The hidden costs of taking programmatic in-house

Talent
Convincing a trader to leave a job working across multiple businesses to work on fewer businesses within a young team that’s remote from the agency world is expensive. Even if executives accept the salary, advertisers still need to spend money training and retaining them.

“You need outgoing staff who will build strong direct relationships with networks and publishers because programmatic is not just ‘plug & play’ software anymore, except maybe for long-tail inventory,” said Ruben Schreurs, managing partner at digital media consulting firm Digital Decisions.

The average salary for a programmatic trader in the U.K. is £32,600 ($42,900), while in the U.S., it’s $64,400 (£48,800), according to job site Indeed.com. From there, traders can be promoted to programmatic analysts often earning between £60,000 ($79,100) and £70,000 (£92,300) per year in the U.K. or between $71,300 (£54,100) and $80,186 (£60,800), per Indeed.com.

Demand-side platform
There are two main ways to buy a DSP. One is to pay the vendor a percentage of the ad spend running through their platform, typically 10-15 percent for self-serve solutions. The other way is to lease a bidder. The first model works best for advertisers whose spending varies by month. The second model is for more sophisticated advertisers who are looking to eke out efficiencies and greater transparency of cost from a set spend each month. A basic bidder to buy programmatic ads will start at around $20,000 a month to license. The larger the audience buy in terms of volume of impressions and markets they’re in, the more data the DSP will need to ingest and therefore the larger the cost.

Data management platform
While DSPs collect campaign data, they usually don’t pull audience data from third-party and second-party sources, meaning the tech lacks the insight needed to optimize online media buying campaigns the way a data management platform can. Besides optimizing online campaigns, DMPs can also aid attribution, content personalization and audience analytics. It can cost around $60,000 to access a basic DMP for a year.

That doesn’t include services like customer support and access to strategies that advertisers might add to get the most for their money. And as with all ad tech, the more data that’s poured into the DMP, the more expensive it is to process, said Paul Wright, former CEO of ad tech business Iotec. The arrival of the consent platforms in the wake of the General Data Protection Regulation may have to be factored into the cost, too, said Wright.

Running the ad tech stack via an ad ops team
Taking programmatic in-house doesn’t end with owning the contract to a DSP. The cost of participating in auctions must also be considered, particularly when it comes to brokering private marketplaces and second-party data deals. It is a big undertaking and the value of an in-house ad tech stack can generate for a business must outweigh the cost and energy expended to build it. The cost depends on the publishers partnered with, software used and talent hired.

“Direct RTB Integrations can take months of negotiating terms and waiting for technical prioritization as each trading relationship is addressed individually,” said Shane Shevlin, svp of strategic development at ad tech firm IPONWEB. “Moreover, as a platform tries to enter new geographic markets or expand into other media channels, this direct RTB integration process becomes a major bottleneck to scaling trading activity and growing revenues.”

Tech fees
Advertisers are getting more curious about these fees as DSPs, ad servers and verification providers increasingly try to work directly with them to offset the power of the network agencies. Advertiser direct rates are more competitive than you would think, programmatic executives said, but the rates that the holding companies can negotiate on behalf of all of their clients are usually lower than what a single advertiser would pay.

“There aren’t many advertisers that are going to be able to command the same sort of negotiating power when striking deals with publishers as a media agency,” said Parker Noren, who leads MediaMath’s Marketing Strategy Consulting business. “If you’re serious about buying your own media, you have to consider the cost of the quality you’re able to achieve versus what the media agency’s negotiating power.”