Every year a few strong trends dominate the marketing industry. This year was supposed to be about blockchain, artificial intelligence, machine learning and the rise of the consultancies, but one subject has emerged to overshadow the rest.
The big story early in 2018 was Facebook/Cambridge Analytica and data privacy in general. The issue of data security has now become a major C-Suite preoccupation, with the introduction of the GDPR in May raising the stakes.
Companies have responded to these issues by taking control of their data, and the trend towards in-housing of marketing services is a direct result of the corporate need for data security and to manage the use of data for marketing effectiveness.
The ‘in-housing’ trend will be the one that 2018 will be remembered for.
Data breaches have occurred regularly in recent times, affecting companies such as Facebook, British Airways, Uber and Google, which closed Google+ shortly after a major breach. Cyber-security is now big business.
Data misuse is also now a top concern. Facebook/Cambridge Analytica merged with allegations of voter manipulation in the US and UK to create an atmosphere of mistrust which has permeated the advertising industry. Facebook’s response to questioning over use of its platform has damaged its reputation and market value.
While public perceptions of how companies can misuse people’s data is an important reputational issue, the introduction of the GDPR on 25 May made data security a significant financial matter with substantial fines at risk.
The right customer consents are now key and companies have to comply or pay up. A fine from the ICO is also a reputational matter to be avoided.
The brand safety and ad fraud issues which first bubbled up in 2017 have also reverberated at the top of companies, generated questions about the opacity of the programmatic market, and encouraged companies to examine their supply-chains.
So it was perhaps inevitable that companies would bring the management of their data in-house, exercise greater control and reduce their risk.
In parallel, brands have recognised that data is a key asset, to be actively managed as a business-driver. Marketing is now data-led and has to prove its worth through measurement, so capturing, analysing and using data is now business-critical.
In Gartner’s annual CMO Spend Survey for 2018-2019, the average percentage of a CMO’s budget being spend on marketing technology increased year-on-year from 22% to 29%, with 40% of respondents nominating marketing and customer analytics as the “most vital marketing capability” over the next 18 months.
Advertisers must continuously harness multiple paid and non-paid platforms – including video, search, web, mobile and social – by carrying out the following:
- Collecting, storing, processing and analysing vast amounts of data
- Assessing the value of first-, second- and third-party data with the right consents
- Matching a huge swathe of different data types into usable segments for targeting
- Identifying customers at an individual level through cross-device ID recognition for more personalised messaging (the so-called ‘single customer view’)
- Using advanced data analytics to continuously optimise in multiple channels
- Producing new content in many formats, including ‘owned’ properties
- Providing robust evidence of success
This is hard enough, and it is complicated by factors including:
- The nature of the ‘walled gardens’, their lack of shared data and high market share
- An emergence of new options and formats (such as voice, or vertical video on Instagram)
- Technology limitations for tracking across devices
- A lack of common metrics across platforms
- The ebb and flow of audiences at speed (for example Facebook to Instagram)
- Issues of brand safety, invalid traffic/fraud and poor viewability in online advertising
- Opaque and expensive technologies
Advertisers have their work cut out, and they need to know they can own, control, manage and have permanent access to the data they need for effective marketing. They want to rely less on outside parties.
If advertisers now have a real motive for change in regulation, fine-avoidance and the need to control and manage data, they also have the means.
The world of technology has leapt ahead to help brands manage this huge set of tasks. The marketing cloud industry has made significant technical advances, and by acquisitions and partnerships has started to offer end-to-end solutions to automate much of the process for content and channels.
Google has long held market leadership over the ad tech stack, and now the big CRM-led players are starting to encroach on the market, as evidenced by Adobe’s partnership with Flashtalking and Oracle’s purchase of Moat.
New offerings in customer data platforms and dynamic creative optimisation are emerging. Self-service platforms such as Adform are enabling in-housing and players such as MIQ are developing managed services for advertisers who want to conduct analytics independently.
In the Gartner 2018-2019 survey, 34% of respondents nominated “marketing technology acquisition and use” as the most vital capability needed now.
They are also increasingly taking control of the ad tech ‘stack’, with direct ownership of the licences for data management platforms, demand-side platforms, ad servers and independent ad verification tools.
So, if the motive is data control and the means is the emerging technology, in-housing becomes a real possibility.
The recent focus on in-housing disguises the fact that many advertisers have been producing content for themselves for several years. The ANA in-housing survey published in October this year surprised the market by announcing that 78% of large US advertisers have some sort of in-house agency, but this number was already at 58% in 2013.
Advertisers started in-housing some content creation to populate the voracious demands of multiple ‘always-on’ channels, varying from video assets and rich media through to product listing ads in search. They found they could be faster and more cost-efficient than agencies, especially at the ‘commodity’ end of the market.
And it has never been easier to produce content at low cost via digital technology.
One automotive manufacturer used to pay millions of dollars to close down Manhattan streets at 5am for a TV shoot. Now Manhattan can be recreated digitally for a fraction of the cost, and no-one can tell the difference.
And advertisers can cut dozens of versions of a spot to dynamically insert into multiple channels to appeal to different audiences identified through data characteristics, at the speed of programmatic.
Advertisers such as Unilever now routinely produce content via in-house studios, and UK agencies such as Oliver and The&Partnership have embedded creative staff into client offices for companies such as Toyota.
The trend towards in-house content creation has been a feature for several years, but the new twist is the move towards the in-housing of media.
Advertisers tend to use different content agencies for their brands, channels and countries, but media works to different norms. Media agencies have generally taken care of all of the larger advertisers’ media, often internationally.
