the advantage.

Audio Clip: Utku [7:43] Special agencies are actually becoming more and more important…. We can’t do it all, we don’t have the resources…

You see, taking your entire media business into your own hands is not as easy as it may sound.

This is because companies usually lack the suitable data infrastructures and the necessary expertise to do everything successfully.

He states that the main challenges in this respect are as follows:

Firstly, Programmatic advertising simply requires a high level of professional management. And trying to switch this over entirely to be managed single-handedly requires an extensive transformation with data management presenting the main challenge.

The data management platforms, such as Oracle or MySQL, pool together all the relevant touch-points and Customer Relationship Management (CRM for short) data and allocate’s them to matching ID’s. 

The tricky thing in-house is that all too often, company data is stored in a company’s individual departments. And this standard decentralised approach makes it too difficult to successfully utilise said data effectively. Sound complicated? Well it kinda is, and this is one of the key disciplines in which agencies can show their worth.

The second key reason Ad agencies are still relevant comes down to all the small and complex details surrounding programmatic buying. While switching to in-house seems to drastically simplify the ad buying process itself, what most organisations find is if they haven’t put in the extensive work in to build up a wide range of expertise, they are presented with a whole new array of challenges. Things like fee structures and consent management, right through to ad verification all have to be considered and then deftly handled, and this simply takes experience and knowledge. Experience and knowledge traditionally held by the Agencies.

So, that brings us to the big question! 

Is all this work and transformation worth it for organisations big and small to go in-house with things like programmatic? And are advertising agencies going to fade into irrelevance?

YES…but it depends, and NO…probably not if…

You see as always, big changes in thinking, and processes require agility, flexibility and open minded-ness. A willingness to test things and push the boundaries. To know what you know, know what you need to know and know what you don’t think you will ever know and need to call in the experts. When to fill these knowledge gaps with external help vs when to invest yourself in acquiring the necessary skills.

Organisations and Advertising Agencies alike are going to need to get comfortable with shifting their perspective on their own function, abilities and purpose, and put the work, money and research in if they want to ride this technology driven rhinoceros to new horizons.

Outro Music

And that’s it. Part 2 of the Digital Distillery from Vienna and the end of the episode.

A big thank you today to Dennis Kirschner for talking to me about the origins of the Digital Distillery as well as the tantalising piece of information that my favourite German Craft Beer makers are bringing us custom branded IPA’s some of our upcoming events

Thanks to Amanda Cohrs for her thoughtful insight into some of the inner workings of Programmatic and you can of course catch her on the new season of the programmanda show: women in adtech. 

Clip: Interview - Amanda talking about her new season…

Programmatic is a pretty huge and important topic and there is a wealth of information and interviews coming up from her, as well as a whole season already available talking exclusively on the topics so I highly recommend you go check out her show.

Thank you to ShowHeroes for sending me all over Europe to these great events. In the next 12 months we’ll be heading to Paris, Madrid and London just to name a few and a huge thanks to our producer Nadia for not making me edit out ALL of the bad jokes and musings from the show.

This episode is brought to you by The Digital Distillery. Written, co-produced and engineered by me, Phil McDowell, also co-produced by Nadia Koski and led by Dennis Kirschner and Stefanie Leonardi. For more depth and insight into all sorts of other topics related to digital media you can check out our other shows by searching ‘The Digital Distillery’ and heading to the podcast tab on the website.

For more info on the topics discussed and references to the various articles that have helped inform this episode you can follow the links in the show notes and if you want to help others find us, tell a friend or give us a rating and/or on your podcast platform of choice.

If you want to get in touch with us at the Digital Distillery about anything from discussion points, being a guest on the show, corrections or info on how you can be involved in one of these events you can email the show at..

Podcast@the-digital-distillery.com 

or use the contact section of the website. 

You can catch us right here next time as we dig into the topic of the importance of Video in digital media and what makes a successful video driven campaign.