To In-House or Out-Source: Evaluating Whether Programmatic In-Housing is Right for your Business

By Adam Gray (Senior Programmatic Growth Manager @Motive)

There is no question that programmatic real-time bidding (RTB) is growing, and quickly.
A study by the Interactive Advertising Bureau (IAB) found that two thirds of marketers have either moved their programmatic media buying functions in-house or started the process. The goal of this post is to shed light on what it takes to bring programmatic functions in-house and the key considerations to evaluate when deciding whether it’s the right strategic investment for your organization.

Why did Motive decide to in-house programmatic? After buying through various DSPs years ago we identified key roadblocks to maximizing the intelligence of our buys. This included a general lack of transparency into the amount our bids were diminished by the time they reached the publishers and ad exchanges in the ad cycle. We also found that the major DSPs at the time lacked mobile specific supply integrations as well as support for basic bidding algorithms. Finally, we saw the long-term advantage of investing in user-centric one-to-one advertising. There is significant value in generating positive user experiences across the entire mobile ecosystem rather than simply targeting a specific publisher that you know caters to the relevant audience.

Bringing programmatic RTB in-house is not for everyone and those entities that would benefit the most are well within the minority. While these successful early adopters may be outnumbered, as first movers in the space, they are also the most likely to reap the benefits from moving programmatic in-house in the long run.

Possibly the most notable advantage of programmatic in-housing is transparency. Once you move in-house, you have the ability to identify and track exactly what is driving that ever-so-coveted incremental performance on your campaigns. This granular-level insight into your performance contributes to enhanced ROI by pinpointing what’s driving engagement and scale on your campaigns and then optimizing for those factors. That said, you better have a team and software that is very good at processing lots and lots of data very quickly from numerous data centers around the world to maximize this increased transparency and insight. Each day Motive’s data science team processes dozens of terabytes of data and leverage over 100 different attributes to make granular bid decisions. Combine this with the processing of hundreds of thousands of ad requests a second and the need to respond to said requests in under 100-150 milliseconds (today it takes Motive less then 10 milliseconds to generate a value for an ad request) and you are looking at an enormous amount of data that needs to be tracked and organized constantly. To learn more on this topic, check out our tips for storing large amounts of data and what we’re doing with it once it’s stored.

By far the most feasible option for bringing programmatic in-house is to work with either a DSP or a managed programmatic buying service that has already done the heavy lifting for you. A demand-side platform (DSP) is a great option for self-service functionality and insights from seasoned teams. DSPs however come at a hefty yearly minimum commitment of around $300k+/year plus additional fees and requires a team of experienced traders and ad ops specialists. This can be an excellent option if you are an advertiser with exceptional data mining capabilities and a desire to build and apply your own algorithms. On the other hand, if you are a mobile game publisher with a historical reliance on playable ads and a need for user acquisition support, a DSP may not be the best option for you due to the technical nuance required to successfully render playables in an in-app environment.

Alternatively, a managed service has already done the work of bringing all functionality in-house and requires little programmatic expertise from the advertiser. This functionality includes robust algorithms, creative capabilities, look-a-like modeling, third party data access, data management and supply integrations for a variety of ad formats and user touch points. Unlike DSPs, managed services come in all different shapes and sizes and most of the time focus on specialized functions. Motive, for example, focuses on mobile direct response for CPA initiatives that drive the highest possible ROAS for advertisers. When working with a managed service it’s important to understand how much control and transparency you’ll have. Some managed services offer little to no transparency while others will pass a wealth of data. At Motive, we try to take a consultative approach with our advertisers by sharing our insights openly, especially with those clients who are new to the programmatic world.

If a DSP or Managed Service isn’t going to meet your ambitious programmatic goals, then undertaking a rigorous planning process will be crucial to a successful in-housing transition. This includes allotting the average one to two year time commitment and millions of development dollars to execute the process and brokering organizational buy-in from your team to come together when challenges arise (which they will). Whether you decide to in-house your programmatic media buying or out-source your functions to a DSP or managed service, the advantages of undertaking the process in any form are inarguable: eMarketer estimates that programmatic ad placement will account for more than 85% of digital advertising by 2020; the bulk of these ad dollars will be spent on mobile devices (83%).

Adam Gray

Senior Programmatic Growth Manager

Adam is a senior programmatic growth manager at Motive. During his 4 years at Motive he has headed several different initiatives, including kickstarting Motive’s programmatic build out. When he’s not reading about the ad tech industry you can find him exploring the Northeast, skiing, drinking craft beer or rock climbing. He is based in New York, NY.