This model is now being questioned and the main reason for this is, again, data – especially ‘biddable’ media traded through automated means, with constant optimisation and efficiency. Media was progressively bundled over the years and now some advertisers are starting to selectively un-bundle.
Last year Vodafone made a high-profile statement about in-housing media, although its initial plan is to control search and social, with programmatic being tested.
Some advertisers in-housed pay-per-click search several years ago when they realised that it was critical for their business, could be largely automated and the keyword bidding system did not require the media buying power of an agency group.
The same principle can apply to programmatic media trading, where data determines the bid-led cost of inventory. It is more complicated than paid search, with significant shortcomings, but it can be in-housed with the right people and systems.
However, by taking control they also take on the headaches. The management of programmatic is complex, time-consuming and requires experience. The time, effort and cost involved should not be under-estimated, and the persistent issues over brand safety, viewability, invalid traffic and ad fraud have to be addressed.
However, a number of e-commerce brands such as Booking.com have been at the forefront of in-housing of media, including programmatic, and have become self-reliant on everything other than upper-funnel demand creation via mass media.
It is natural for direct-to-consumer brands to prefer in-house control of their channels. Their model is performance-led, with constant optimisation across channels, and programmatic, done well, can deliver this.
However, many still turn to mass media to generate demand in the ‘upper funnel’. For example, the financial services price comparison websites are among the biggest TV ad spenders in the UK as they compete for the all-important search terms, with branded keywords a primary goal.
Other e-commerce players such as Amazon use mass media heavily around seasonal spikes, such as Black Friday and Christmas. As the e-commerce market becomes more competitive, mass media are being used to build brands and preference as they always have been.
However, it isn’t only performance-led advertisers who are looking to in-house media. The pharmaceutical company Bayer has announced its intention to in-house all digital by 2020, but will still continue to work with agencies in offline media.
Mass media require substantial resources in people, systems, research, data tools and booking/payment infrastructure, including credit insurance for significant sums.
In a fluid market, many hybrid models are emerging whereby brands are choosing to selectively in-house some services while continuing to outsource others. The result is a patchwork quilt of options, with no one-size-fits-all solution.
In-housing: the actions to take
For advertisers considering some form of in-housing, there are a number of key actions required. It is critical to answer the ‘why, what and how?’ questions with no room for ambiguity, with consensus across the company.
Firstly, the why.
Clarity of objectives is crucial. Media is a resource-intensive and dynamic business that requires significant investment and time. It relies on high levels of experience and expertise. In-housing often involves setting up a media agency from scratch.
Although in-house teams will have a better understanding of a brand and its marketing than their agencies, the latter often bring a perspective that advertisers lack. Exposure to the wider market can be critical.
Media agencies invest heavily in the people, tools and systems that enable planning, not just buying, and the cost of these can be under-estimated by advertisers. And planning still requires expert skill and judgement.
Media owners will always find it more efficient to service agencies where multiple sales opportunities reside, and agencies will have a better idea of the value and cost of the properties on offer.
One large e-commerce player looking to in-house all media discovered the gaps in their understanding of the media process and sought a media agency network to effectively ‘shadow’ them, providing research, data, systems and know-how.
So the commitment to investment needs to be made around the most solid rationale for choosing to in-house, with a full understanding of the implications, logistics and costs. Individual advertisers do not benefit from the economies of scale that media agencies enjoy, nor the negotiation power, so the apparent economies of in-housing may not transpire.
Some performance-led advertisers may well benefit from in-housing given their business model, but for the majority of brands the decision is less clear-cut, so a forensic analysis of objectives is crucial.
Secondly, the what.
Knowing which aspects of media to in-house is important in determining the objectives. For example, performance-led brands can be highly efficient at optimisation, but then find it hard to scale demand. This often leads to a return to ‘upper-funnel’ channels, where different skills are needed and the tools are vital and costly, such as TV audience research.
The collective buying power of media agencies is a major factor in mass media.
Dividing up the responsibility for digital channels and offline ones creates a degree of complexity, especially where different media multiply one another, such as TV and paid search.
International advertisers may find that the multi-territory execution of an in-house model will encounter variances by country that can impede progress. For example, programmatic trading shares many common characteristics across territories but Germany, for example, is less auction-led than the UK or France, so the shape of teams and systems will need to be flexible.
For advertisers who want to take control and manage risk, many hybrid options exist for the media process. The right model will depend on the nature of the business, its content and channels and its appetite for the complexity involved in today’s multi-channel market. Knowing what to take in-house is as important as knowing why.
Thirdly, the how.
A crystal-clear road-map for the implementation of in-housing is vital. Media is a complicated and requires the right ‘wiring’ to succeed. Media agencies are complex, multi-layered entities which are not easy to replicate. Having the right strategy, structure, tools and systems is critical, and these need to be carefully planned.
However, advertisers may under-estimate the human element. Media skills are valuable and rare and thrive in a creative culture where rules are fluid, so the way that an in-house unit may run should also be carefully constructed.
Location can also play a part, with some advertisers finding it hard to attract the right kind of people to their offices in out-of-town locations.
So a critical part of the ‘how’ is getting the right people and creating a working environment that allows them to perform, over and above the necessary rigour of a detailed road-map.
Media in-housing: this year’s model?
Although 2018 will be remembered for the explosion of the in-housing debate, this issue will dominate the discourse in 2019 and beyond. The factors behind it, data-related, are top-level corporate ones, not just marketing matters.
It can be predicted with confidence that advertisers will continue to take more control over their business affairs when they have the motive and means. However, the practical implementation of media in-housing is a major undertaking that requires both a clear analytical approach and a recognition that cultural considerations play a part.