Adtech: Three models of managing the brand-agency-vendor relationship

Here are three different models of ownership of adtech contracts and operations so you can pick the right one for your brand.


This article originally appeared in The Adtech Issue, our current special edition of Marketing, produced in collaboration with TubeMogul and SpotX.


Learn if, when and how clients should take control of their digital media buying taking on the ownership or operation of the primary tools used to buy advertising programmatically, the demand-side platform (DSP) and data management platform (DMP).

 

1. In-house/self-managed

Brand owns contract with vendor and hires internal resources to manage operations.

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This is the fully in-house model where the advertiser owns the tech and controls the operations. For large organisations and big advertising spenders, this is often the end goal, although in reality they may need to go with a service managed by the vendor or an agency until they have enough experience to be able to hire internal resources.

Foxtel is one Australian example of a brand that has taken both the contract and operations fully in-house. Should you take adtech in-house? It’s certainly not for everyone. The answer to that question will ultimately rely on your unique circumstances, but here are some things to think about.

“Organisations vary widely in their digital maturity, and many do not understand the scale and breadth of the addressable audience available and they do not understand how data flows within the adtech ecosystem,” says Cameron Strachan, principal solutions consultant at Oracle Marketing Cloud.

“The confusion results in a few outcomes that seem to pop up repeatedly,” he says. “Advertisers are underwhelmed by acquisition efforts, tech investments do not turn out, businesses let multiple adtech vendors have access to their rich data and programmatic buying does not quite have the sophistication it should.”

Some time and financial cost factors to weigh up when considering taking adtech operations in-house include:

  • Budget. Brands with small advertising budgets may not see much benefit from taking adtech operations in-house. Brands with large budgets, on the other hand, should see the benefits, but will require a lot more management time, which means manpower.
  • Campaign characteristics: Shorter, more frequent campaigns take up more time, as do campaigns across lots of different channels. Different markets have different inventory supply issues, so multi-market campaigns will need care.
  • Partnerships. Managing relationships with suppliers of all the different components of an adtech stack and sources of data takes up time.

 

That said, if the DSP is replacing manual RFP and insertion order processes, moving to a DSP should reduce the hours required to manage a campaign end-to-end from days to hours.

To take adtech in-house, marketers will need to be ready to learn, and possibly also lure someone client-side who has the expertise already. People like this aren’t in abundance, but media agencies are a good place to start looking, as are adtech vendors themselves.

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2. Managed service

Brand owns contract with vendor; agency or vendor manages operations.

According to a Forrester Research study, only a handful of marketers have eliminated or reduced their agencies’ role in programmatic buying. But several interviewees described how their firms are contracting directly with  demand-side platforms (DSPs), data management platforms (DMPs) or both. Behind this approach are issues such as data security, privacy and retaining the learning.

For brands that have begun the process of taking control of their digital media buying, this is currently the most prevalent model.

Where brands employ the vendor-managed service, this is often the first step towards in-housing of programmatic. At time of writing, alcoholic beverages company Pernod Ricard Winemakers is operating under this arrangement with its DSP, TubeMogul.

A service fee will typically go on top of the vendor’s tech fee as an added percentage, although sometimes vendors will use the service as a value add to help a brand scale their programmatic operations.

Similarly, with an agency-managed model, the agency charges a service fee, which should be transparent. Indeed, transparency is one of the key reasons clients adopt this model, because they can log in to their platform at their leisure.

While programmatic trading eliminates the economies of scale media agencies enjoyed in negotiating with media owners, they still offer benefits in expertise. “An agency can provide economies of scale in training the media planners. They cross train each other, they move around and work on different brands,” says Mark Torrance, chief technology officer of Rocket Fuel, a marketing platform that combines elements of a demand-side platform and a data management platform.

“There’s not an opportunity for their growth and learning if you’re just working in a small team on a single brand.”

A Forrester Research study concluded that programmatic is changing the role of, but not eliminating agencies. Marketers still value agencies’ strategic guidance and expertise. When asked if they have reduced their agencies’ media buying responsibilities as a result of strengthening buying capabilities, 86% of clients said no, while 77% reported relying on their agencies’ trading desks.

“Pulling all the channels into a holistic solution is the core of what agencies are good at. Programmatic is just one piece, so why should I bring it in-house?” Says Blaise D’Sylva, vice president of media for Dr Pepper Snapple Group in the report. (ANA/Forrester ‘Q1 2016 US Programmatic Media Buying Online Survey’.)

In the US, Beam Suntory is one example of a company operating under this model. “Programmatic is the future but we want to own our own destiny,” says Annette Cerami, US marketing services procurement manager for the spirits maker, as quoted in a May 2016 report by Forrester Research, ‘Programmatic Transforms Digital Media Buying.’

“We’ve contracted with a DSP and started with a fully- managed service, but will move to self-service,” she says. “But self-service doesn’t mean in-house. The agency will still execute the buys, but we’ll retain the knowledge of what works so we can apply it across all our brands.”

Another example is Regions Bank, which sees most benefit in the ability to pair marketing and analytics teams. “We have a marketing effectiveness and efficiency group that sits in corporate marketing,” says Ben McLeod, senior vice president of corporate marketing for Regions.

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3. Private trading desk

Agency or independent trading desk company owns technology or contract with vendor and manages operations.

The last model of client-agency-vendor relationship we’ll look at is the use of a trading desk. A trading desk is a “centralised, service-based organisation that serves as a managed service layer, typically on top of a licensed DSP and other audience buying technologies. It manages programmatic, bid-based media and audience buying.” (Forrester)

In an agency scenario, it works as an internal ‘centre of excellence,’ supporting agency teams wishing to tap into this new buying model on behalf of agency clients. Trading desks independent of an agency group also exist, and are usually referred to as ‘independent trading desks.’

In either case, the trading desk owns the contract with the tech vendor, or has built its own technology, and builds a tech stack for the specific brand.

A client may be able to direct an agency on which tech to use, but since large media agency groups started building or white-labelling their own technology several years ago, often the agency will use that. Because of that, this type of arrangement is the least transparent for the client.

This is the main criticism of agency trading desks. A white paper b the Association of National Advertisers (the US sister of the AANA) found member knowledge about agency trading desks to be extremely limited.

Clients have expressed concern over double paying (paying their agencies to manage media and then paying again for the agency-acquired services of a trading desk), conflicts of interest (agency trading desks acting simultaneously as both agent and vendor), marked-up media (some agency trading desksbuy media at their own risk and then resell that media to clients, often at a premium), mandates (that all network-based transactions be executed through their internal agency trading desks), rebates (agencies may help fund trading desk and technology infrastructure by getting rebates or discounts from publishers) and operational challenges (some may have rushed into this new business without properly integrating this service into their overall business practice).

Because each agency group conducts business differently, marketers who elect to work with an agency trading desk should understand and be comfortable with their agency’s model. Have a conversation with your agency to understand the business model of the trading desk being used on your brand/s, understand which media is purchased via a trading desk and be clear on metrics.

 

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